Summary

A series of explosions hit the Indian high-tech city of Bangalore on July 25. Though the blasts caused little damage and were likely perpetrated by amateurs, the attack is yet another wake-up call to foreign investors that the shine is coming off of the “Shining India” investment model.

Analysis

A series of small explosions hit the high-tech hub of Bangalore, India, and its outskirts July 25, killing at least two people and injuring several others. The attack itself was an amateurish attempt, but the fact that it occurred in the Silicon Valley of India is enough to make foreign investors jump and bring into question India’s attractiveness as a hot destination for foreign investment.

The speedy growth of India’s information technology (IT) sector during the 1990s put India in the limelight, with analysts worldwide claiming that India was on its way to becoming a global superpower with its giant, cheap labor pool, trained English speakers and considerable expertise in the IT industry. The then-ruling Bharatiya Janata Party coined the term “Shining India” to mark India’s ascent into the developed world, leading popular Western journalists to clamor over the idea that a McDonald’s made Bangalore the next San Francisco.

Stratfor never subscribed to this view. India simply suffers from one too many structural deficiencies to even come within sight of superpower status. Though the West quite naturally views liberal democracies positively, the Indian democracy is a different story. Split across geographic, economic, linguistic, cultural, religious, political and ideological lines, India is incapable of coordinating and implementing high-level policy among the national, regional and local governments. The country is still in a deep struggle over how to accelerate growth in the IT sector, while India’s agricultural sector, which employs more than 60 percent of the country’s labor force and grows annually at a staggeringly low rate, continues to lag behind. Add to that rampant corruption and a bloated bureaucracy, and any chance of lifting India’s infrastructure from its sorry state of a ffairs in even premier cities like Bangalore is near impossible.

And it gets worse. India is in a dire energy situation. Already, companies in India have grown accustomed to hours-long blackouts, especially in the hot summer months.