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Editorial comment

Over the past few years, India has been associated with rapid economic growth. But recently some of the shine has started to come off, with growth dipping to 6.1% in Q1 2012 – its weakest in three years. Many now worry that India will struggle to grow at much above 7% this year – a serious slowdown and a way behind the 8.5% growth that the IMF expects for China.

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Some of the problems facing India were illustrated this month in a scandal over the sale of coal assets. In a leaked report, the country’s comptroller and auditor general (CAG) accused the Government of selling coal blocks too cheaply, missing out on US$ 210 billion of potential revenue as a result. This comes on the back of a similar scandal involving the sale of mobile telecoms licences that resulted in all of the licences being cancelled by India’s Supreme Court earlier this year.

The Government claims the low prices were set to encourage investment and disputes the CAG’s findings. And while it is true that there is no indication that the large-scale corruption involved in the mobile telecoms scandal was also present in the selling of coal blocks, this sort of bungling sets back still further India’s ability to mine the coal that it needs. In a country already chronically short of electricity, it is yet more bad news.

The facts are stark. Although desperate for more coal, India’s domestic mining industry is a quagmire of bureaucracy and vested interests. Of the more than 190 coal licences awarded, only 28 have been developed. Even when new projects are undertaken, it takes an average of 8 – 10 years to bring a coal block to production; in China, Australia and Indonesia, it takes a maximum of four. “India needs more coal [and] unless we figure out a quick solution we will have to import more expensive coal”, said Arvind Mahajan of KPMG in India.

This seems to be the way it will go. Good news for coal producers in southern Africa and Indonesia, which are set to feed India’s growing need for imported coal, but bad news for the 400 million of India’s poor that still lack access to electricity. These are the true victims of the corruption and Byzantine bureaucracy that comprise the darker side of the  Indian economy. If India is to continue its upward rise, it is time for that to change.