India’s Drive to Build out Infrastructure

India and China are again facing off against each other high up on the Doklam Plateau. This is only the most recent challenge by China, which shares a 2500 mile border with India. There is no question that the biggest reward is not a few square miles of worthless rock, but establishment of hegemony in Southern and Southeast Asia.

While India has the advantage in air power along the border with twenty air bases to China’s five, India’s only option for supplying the bases is by air. It is too easy to overlook infrastructure when examining a country’s defensive abilities. Bridges, tunnels, railroad lines, and highways could all play a significant role in India’s battle to defer the Chinese land grab.

India is currently no match for China in strategic infrastructure, but India is not the only venue where China sees threats. They have periodically challenged and been challenged by Taiwan, Viet Nam, Russia and many of the other eleven sovereign states which share a border with China. But as it extended its authority over Tibet, China built highways, bridges, tunnels and railroads into the region as part of its military strategy.

India has long realized that its lack of infrastructure was a major deficiency, but frankly it did not have the political will to assert its central authority over its own provinces nor did it have the money to build what the military knew it needed. The result has been heavy reliance on air power, but that air power has yet to prevent the steady encroachment by the Chinese.

Political insiders have alluded to a plan to build 73 strategic highways 21 of which are complete, and 52 scheduled to begin shortly. There is also a plan to build 28 major railways, none of which are beyond the contracting phase. The Chinese threat is providing the political impetus as local leaders fear Chinese aggression. The elimination of large denominations of currency have begun to pull the 80% of the Indian economy that has relied on non-taxed cash transactions into the tax base. This and the rapid development of regions like Bangalore, Mumbai, Delhi, Pune, Ahmedabad, etc. also bring expanded tax revenues.

So, with the will and the money, the build is now more than just a prospect. Notional evidence may also be in the recent increases in shipping rates for dry-bulk carriers and in the relative price increases in iron ore, copper and cement. Australia seems to be the likely beneficiary of these purchases though South American producers will get their share, especially Chili.

In the 1950’s, when President Eisenhower instigated the building of the US interstate highway system, his only thought was to increase our ability to move troops across the country. The unintended consequence became the massive economic development which occurred in the interior of the country. Markets were created in the interior, workers hired, and production built to serve all the markets in the US. It was the greatest expansion of economic power in the history of the planet. Yes, it was due greatly to the destruction of the country’s competitors (Germany, Japan, Europe overall, and Great Britain) in WWII, but the connecting of America turbo-charged the country.

By the way, the Dow Industrial’s rose 297% during that 20 year period. Year to date the Indian Nifty Index has risen almost 20%. So, maybe it’s time to buy the Indian market?

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