INXX: Indian Infrastructure ETF

Ever been to India, I have you'll find Cars, trucks, buses, motorcycles, taxis, rickshaws, cows, donkeys, and dogs fighting for every inch of the roadway as horns blare and brakes squeal. Drivers run red lights and jam their vehicles into any available space, paying no mind to pedestrians clustered desperately on median strips like shipwrecked sailors.

India's high-tech services industry has set the country's economy booming. Growth is running at 9%-plus this year. The likes of Wal-Mart (WMT) Vodafone (VOD), and Citigroup (C) are placing multibillion-dollar bets on the country, lured by its 300 million-strong middle class. In spite of a recent drop, the Bombay stock exchange's benchmark Sensex index is still up almost 100%, in the last 5 years.

But this economic boom is being built on the shakiest of foundations. Highways, modern bridges, world-class airports, reliable power, and clean water are in desperately short supply. And what's already there is literally crumbling under the weight of progress. The bridges are in disrepair, highways are deathtraps, people hanging off trains. Economic losses from congestion and poor roads alone are as high as $6 billion a year, says Gajendra Haldea, an adviser to the federal Planning Commission.

The infrastructure deficit is so critical that it could prevent India from achieving the prosperity that finally seems to be within its grasp. Without reliable power and water and a modern transportation network, the chasm between India's moneyed elite and its 800 million poor will continue to widen, potentially destabilizing the country. Jagdish N. Bhagwati, a professor at Columbia University, figures gross domestic product growth would run two percentage points higher if the country had decent roads, railways, and power. "We're bursting at the seams," says Kamal Nath, India's Commerce & Industry Minister. Without better infrastructure, "we can't continue with the growth rates we have had."


India today is about where China was a decade ago. Back then, China's economy was shifting into overdrive, but its roads and power grid weren't up to the task. So Beijing launched a massive upgrade initiative, building more than 25,000 miles of expressways that now crisscross the country and are as good as the best roads in the U.S. or Europe. India, by contrast, has just 3,700 miles of such highways. It's no wonder that when foreign companies weigh putting new plants in China vs. India to produce global exports, China more often wins out.

CAVEAT: India's government has legacy of bureaucracy, politics, and corruption! 

BUT IT CAN BE DONE

PROOF: Politicians who refuse to play the game, N. Chandrababu Naidu, the former chief minister of the state of Andhra Pradesh, transformed the state capital of Hyderabad from a boon-dock, into a high-tech destination by building new roads, widening others, and aggressively carving out land for factories and office parks. Google (GOOG), IBM (IBM ), Microsoft (MSFT ), and Motorola (MOT) have all built R&D facilities there.

As always, do your own homework. I'm buying INXX (Holdings) on any pullback.