The trouble with India is ...

India is front and center stage these days - the world is keeping a close eye on developments in India, on the economic front and also on the political front (as it relates to the economy). Last month, The Economist had a cover story feature about India's overheating economy, and now Businessweek is following that up with its own cover feature on India titled The Trouble with India. The article calls attention to one major drawback - inadequate infrastructure, including crumbling roads, jammed airports, and power blackouts. There is of course plenty of bureaucracy and red tape - getting things done is not easy. It cites examples of investments lost to China, Vietnam and other emerging countries. And add to all of that - corruption siphoning away large chunks of government budgetary allocations before they reach their intended goals.

A cover story like that is certainly unwanted publicity for the Indian economy .... but a reality check against the sugar coated stories of India Shining. The fact however remains that the Indian economy continues its march - the Indian Economy Blog has an excellent summary on whether the economy is sizzling or just right ...

The power of expat money

India received $23.4B (yes billion!!) in remittances last year, the single largest player now - and the amount has more than doubled in the last five years.

Some staggering statistics:

• Remittances account for 3% of India's GDP
• Remittances are more than both FDI ($4.7B in 2005-06) and FII ($12.5B in 2005-06) combined!!
• Source of all this money - about 111million migrants from India worldwide! (and to think that we still have more than 1 billion people still left over in India ...)
• Fate of these dollars: about 54% spent on family, 20% in bank accounts and about 13% invested in land and property

To put that in perspective - thats about $2.5B invested in real estate - no wonder that property prices are just not coming under control. The endless supply of liquidity into the system is pushing up prices to no end ... and about $5B in bank accounts - no wonder everyone's screaming inflation inflation ... and all this without even considering the increase in the purchasing power of the people as a result of local economic growth!!

No wonder the RBI is having fits trying to curb inflation ...