Poor infrastructure, corruption weigh on Indian economy

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Poor infrastructure, regulation, and corruption hinder business and economic growth in India, although the country is showing willingness to address shortcomings, a top official with the World Bank's private sector arm said.
The International Finance Corp has been adding about USD 1 billion of portfolio exposure a year in India, a pace it aims to maintain in coming years, executive vice president and chief executive Lars Thunell said.
"There are still lots of opportunities for improvement," Thunell said in an interview towards the end of a visit to India.
The IFC is a private-sector lender that also takes direct equity stakes in firms or projects. India is its largest market, and the multilateral agency is increasingly focused on investment in the country's poorest states.
Thunell said poor infrastructure remains perhaps the biggest hurdle facing economic growth in India, and is an area of investment focus, along with efforts related to climate change.
"How can you have an efficient production if you can't get stuff out, or if you have to close down, as they have in many low-income states for a number of hours, because there's no electricity," he said.
He said the IFC hoped to invest in a major road-building initiative unveiled earlier this year by the Indian government, but declined to elaborate.
Inclusiveness
India, whose fast-growing economy is propelled in part by a robust entrepreneurial sector, ranked just 133rd among countries for ease of doing business in a World Bank/IFC report released earlier this year.
"India is surprisingly far down on that ranking," Thunell said.
Fellow emerging market giants China ranked 89th, the Russian Federation ranked 120th, and Brazil came in at 129 in the survey.
Still, India managed to attract more than $15 billion in foreign direct investment and a similar level of portfolio inflows in the first six months of the current fiscal year, as its economic growth trails only China's among large countries.
Prime Minister Manmohan Singh, speaking at a World Economic Forum event last week in New Delhi, said the country was pressing ahead with measures to further open up sectors of the economy and develop its financial markets.
"You've got the issues of bureaucracy. You've got the issue of corruption that was discussed at the World Economic Forum very openly, which I thought was very good," Thunell said.
"There's a number of things that has to be addressed, but I think the good feeling I got from the World Economic Forum was that the government now is prepared to look at them," he said.
Thunell said "inclusiveness" is also important for India.
The country clocked three straight years of economic growth of at least 9% before the global downturn slowed expansion last year to a still-vigorous 6.7%, but broad sections of the world's second most populous country are impoverished.
About 46% of Indian children, for example, are underweight.
"As India develops you can't have too big a gap between the haves and the have-nots. The good news is that I've been impressed with many of the industrial leaders that I met here who are actually actively engaged in their corporate social programmes," he said.
The IFC last month joined with Standard Chartered and State Bank of India to lend $1.6 billion to Cairn India, a unit of Cairn Energy, to fund a crude oil project in the western state of Rajasthan.
Other IFC India investments this year include a $50 million loan to Apollo Hospitals Enterprise Ltd. It also led a 135 million euro ($200 million) investment in Volkswagen's India manufacturing plant in Pune to create jobs.
(US$1=0.6684 euro)