Saturday, May 06, 2006

How bad are Indian ports, and how badly does it matter?

Everyone in India is envious of the labour-intensive, export-oriented manufacturing exporft of China. The gap between India and China is caused by 4 problems: Small scale sector reservation, labour law, lack of GST and superior Chinese infrastructure.

I recently came across some striking data which suggests that Chinese ports are roughly as bad as ours. I wrote an opinion piece in Business Standard on these issues. On one hand, this raises questions about the port reforms in India - we haven't yet obtained low-cost ports by world standards.

But equally, this makes one question the importance of infrastructure as the explanation of why India lags China on manufacturing exports. Perhaps the other 3 problems are more important. You wouldn't start a factory with 100,000 employees with Indian-style labour law, which critically impedes the economies of scale that are attainable in India.

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