investing in india 2012

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What 700 Million People in the Dark Says About Investing in India

For years now I've preferred China over India.

When invariably asked to compare the two as investments, my answer has always been the same.

Somewhat tongue -in-cheek, I'd point out "that India has trouble keeping the lights on from one end of the country to the other."

Little did I know that those comments made in jest would actually become reality.

Earlier this week, a massive power blackout left more than 700 million people without power in India as not one, but three, regional electrical grids failed.

If that isn't a glaring sign that India isn't ready for prime-time I don't know what I can say to make you see the light - pun absolutely intended.

Don't get me wrong. There are clearly a few select Indian companies worth the risk.

But as a whole, the scope of this power failure suggests India has a long way to go before it achieves the global superpower status it seeks and a dominant position in your portfolio.

India Needs to Put its Own House in Order

Not that this will stop India from trying.

It's now the 8th largest military spender in the world, having tripled defense spending in the past 10 years. It's no secret India desperately wants to have a permanent seat on the United Nations Security Council.

And, it's making great strides in international diplomacy that it believes will pay off later in increased foreign recognition and direct investment.

But as this embarrassing power failure demonstrates, India would be better off getting its own house in order first before it steps onto the world stage.

Many investors take issue with these views. They cite the fact that India is the second-largest English-speaking nation in the world, that 58% of its economy is consumption-based, that it has huge numbers of tech-savvy and well-educated people.

I don't dispute any of that.

However, on the other side of the ledger is a laundry list of reasons for investors to be wary.

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