India Investment: Where Have All the Jobs and Cranes Gone?

Gurgaon, India. 7 May 2009 I have a confession to make. In the last few years I have changed jobs four times, working my way up as an analyst in the financial industry. Each time I switched I increased my salary by 30-50 per cent. Even so, I kept my resume posted on the jobs boards and continued flirting with other employers. I was playing the field, I had no intention of settling down and getting married to a job permanently, because there was always something better out there for me. And then the unthinkable happened – I was dumped.[br]

To my Indian readers: let’s be honest, we felt invincible, right? Mother India was on top of the world, and we were climbing on top of her. There were never enough talented people, and we didn’t have time to waste doing the same thing for one whole year. A few months was enough, we felt we thoroughly deserved our ever growing salary.

We also believed the financial crisis was someone else’s crisis. Our growth prospects would not be dimmed by the foolish actions of some westerners. And then, suddenly, rudely, we started coming back down to earth.
Was my last employer just a victim of the crisis? Were they badly run, or worse, vindictive? Did they suddenly realise that I had been promoted too quickly and didn’t have the abilities I should have had? Had my salary grown so big as to make me unemployable? These are the questions that haunt me sometimes – although frankly I still believe that India will continue rising up and I will become a captain of industry. Maybe not ‘soon’, but ‘soonish’. We Indians are still a confident bunch no matter what happens.

Its not all bad. I have more time with my family now, I get to write for EconomyWatch.com and other prestigious publications, and this research and writing has led me to understand some surprising things.

Yes the west had credit problems, but it turned out so did we. In our pride and our haste, we didn’t always realise that Indian investments, and the Foreign Direct Investments (FDI) that were often behind them, were often ticking time-bombs. Those time-bombs have started going off.[br]It turns out that investment accounted for 39 per cent of India’s GDP in 2008, up from 25 per cent in 2003. A third of that came from FDI, but as global finances collapsed, a third to a half of FDI inflows have vanished this year.

It gets worse. The International Monetary Fund (IMF) says that Indian firms have some of the worst debt profiles in the world – only the US is worse in fact. Now that wasn’t part of our world domination plans I can assure you. The IMF says that US firms this year could default on 23 per cent of their loans, while Indian firms could default on 20 per cent of our loans, up 4.2 per cent versus 2008.

The only way to offset a decline in FDI worth as much as 10 per cent of GDP is for the Indian government to make private capital cheaper and easier to come by, and for the government to invest directly in more much needed infrastructure investment. Although there has been some positive movement in this direction, it will not happen quickly enough, certainly not in any major way until after the mammoth elections process is completed and the new coalition and executive forms.

In the meantime, the jobs and cranes are on holiday, the big hole in the ground that DLF hopes will one day be the Mall of India collects rainwater, and I continue to dream of becoming a CEO – but on a much slower 2015 schedule, instead of by 2010 as I had originally planned …

This is the first article by our new India correspondent, Dwayne Ramakrishnan, EconomyWatch.com