The Economist

Trade and investment with Australia

Are you being served?

An ambitious trade deal with Australia has Chinese businessmen aflutter

Dec 4th 2014 | SHANGHAI AND SYDNEY | China

ZHU Xinli has gone from prey to predator. The firm he runs, China Huiyuan, is the country’s largest privately owned juice firm. In 2008 Coca Cola, the largest drinks firm in the world, tried to buy his company but was prevented from doing so by Chinese regulators. Today, Mr Zhu is on the prowl for big acquisitions of his own—down under.

China’s juice king joined nearly two dozen of China's leading private businessmen on a recent visit to Australia. The group, which calls itself the China Entrepreneurs Club, wanted to investigate new opportunities created by an ambitious free trade agreement (FTA) that was agreed in principle by President Xi Jinping of China and Australia’s prime minister, Tony Abbott, on the sidelines of a recent G20 summit in Brisbane. Such is the importance Australia attaches to this deal that on December 1st Mr Abbott himself met the visiting fat cats.

One important aspect of the FTA, which is to be formalised in a few months, is that it makes life easier for private Chinese firms. In the past state-owned firms looking for big energy or mining deals dominated southerly investment flows—and, in the process, provoked wails of a takeover by China of Australia's crown jewels (Australia's natural resources are in huge demand in China: see chart).

Such talk was always absurd. Chinese direct investment pales in comparison to flows from America—and in any case has long been subject to prior approval by a government review board. But a recent study by KPMG, a consultancy, and the University of Sydney found that investment is shifting toward smaller deals and private investors.

Under the new trade deal, if an acquisition by such a private firm is smaller than about a billion dollars, prior approval is no longer needed. Mr Zhu has had a team of eight people scouring the country for possible targets in the agricultural sector. New Hope Group, whose boss is also a member of the business club, plans to spend some $500m on deals in the farming, animal husbandry and food sectors.

Another important aspect of this FTA is that it represents the biggest opening of China’s services sector to foreigners. Chinese leaders are keen to transform the economy, from the world's sweatshop to one that is focused on domestic consumption and services. These range from nursing homes and express delivery companies to firms providing financial advice or legal services.

What explains this apparent zeal for opening? Some in China see Australia as a good place to experiment. The country is the most urbanised of the advanced economies, and as such has a highly sophisticated consumer base and innovative service-companies. By giving such businesses greater access to China's market, Chinese officials are hoping to inject competition that will force lazy incumbents and oligopolists to shape up. But because Australia is much smaller than America or Europe, local firms are unlikely to be overwhelmed by such an inflow. Shock therapy is not the Chinese way.

The Economist

Corporate debt in India

Power cut

Hamstrung banks are a barrier to faster economic growth in India

Dec 6th 2014 | MUMBAI | From the print edition

“WE WANT to make sure that this is for real,” said Raghuram Rajan, referring to the recent drop in inflation in India, to 5.5%. Mr Rajan, the head of the Reserve Bank of India, was speaking after the central bank decided to keep its main interest rate at 8%. India’s finance minister, Arun Jaitley, was part of a chorus that had been calling for a rate cut. The RBI seems increasingly likely to meet its goals of pushing inflation below 8% by January 2015 and below 6% by January 2016. Mr Rajan chose to be cautious. However, he did suggest lower interest rates were likely early next year if the outlook for inflation was still rosy. The government, he also said, was minded to set a formal inflation target for the RBI soon, of 2%-6% beyond 2016.

India has been lucky. It had been struggling to contain inflation until weaker prices for its imports, most notably oil, provided a boost. But there is concern about a recent loss of momentum in the economy. Figures published on November 28th showed GDP growth slipping to 5.3% in the year ending in September. Investment was especially weak. Credit growth has been feeble. The main cause of both is not the level of interest rates but an overhang of debt. Indian firms are heavier borrowers, measured by debt-to-equity ratios, than those in any other emerging market bar Brazil, according to a recent analysis by the IMF. The worry is that banks will not be able to fund fresh investment because they are weighed down by dud loans.

Most of India’s private debt is owed by companies. The incidence of non-performing loans is rising. Including “restructured assets”, loans whose terms have been rejigged to make payment easier, troubled assets are 10% of all lending (see chart). The problem is bigger among public-sector banks, which account for more than 70% of the loan stock. Around 15% of restructured loans typically turn bad in India. But in the aftermath of an investment boom, such as the one the country enjoyed until 2012, the rate at which such loans sour again may prove to be higher than that.

Analysts at Credit Suisse, a brokerage, find that a third of the debt in its sample of 3,700 listed companies is held by firms that paid more in interest than they earned in the past quarter. Many debt-ridden firms had no earnings at all. Much of the trouble lies with infrastructure, power and metal companies that invested heavily in the go-go years. Some completed projects lie idle waiting for officials to sign off on an all-important detail—allowing a power station to procure coal from a particular mine, for instance. The government was making inroads into the backlog of stalled projects until September, when the supreme court cancelled more than 200 coal-mining licences it said had been sold unfairly. Fresh auctions for many of the affected areas will take place in February. But the delay has put $40 billion of debt at risk, according to Credit Suisse.

Some ventures will eventually come good but others may no longer be viable. The courts move slowly in India so banks have trouble getting their money back when borrowers get into trouble. That is why, as Mr Rajan pointed out in a recent speech, the average interest rate on loans to the power industry is 13.7%, well above the average home-loan rate, of 10.7%. When the spread over the RBI’s benchmark rate, of 8%, is so large, the cut in interest rates hinted at by Mr Rajan will not make as much difference as it should.

Presenting his budget in July, Mr Jaitley said that India’s banks would need $40 billion (2% of GDP) of fresh capital by 2018 to comply with international regulations. But Credit Suisse’s analysts argue that up to $45 billion more will be needed to fill the hole left by bad debts. The government, which is battling to contain a budget deficit, has said it will raise capital for public-sector banks by further reducing its stake in them to 52%. It will need to do more. Without well capitalised banks, India will not be able to reach the faster growth rate the government has promised.

Bloomberg

China Plans Wealth-Product Rules to Cut Shadow Banking Risks By Bloomberg News Dec 5, 2014 12:10 AM ET

China urged banks to directly invest money raised from wealth-management products, signaling a more limited role for trusts and securities firms, and said it wanted to end implicit guarantees of the investments.

The China Banking Regulatory Commission plans to let banks’ wealth funds set up their own investment accounts, a draft rule seen by Bloomberg News showed. A Beijing-based CBRC spokeswoman confirmed a document was circulated to banks for feedback.

The regulator is trying to curb the channeling of wealth funds by banks through trusts and brokerages to risky borrowers in order to circumvent lending quotas and regulatory restrictions. The products, worth $2.1 trillion in June, have fueled China’s shadow-banking industry as high returns and perceptions of an implicit government guarantee lure investors.

The draft rule “aims to dismantle the iron-clad guarantee and help transform the business into a real asset-management business,” China International Capital Corp. analysts led by Mao Junhua said in a note today. More direct investment would help reduce the economy’s funding costs, they said.

Money can’t be invested in domestically traded equities unless it’s for high-net worth individuals or companies, the rule said, reaffirming a 2009 restriction. The CBRC at the time banned the investment of funds from wealth-management products into equities traded domestically, unlisted shares, or private placements by listed companies, while allowing the purchase of stock in initial public offerings.

Extra Costs Wealth-management products had an average annualized return of 5.2 percent in the first half, data from the China Banking Wealth Management Registration System show. That’s higher than the 3 percent rate for benchmark one-year deposits at that time.

A “gambling mindset” was pushing up costs for the real economy as people channeled money into high-yield short-term investments such as wealth products, Liu Shiyu, the Communist Party’s secretary for Agricultural Bank of China Ltd. and a former deputy governor of the central bank, said in May. Banks then diverted the proceeds through a third party to borrowers, adding extra layers of costs, he said.

With such products, investors have no incentive to buy equities because stock investments carry risks, while banks offered “implicit guarantees” on the products, Liu said.

The draft rule says the CBRC will seek feedback through Dec. 8. Investors should bear their own losses, the document says.

As of June, about 39.8 percent of wealth management products’ investments were in bonds and the money market, 28.7 percent in cash and bank deposits, 22.8 percent in “non-standard credit assets,” or less liquid

assets such as loans and trusts, and 6.5 percent in equities, according to the China Banking Wealth Management Registration System.

India's GDP growth will overtake China's over 2016-18: Goldman SachsForecasts FY16 GDP growth at 6.5% and FY17's at 7% on strong FDI inflows and a cyclical recovery

Malini Bhupta  |  Mumbai  December 5, 2014 Last Updated at 00:50 IST Ads by Google

A day after global brokerage firm Macquarie painted a rosy picture of the Indian economy and raised its target level for the stock indices for the next 12 months, Goldman Sachs said India was set to overtake China and become the fastest-growing emerging market during 2016-18.

Goldman Sachs India managing director and chief India economist Tushar Poddar and chief Asia-Pacific strategist Timothy Moe said on Thursday they believed the Indian economy was beginning a new growth cycle, driven by reduced macro imbalances, benign global conditions (lower commodity prices) and structural reforms.

The Asia-Pacific research division of the foreign investment banking firm believes the Indian economy is on the mend. In 2015, Goldman Sachs expects the markets to give 13 per cent returns (after factoring in currency depreciation). The brokerage expects Nifty to close at 9,500 by the end of 2015, which is, however, less than 9,960 predicted by Macquarie.

Structural reforms and the focus on reviving the economy is expected to boost India’s gross domestic product (GDP) growth to 6.3 per cent in calendar 2015 (6.5 per cent in FY16) and 6.8 per cent in calendar 2016 (7 per cent in FY17), forecasts Goldman Sachs. In contrast, it expects China to grow by seven per cent in 2015 and 6.7 per cent in 2016. India’s growth is expected to accelerate in the coming years, while China would witness a gradual slowdown in growth, which economists prefer to describe as “long-landing”.

China's growth in the coming years is expected to remain below seven per cent, while India’s growth revives in the coming years, making it the fastest-growing emerging market. Other emerging markets such as Brazil, Russia and South Africa are expected to grow at a much slower pace on weaker commodity prices.

Even though Prime Minister Narendra Modi has been faulted for his many foreign trips and absence of “big bang” reforms, Goldman Sachs believes that a cyclical recovery has already begun with demand picking up. Financial conditions have significantly eased and liquidity conditions have improved. The government is looking at easing investment conditions in India and focusing on project clearances. Also, 2015 is expected to see a rush of foreign direct investments (FDI) coming into India, thanks to liberalising the defence, insurance and construction sectors.

Moe believes Modi’s recent foreign trips will result in close of $36 billion of FDI in the next calendar year. If the monthly inflow of $3 billion of FDI flows materialises, as anticipated by Goldman Sachs, it would outpace the $29 billion that came into Indian equities in 2010 — the highest in 10 years. In calendar 2013, foreign institutional investors poured in $20 billion into Indian equities, while this year has seen inflows of $16 billion so far.

Goldman Sachs also expects the Indian rupee to remain largely stable against the dollar, thanks to the capital flows. This means that even as the US Federal Reserve begins to increase rates next year, India will not see the kind of turmoil seen in 2013. However, India's rupee could appreciate strongly against other developed market currencies such as the euro and the British pound.

The biggest risk to India's growth story will come from the tardy implementation of reforms. The government has its task cut out as far as reforms in the financial sectors and in governance, labour and technology are concerned. Goldman Sachs believes the government will be able to push through reforms to boost manufacturing and infrastructure, implement goods and services tax, use technology to cut red tape and create a more friendly business environment. However, where the government can falter are labour reforms and pushing through changes in the civil services.

Expert views: RBI keeps interest rates unchanged

MUMBAI Tue Dec 2, 2014 12:34pm IST

The Reserve Bank of India (RBI) seal is pictured on a gate outside the RBI headquarters in Mumbai October 29, 2013.

(Reuters) - The Reserve Bank of India kept interest rates unchanged at 8.0 percent on Tuesday as widely expected, staying focused on containing inflation while adopting a more dovish tone in response to the government's call for help to revive economic growth.

COMMENTARY

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

While governor Rajan's contention has been that money market and bond yields have come down, so lending rates from banks should also follow suit. But it is difficult to believe that will happen without RBI sending a signal in that direction. Policy rates remain at elevated levels and are aimed at controlling aggressive credit disbursals, so as to keep inflation in check. It is also good to know that RBI has been in talks with the government to frame up the contours of the monetary policy framework, although we do not know any major details about it as yet.

(Click here to read Reserve Bank leaves rates on hold, may cut early 2015)

RADHIKA RAO, ECONOMIST, DBS, SINGAPORE:

The RBI did not relent to market pressure and opted to keep rates unchanged. The policy language has turned neutral as risks to the FY16 target are now seen as evenly balanced, but policymakers were quick to add that durability of readings beyond December will be watched.

We interpret these statements to signal that a decision to lower rates will be data-dependant given the uncertainty over the trajectory for crude prices and challenging fiscal outlook. More importantly, the RBI is wary of policy flip-flops and highlights that if and when the policy direction shifts, the subsequent action needs to be consistent with the changed course.

Hence, further clarity on price outlook will be preferable as base effects fade in first quarter next year. Nonetheless, the door for rate cuts has been left open and is likely to see the market shift rate cut expectations to February's review.

SANDEEP NANDA, CHIEF INVESTMENT OFFICER, BHARTI AXA LIFE INSURANCE, MUMBAI

The policy has come in line with market expectations. There is no rate cut but guidance is definitely dovish. People will now expect rate cuts from February onwards. RBI has brought down its expectations to market's level. More positive surprises can be expected given the way commodity prices are behaving.

ARVIND CHARI, HEAD OF FIXED INCOME AND ALTERNATIVES, QUANTUM ADVISORS, MUMBAI

We have maintained that the RBI will only move post certainty on growth polices and supply reforms in the budget. We thus expect the first rate cut to be immediately post-budget in the first half of March and it can be a 50 basis point cut.

KILLOL PANDYA, SENIOR FUND MANAGER-DEBT, LIC NOMURA MF

RBI's policy is very balanced and pragmatic. There should be no complaints from market participants. The policy is dovish relatively so there would be continued expectations of rate cuts in future. The trajectory would remain dovish but government's needs to do its part.

R.K. GUPTA, MD, TAURUS ASSET MANAGEMENT, NEW DELHI

This is what we were expecting. Probably rates may not be reduced before April 2015. Reducing 25 basis points is not going change anything in the corporate sector. If inflation continues to remain low, foreign currency reserves remain comfortable, current account deficit remains under control, probably you can expect a 50-75 basis point cut in April 2015, after the budget. RBI will take a very, very cautious approach.

SHAKTI SATAPATHY, FIXED INCOME STRATEGIST, AK CAPITAL, MUMBAI

Today's action is aimed at containing the medium-term inflationary pressure and is well in line with the RBI's sanctity towards its previous tone. However, the tone for today's policy seems more softer on account of positive developments happening to the intermittent data points. The prolonged low price regime seen in international crude and the government's effort in containing the fiscal deficit would weigh positive in forthcoming policies of 2015 and might lead to a first rate cut in the first quarter of 2015.

DEVENDRA KUMAR PANT, CHIEF ECONOMIST AND SENIOR DIRECTOR, (HEAD-PUBLIC FINANCE), INDIA RATINGS AND RESEARCH

The policy has come in line with our expectations. There are high chances of a rate cut in Feb 2015. Decline in inflation has come mainly from falling crude oil prices. Oil prices will remain low but may not see a sharp fall next year. Food inflation may also rise due to summer pressure. Base-effect will keep inflation lower until December.

J. VENKATESAN, EQUITY FUND MANAGER, SUNDARAM AMC, CHENNAI

The central bank has made a strong dovish statement. Inflation is clearly trending downwards, and based on that the RBI has clearly stated that the monetary stance will be reviewed early next year. If the interest rate is cut it would be sentimentally beneficial, but things will not pick up just because of rate cuts. A strong reforms push is needed to revive economic growth, that is where the cycle had got stuck.

A. PRASANNA, ECONOMIST, ICICI SECURITIES PRIMARY DEALERSHIP LTD, MUMBAI

This policy is as per expectation. The guidance is dovish which leads us to believe that there is a significant chance of policy easing by February subject to inflation and government's efforts to meet fiscal targets. At this point we'll go with 25 basis points. The bond market is running ahead, but there's more conviction about policy easing by February.

KUMAR RACHAPUDI, SENIOR RATES STRATEGIST, ANZ, SINGAPORE

The RBI assessing the risks to its January 2016 inflation forecast as 'balanced', previously the risks were biased upside, is significant. In fact, the RBI said if the current inflation momentum and changes in inflationary expectations continue, a change in the monetary policy stance is likely early next year. Think this paves way for a rate cut in early 2015 unless global commodity prices aggressively reverse their fall. We like staying long Indian bonds here.

SANDEEP BAGLA, ASSOCIATE DIRECTOR, TRUST GROUP

The change in stance by RBI is very heartening. The easing of commodity prices has meant that the central bank has room to cut rate by around 75 bps for the next full year. Market has tried to price in this possibility by rallying strongly. There's a good chance that the 10-year yield will fall to 7.90-7.95 in the immediate term.

R. SIVAKUMAR, HEAD OF FIXED INCOME, AXIS ASSET MANAGEMENT, MUMBAI

Clearly, a very dovish statement by the governor; they have acknowledged that inflation is treading expectations and that there is scope for monetary easing in early 2015. Markets like clarity and they are reading this as a signal that barring any surprises, a Feb 2015 rate cut looks likely.

BACKGROUND

- India's annual infrastructure output growth accelerated to 6.3 percent in October, driven by pick up in coal and electricity generation, government data showed, indicating an improvement in economic activity.

- Gross domestic product expanded 5.3 percent in the July-September quarter from a year earlier as a manufacturing slump took the bounce out of Asia's third-largest economy. Growth in the previous quarter was at a 2-1/2 year high of 5.7 percent.

- India has scrapped a rule mandating traders to export 20 percent of all gold imported into the country, a surprise move that could cut smuggling and raise legal shipments into the world's second-biggest consumer of the metal after China.

- The Indian government plans to raise about 891.2 billion rupees ($14.4 billion) by reducing its stakes in state-run banks to 52 percent, the junior finance minister said.

- India could give banks more flexibility to restructure distressed loans in a bid to steer funding towards cash-strapped infrastructure projects, Reserve Bank of India (RBI) Governor Raghuram Rajan said.

- The wholesale price index rose an annual 1.77 percent last month, its slowest since September 2009, compared with the 2.20 percent forecast by economists in a Reuters poll.

- Retail inflation, which the RBI tracks in setting lending rates, slowed to 5.52 percent in October from a multi-year low of 6.46 percent a month earlier, helped by slower annual rises in food and fuel prices.

- India raised the minimum capital requirement for so-called shadow banks and tightened rules on deposits and bad loans to avoid any potential risk to the economy from these rapidly growing finance firms by regulating them like traditional banks.

Times of India

China wants to push polluting 'sunset' industries to IndiaSaibal Dasgupta,TNN | Nov 28, 2014, 08.02 PM IST

China has launched a massive drive to relocate outdated and polluting technologies to neighboring countries including Vietnam, Laos and Bangladesh. 

BEIJING: The best way to turn Prime Minister Narendra Modi's 'Make in India' a success is to absorb sunset industries with low technologies, which China is pushing out, according to an article in the Global Times newspaper, which is one of the organs of the Chinese Communist Party.

"China's sunset industries are where India's hope lies," the article by Ding Gang, a senior editor of People's Daily, the main organ of the Communist Party, said.

Hiding the fact that it is Chinese companies that are desperate to relocate their plants to India and other neighboring countries, the article advises the Modi government to learn from China's success in the manufacturing sector.

China has launched a massive drive to relocate outdated and polluting technologies to neighboring countries including Vietnam, Laos and Bangladesh. It is now looking at India for a possible location because of the advantages made available under the 'Make in India' policy.

But Chinese companies have faced severe resistance in the form of anti-China riots in Vietnam some months back.

Leaders and businessmen from different Chinese provinces are visiting India looking for opportunities in sectors like textiles, chemicals, iron and steel, low-end motors and machines. They ran desperate to deal with overcapacity and rising production costs by transferring plants to India and other countries.

"What India needs to move into are the products China has been making but lacks advantages in doing so compared with India. In other words, China's sunset industries are where India's hope lies," the article said.

It did not mention the disadvantages faced by Chinese industries which include government censure for high-polluting industries, and rising cost of labor, land and components.

"However, New Delhi's strict control and regulation have set obstacles for Chinese enterprises to enter its market in recent years. For example, some textile firms would rather choose Vietnam, Cambodia and even Myanmar as their investment destinations," the article said.

"India has a lot of disadvantages in developing its manufacturing industry. For instance, its market has yet to be open enough to foreign capital; it has too many small enterprises and a poorly educated workforce," it said.

The Chinese desperation is relocating industries was evident as the article said, "Chinese corporations that manufacture these products can bring not only capital and order, but also technologies, managerial expertise, market and support in other arenas".

Bloomberg

India VS China: The Battle for Global Manufacturing11/06/2014

With its chronic blackouts, crumbling roads, and other infrastructure woes, India should have no appeal for John Ginascol. A vice president at Abbott Laboratories (ABT), Ginascol is responsible for ensuring that the company’s food-products factories run smoothly worldwide. He can’t afford surprises when it comes to electricity, water, and other essentials. “People like me,” he says, “dream of having existing, good, reliable infrastructure.”

Yet Abbott has just opened its first plant in India, and Ginascol says there haven’t been any nightmares so far. In October the company began production at a $75 million factory in an industrial park in the western state of Gujarat. The factory is producing Similac baby formula and nutritional supplement PediaSure, which Abbott plans to sell to the growing Indian middle class. The plant will employ about 400 workers by the time it’s fully up and running next year. As for India’s infrastructure, Ginascol has no complaints. The officials in charge of the park “were able to deliver very good, very reliable power, water, natural gas, and roads,” he says. “Fundamentally, the infrastructure was in place.”

Indian Prime Minister Narendra Modi is hoping other executives will be similarly impressed with the ease of manufacturing in his country. Before Modi took charge in New Delhi, he headed the state government in Gujarat, and during his 13 years in power there he made the state an industrial leader. Manufacturing accounts for 28 percent of Gujarat’s economy, compared with 13 percent for the country as a whole, and a touch less than the 30 percent figure for manufacturing titan China.

Story: Why Factory Jobs Are Shrinking Everywhere

In an attempt to build India’s industrial base nationwide, Modi is pushing the Make in India campaign, designed to attract foreign investment by highlighting the ongoing changes. “We have to increase manufacturing and ensure that the benefits reach the youth of our nation,” Modi tweeted after the initiative’s Sept. 25 introduction. By now he’s eased restrictions on foreign investment in property projects and begun an overhaul of the railroad system.

In the year ahead the prime minister’s campaign may gain momentum, thanks to the shifting fortunes of India and its neighbor China. The Indian economy, which slumped badly in 2012 and 2013, will likely

grow 6.3 percent next year, in part because of investor confidence in Modi. By 2016 the country’s growth rate of 7.2 percent will surpass China’s 7.1 percent, says CLSA senior economist Rajeev Malik.

Well before the arrival of Modi, Indian leaders had talked about promoting manufacturing. The slowdown in China, however, could make a big difference this time. China became an export powerhouse because of its vast pool of low-wage workers, but it’s no longer so cheap to manufacture there. Pinched by double-digit increases in China’s minimum wages, many companies are looking for low-cost alternatives. Southeast Asian countries such as Vietnam and Indonesia are attractive, but they lack the deep supply of workers available in India. “It’s the only country that has the scale to take up where China is leaving off,” says Frederic Neumann, a senior economist with HSBC (HSBC). Vietnam and Indonesia? “Neither one is big enough to take up the slack,” he says, leaving India with a “golden opportunity.”

Story: In Manufacturing, the U.S. Is Surprisingly Competitive

The hourly labor cost in India for manufacturing averages 92¢, compared with $3.52 in China, according to Boston Consulting Group. But, says Anil Gupta, a professor at the University of Maryland’s Robert H. Smith School of Business, India hasn’t come close to matching China’s investments in the roads, ports, and power networks that companies want. “Lousy infrastructure essentially eats up any advantage the country may have on the labor front.”

Local leaders allied with Modi are trying to change that. In Madhya Pradesh the state government is creating 27 industrial areas while promising to improve infrastructure and make labor laws and land acquisition regulations more investor-friendly. Passing new labor laws that make it easier to hire and fire is especially important.

On the diplomatic front, Modi has adroitly taken advantage of the rivalry between Japan and China: After recent meetings with Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping, he won commitments for almost $57 billion in investments in India. China pledged $20 billion, and Japan about 4 trillion yen ($35.5 billion). Much of the money will be used to build a giant industrial corridor between Delhi and Mumbai featuring high-speed trains and superhighways. The goal, University of Maryland’s Gupta says, is to turn the area into the equivalent of southern China’s Guangdong province, which built special economic zones to transform China into an exporting power. India’s leaders “have the political ducks lined up” to make that happen, he says.