Investors decry India-China comparisons

Bunching China and India as similar investment destinations for infrstrucure investors is not fair for a number of reasons, panelists told delegates at the inaugural Infrastructure Investor: Asia 2009 forum in Singapore.

Infrastructure investors are wrong to club China and India together as investment destinations with the same characteristics, panelists at the inaugural Infrastructure Investor: Asia 2009 forum in Singapore said yesterday.

Notwithstanding similarities in certain characteristics such as rapid growth, the demand for infrastructure and favourable demographics, the two countries have a number of crucial dissimilarities that investors need to be mindful of before committing capital there.

“The make up of the two countries is the biggest difference,” Archana Hingorani, executive director of Mumbai-based IL&FS Investment Managers, said in reference to the decision-making process in the two countries.

India and China:
not as similar as
some people think

“China has the ability to do whatever it wants to,” she said, while in India, consensus-based decision-making is time consuming and slows down the investment process considerably. Nevertheless, she declined to say that India's modus operandi is inferior to China's way of doing things. 

“I don’t think either of the paths is wrong,” she added.

Kamran Khan, head of the World Bank’s Singapore office, also insisted that viewing China and India  as similar investment destinations is not fair.

He said while India’s economy has been growing at an average growth rate of 9 percent per year since 2003, China’s economy has grown at an average of 10 percent per year since 1983. Furthermore, while China has a savings rate of 54 percent, the savings rate in India is a much lower 34 percent of gross domestic product. “This is a massive difference,” Khan said. 

He also pointed out that local governments have much more autonomy over the development of infrastructure in China versus India. Chinese municipalities have the authority to undertake projects on their own, while in India, decision-making remains more centralised, adversely affecting the development of infrastructure in the country.

The two countries' governments ability to fund infrastructure development is also vastly different, Khan said. In its 11th five year plan for the years 2006 to 2010, China had estimated $500 billion in infrastructure spending, he said. In November 2008, through its stimulus package alone, the Chinese government outlined plans to spend RMB4 trillion ($586 billion; €394 billion) to be spent mainly on infrastructure in 2009 and 2010, underlining the fact that, unlike India, China has ample ability to quickly mobilize funds for its infrastructure needs. 

“In India, infrastructure is a bottleneck for growth; in China, it has been the basis for growth,” Khan told delegates.