Implications of the Commonwealth Games Black Eye | Sherpas in Blue Shirts

Posted On November 12, 2010

Just back in Delhi for the first time since the Commonwealth Games concluded. As many will recall from media coverage before the games, Delhi struggled to get everything in place in advance – the venues, housing for the athletes, equipment and other things were all late in being completed (and some were never completed). This led to threats and the real possibility that some of the national contingents would skip the games entirely due to poor conditions.

Although the games did come together and were largely seen as successful (plus India won a record number of medals), most of the world will recall the stumbling approach India demonstrated in getting the infrastructure together.

This black eye on the evolving reputation of India is unfortunate and will cause many investors to continue to view India with caution. And rightfully so – India is not good at large scale infrastructure. Never has been, never will be.

This criticism could be interpreted as a suggesting that India’s role in global services will be hampered by the underwhelming performance in pulling off the Commonwealth Games. But that would wrong – this actually helps India’s position in global services.

The repeated failures at building world class infrastructure in a predictable and on-budget manner will slow future investment in large scale infrastructure in India – which impacts supply chain-oriented portions of the economy. Rail, roads, ports, power and other large scale infrastructure projects are necessary for supporting the manufacturing sector. But not service delivery centers – these centers can be built in an isolated manner with redundant systems to overcome the unreliable and sub-optimal surrounding infrastructure (think multiple telecom lines, back-up power generators, etc.). This tactic is the backbone already used to scale the India offshore market.

The good news for India’s global services industry is that limited investment in building world class supply chain infrastructure means that the manufacturing sector will develop more slowly. This is good news because it means less talent (especially entrepreneurial leadership) and attention will flow into the manufacturing sector – which leaves more for the services sector. In many ways, this is the exact opposite story of China – excellence at building world class infrastructure helps drive a powerful supply chain-centric export economy.

Every delivery center manager in India wishes that the infrastructure could be improved so that they could arrive at work each day without having to look for unexpected holes dug up in the surrounding streets, but that is simply not a reality. Rather, it the price one pays for getting the benefits of the India offshore services model – and without robust competition from a manufacturing sector.

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