India’s entrepreneurs: slowly supplanting the Indian state

by Dave

while Lord Ganesh removes obstacles, Indian entrepreneurs prefer to bypass them as much as possible

For Gautam Adani, the power mogul, the answer was simple: the easiest and most profitable way to meet India’s rising demand for electricity is to avoid the obstacles, divisive political confrontations and practical inefficiencies of India. In the spirit of the workaround ethos typical of India’s private sector, Mr. Adani is working around the subcontinent itself.

He owns the Indonesian coal mine, the Korean-made cargo ship (named for his niece Vanshi), the Indian power plant and, most important, the private Mundra port. He owns coal mines and a major port in Australia, and has built his own private railroad spur in India. His business plan is to do as much as possible without relying on the creaky infrastructure of the Indian state.

“He is able to do so well partly because he is very entrepreneurial and has found the right opportunity,” said Eswar Prasad, an economic adviser to India’s finance minister. “But it’s a symptom of a dysfunctional state. He is able to deliver something more effectively than the state.” Today, India is increasingly turning to the private sector to deliver the electricity needed to maintain rapid economic growth into the future. India’s economy is growing at more than 8 percent annually, but is badly constrained by an inadequate power supply after years in which the government dominated the power sector and failed to keep up with growing demand.

The rise of Mr. Adani attests to a broader shift, as the [Indian] private sector is playing a greater role in areas once controlled by the state like telecommunications, ports, airports, banks and infrastructure. At a global level, this contrasts sharply with China, where huge state-owned enterprises dominate strategic industries and lead the country’s global expansion. Mr. Adani recently had to outbid the Chinese for his Australian port.
Swaminathan Aiyar of the Cato Institute considers the Indian economy far more open and competitive today, noting that of the 30 largest companies on India’s stock exchange in 1991, at the beginning of India’s market-oriented reform period, only 9 are still on that list today. He argues this turnover suggests fierce competition rather than a hardening oligarchy.

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