Even if one manages to find a place to build a big business facility, there's the problem of supporting infrastructure. India's roads, rail lines, and electric power and port facilities are all overtaxed. This factor alone can spell the difference in competitiveness in global markets that favor flexibility, speed, and just-in-time inventory policies.
And why, you might ask, is Indian infrastructure inferior to that of potential rivals? One factor is the legendary inefficiency of its state-owned enterprises, which serve political constituencies rather markets. Another is the inability to build new rail corridors through densely-populated regions, which channels low-cost rail traffic into high-cost truck traffic. Yet another factor is the failure to attract capital from foreigners who are wary of the uncertain legal climate -- especially when it comes to big, high-profile projects that are catnip to corrupt politicians and bureaucrats.
All that said, the Indian economy is not about to fall off an economic cliff, or even return to the pre-1980s "Hindu rate of growth"-- it still has much going for it. But these days, development specialists are more likely to cite economic institutions -- regulation, rule of law, entrenchment of local interests ---than logistics or education or natural resources in explaining why economies succeed or fail. And from this perspective, there's no mystery why the Indian economy has downshifted. Indeed, the better question is, how has it managed to get this far?
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