Friday, December 09, 2022

Concentrate on the Possible

By The Editorial Team Updated: Apr 11, 2019 1:48 am

It is election time in the country. As usual the political parties are promising the moon to the electorate. This shows that the political parties in India either are not aware or not at all bothered to feel the pulse of the people of the country. The parties have simply failed to read the writings on the wall. People of India do not need the moon. All they require is the basic necessities of life – Roti, Kapra aur Makan. They need basic infrastructure such as sadak-bijli-paani.” So, it is almost certain that Indian electorate will wholeheartedly support whichever party promises to provide these basics necessities of life.

But sadly, there is an unhealthy competition going on between the political parties in promising sops. Ruling BJP has promised pension for farmers in reply to Congress’ minimum basic income. Similarly, smaller parties have left no stone unturned to woo the voters by making promises keeping an eye on respective vote banks while forgetting that “basic” infrastructure such as roads, water and electricity are critical drivers of economic growth. Creating the “basic” backbone infrastructure not only delivers value through the usage of the asset or service but, inter alia, offers even greater value through the ecosystem that can be built around the core assets. For instance, 15 states of the country now have 100% household electrification. This development may increase sales of electrical appliances too. It drives home the point that electrification has the potential to create value through multiplier effects on the economy and boost demand for goods and services down the consumption chain. It may be mentioned that creation of a new market is not limited only to the product being sold. Given the relatively high value nature of consumer durables, there will always be new vistas. This opportunity is applicable mainly to well-entrenched incumbent lending institutions looking for the next phase of growth. For instance, there might be a Non-Banking Financial Company (NBFC) with a significant business in financing two-wheeler market in and around the areas seeing increased electrification. The increased electrification trend allows the NBFC to now access a substantial component of existing customers for a new product line of consumer durables. Thereby, the NBFC can deliver value to its stakeholders by building on an existing distribution network and credit information repository. Additionally, there is business opportunity for the logistics sector as well. A new market in consumer durables creates the need for transportation, storage and distribution of products in new areas. The above is an example of how “basic” infrastructure development creates positive multiplier effects throughout the economy. Most importantly, new industries are established and existing industries can expand into new areas thereby creating jobs and facilitating investments. For investors focused on India, both in the private and public markets, current trends such as increased electrification create investment opportunities. Apart from creating infrastructure, value creation is possible by improving the quality and maintenance of existing “basic” infrastructure. New projects tend to grab the headlines; gradual quality improvements and effective maintenance of infrastructure is value-additive as well. The creation of “basic” infrastructure delivers value on many fronts. Starting from attracting private capitals, job creations, a higher standard of living, access to basic amenities and expansion of business opportunities are the obvious advantages that will be made available. So, instead of promising the impossible, the parties should concentrate on building and improving basic infrastructure facilities.


By The Editorial Team Updated: Apr 11, 2019 1:48:14 am