Emerging India Has a Long Way to Go

NEW DELHI, India—A yellow truck festooned with black tassels and hex symbols to ward off bad luck passed our van on the right as we jounced over the potholes that slowed us to a crawl on the road between Jaipur and Jodhpur. The truck was similar to many of the trucks I saw on a three-week road trip in the northern Indian states of Rajasthan and Uttar Pradesh this winter, except for one thing: It was carrying a 20-foot container, the only box I spotted in hundreds of miles of tortuous driving. The blue box bore the familiar APL logo.

As a New Yorker inured to the sight of the mostly 40-foot boxes that populate the U.S. Interstate system, I was not surprised by the dearth of containers moving on India highways, if you can call them that. Only a few of the roads between India’s cities are divided. Even on these divided, mostly toll roads, the stretches where our driver could travel more than 50 miles per hour didn’t last more than 10 miles before we were detoured off onto the other, two-way lane while the other, one-way lane was being built or repaved.

Detours and potholes are not the only hazards. Cows, which are sacred in the Hindu religion, and dogs, which are worshipped, wander the roads freely. Our driver, who had the patience of Job, was always on the lookout for any cows, dogs or the occasional camel that appeared ready to stray into our lane. The Jersey Turnpike this isn’t, so our journey of about 1,000 miles took at least twice as much time as it would in the U.S.

“It’s challenging to say the least,” said Gene Seroka, president, APL, Americas, who had direct experience with Indian logistics when he was vice president of APL Logistics for Asia and the Middle East. “Every monsoon season, the roads get washed out and need anything from pothole repairs to complete reconstruction.”

APL Logistics launched its IndiaLinx intermodal stacktrain service in 2011, and it now runs 24 weekly train services between three ports on the west coast and five inland container depots that bring retail imports to the growing consumer market. Indian retailers are setting up larger distribution centers and warehouses, but India’s dilapidated road network means APL can’t transport 40-foot containers from container depots over the road to DCs. Instead, APL Logistics breaks down its 40-foot containers at inland container depots around Delhi. “You put the goods in lorries or smaller trucks that have the ability to navigate the roadways at the local level,” Seroka said.

Even smaller trucks have difficulty carrying goods to the traditional markets that line the streets of Old Delhi, which are jammed with tuk-tuks, rickshaws, motorcycles and bicycles that make New York streets look like a sylvan village. I saw motorcycles teetering through those streets carrying stacks of cartons as high as the top of a small truck.

Air and sea are in better shape

India’s ports are in somewhat better shape than its road network and are slowly improving as the government privatizes container terminals at the 12 major state-owned ports, six on the east coast and six on the west coast. But they are still subject to such congestion that many of the major east-west carriers call at Sri Lanka’s Port of Colombo with cargo for transshipment to India on feeder services. The $500 million Colombo International Container Terminal, which is 85 percent owned by operator China Merchant Holdings International, opened last year as a transshipment hub for South Asia.

The Indian government is seeking private investment to develop a privately run transshipment hub at Vizhinjam in the southern state of Kerala after two failed attempts by local agencies to get it built. The government has approved plans to develop five new cargo terminals, including four major container facilities, at various state-owned ports through public-private partnerships, as part of its $110 billion port capacity-building program. It will need to make progress on its port plans if it hopes to fulfill its image as a fast-growing member of the much-touted BRIC group of Brazil, Russia, India and China.

By contrast, India’s airports are modern and up-to-date, as judged by the sleek and spacious terminals I experienced in Delhi, Udaipur and Varanasi. Security is so tight at the army-guarded terminals that you need a boarding pass or a pre-paid itinerary and passport just to get inside.

India is often portrayed in the U.S. as a rising Asian economic power, and the world’s largest democracy, which can offset the growing predominance of China. But my visit to India this winter throws that pretty picture into doubt. The first thing I noticed when I got to New Delhi was the pervasive air pollution, which the New York Times Delhi correspondent Gardiner Harris reported in January “is more laden with dangerous small particles of pollution, more often, than Beijing’s.” Indian media took little notice of the pollution until he reported it and it drew worldwide attention. But India, so far, unlike China, is doing nothing about such pollution.

Economic growth is slowing

Indian Prime Minister Manmohan Singh, who took office as the Congress Party’s candidate 10 years ago, has won a reputation as a reformer who opened the country’s protectionist economy to foreign investment. As finance minister before 2004, he freed the economy from what was known as the License Raj, the red tape and corruption that dragged down economic growth for decades. His reforms helped fuel the economy to 8 to 9 percent annual growth rates, but the 81-year-old Singh has been sitting on his laurels in recent years, and growth is slowing. In 2014 GDP growth is forecast to grow by only 4.5 percent, down from 4.9 percent last year.

Flagging growth threatens to aggravate the lack of employment opportunities for India’s rapidly expanding population of 1.27 billion, which already accounts for a sixth of the world’s people and is forecast to overtake that of China by 2025. Unlike China’s aging populace, more than half of India’s population is below the age of 25. Its youth has flocked to the cities looking for employment, as one can see in the streets of Delhi or any other population center. Unless India can pursue reforms that will spur growth, the growing youth population in its cities has the potential to act as a time bomb of protest.

Corruption at the government level is still pervasive. I met the head of a major U.S. firm who was trying to set up a distribution network in India. The government had recently issued a warrant for his arrest after he blew the whistle on a government official who had demanded kickbacks in return for approving the company’s plans.

Singh’s second five-year term as prime minister comes to an end this year, when elections will determine which party controls parliament. The smart money is on Narendra Modi, chief minister of the state of Gujarat, where every village has gained electricity, infrastructure has improved and investment poured in under his administration. He is the candidate of the opposition BJP Party in the general election due by May. The hope is that he would replicate Gujarat’s rapid growth at the national level by spurring further reforms and fighting corruption.

The U.S. State Department has denied Modi a visa to enter the U.S. for the last nine year because of his stance as a hardline Hindu nationalist and a suspicion he was involved in the 2002 riots in Gujarat that led to the death of more than 1,000 Muslims. U.S. Ambassador Nancy Powell’s Feb. 14 meeting with Modi signaled that the U.S. is moving to normalize relations with the man who may be key to the future growth of the Indian economy and the strengthening of mutual trade, investment and diplomatic relations.

Contact Peter Leach at pleach@joc.com and follow him at twitter.com/petertleach.

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