Indian woes

Five years ago India, the world’s fastest growing economy, bolstered its overseas foreign exchange reserves by $92bn. In the space of just twelve months.

That was – and remains – an impressive feat for the BRIC economy. Providing many overseas investors with a shot of confidence to deploy capital and invest.

And invest they did. Best estimates suggest that India is the fifth largest installed global wind capacity and three years ago its growth rate was the world’s highest.

As a result, wind power within India now accounts for almost 10% of installed capacity and generates 2% of the country’s power.

Suzlon, an Indian firm that’s now the fifth largest turbine manufacturer in the world, characterises much of this growth.

Headquartered in Pune and with an employee base of over 13,000, the firm has a presence in over 32 countries and benefits from a 22GW installed capacity base.

However, while it’s rise up through the ranks mirrors the wider Indian economic picture, so too do its latest woes.

Earlier this year the firm reported record quarterly losses as business stalled under mounting debts.

For, while the firm grew rapidly through the boom years, much of this international expansion was built on an over reliance on credit. Something that’s led to significant problems further down the track, as executives struggle to manage and keep a handle on the growing debt.

India too is already feeling the pain, with currency reserves at an all time low and with foreign investors exposed to significant currency risk as the economy splutters.

Many observers believe that India’s financial pain is self-inflicted, with annual growth declining over a three-year period as investors tire of corruption, bureaucracy and a chronic under investment in local infrastructure.

That’s not stopped some investors from continuing to commit of course, with Goldman Sachs having recently deployed $135m in local developer, ReNew Power – a commitment that follows an initial $200m capital injection in 2011.

The investment for many, underlined a bullish commitment to the market, during a time when many of its peers had paused to review and take stock.

Whatever the case, Goldman’s Indian investment remains a rarity in a market where only a few years ago there was a scramble to gain a foothold and commit.

This, combined with the country’s renewable energy credit system (REC) left hanging by a thread following insufficient enforcement and falling manufacturing and technology costs, presents India with a mountain to climb.

Especially when it comes to regaining international financier and investor confidence and trust.

Sure, blame for the freefall of the rupee and India’s wider political and economic malaise by no means sits solely at the feet of the domestic wind energy market.

Nevertheless, with much of the recent growth built on the availability, access and ease of cheap credit, it’s increasingly clear that future market growth cannot be driven by developer ambition and sheer bloody-mindedness alone.

Rather sector success is dependent on a long-term shift in domestic energy policy, coupled with a wider commitment to infrastructure investment.

Time then to rebuild. BRIC by BRIC.

Five years ago India, the world’s fastest growing economy, bolstered its overseas foreign exchange reserves by $92bn. In the space of just twelve months.

That was – and remains – an impressive feat for the BRIC economy. Providing many overseas investors with a shot of confidence to deploy capital and invest.

And invest they did. Best estimates suggest that India is the fifth largest installed global wind capacity and three years ago its growth rate was the world’s highest.

As a result, wind power within India now accounts for almost 10% of installed capacity and generates 2% of the country’s power.

Suzlon, an Indian firm that’s now the fifth largest turbine manufacturer in the world, characterises much of this growth.

Headquartered in Pune and with an employee base of over 13,000, the firm has a presence in over 32 countries and benefits from a 22GW installed capacity base.

However, while it’s rise up through the ranks mirrors the wider Indian economic picture, so too do its latest woes.

Earlier this year the firm reported record quarterly losses as business stalled under mounting debts.

For, while the firm grew rapidly through the boom years, much of this international expansion was built on an over reliance on credit. Something that’s led to significant problems further down the track, as executives struggle to manage and keep a handle on the growing debt.

India too is already feeling the pain, with currency reserves at an all time low and with foreign investors exposed to significant currency risk as the economy splutters.

Many observers believe that India’s financial pain is self-inflicted, with annual growth declining over a three-year period as investors tire of corruption, bureaucracy and a chronic under investment in local infrastructure.

That’s not stopped some investors from continuing to commit of course, with Goldman Sachs having recently deployed $135m in local developer, ReNew Power – a commitment that follows an initial $200m capital injection in 2011.

The investment for many, underlined a bullish commitment to the market, during a time when many of its peers had paused to review and take stock.

Whatever the case, Goldman’s Indian investment remains a rarity in a market where only a few years ago there was a scramble to gain a foothold and commit.

This, combined with the country’s renewable energy credit system (REC) left hanging by a thread following insufficient enforcement and falling manufacturing and technology costs, presents India with a mountain to climb.

Especially when it comes to regaining international financier and investor confidence and trust.

Sure, blame for the freefall of the rupee and India’s wider political and economic malaise by no means sits solely at the feet of the domestic wind energy market.

Nevertheless, with much of the recent growth built on the availability, access and ease of cheap credit, it’s increasingly clear that future market growth cannot be driven by developer ambition and sheer bloody-mindedness alone.

Rather sector success is dependent on a long-term shift in domestic energy policy, coupled with a wider commitment to infrastructure investment.

Time then to rebuild. BRIC by BRIC.

Five years ago India, the world’s fastest growing economy, bolstered its overseas foreign exchange reserves by $92bn. In the space of just twelve months.

That was – and remains – an impressive feat for the BRIC economy. Providing many overseas investors with a shot of confidence to deploy capital and invest.

And invest they did. Best estimates suggest that India is the fifth largest installed global wind capacity and three years ago its growth rate was the world’s highest.

As a result, wind power within India now accounts for almost 10% of installed capacity and generates 2% of the country’s power.

Suzlon, an Indian firm that’s now the fifth largest turbine manufacturer in the world, characterises much of this growth.

Headquartered in Pune and with an employee base of over 13,000, the firm has a presence in over 32 countries and benefits from a 22GW installed capacity base.

However, while it’s rise up through the ranks mirrors the wider Indian economic picture, so too do its latest woes.

Earlier this year the firm reported record quarterly losses as business stalled under mounting debts.

For, while the firm grew rapidly through the boom years, much of this international expansion was built on an over reliance on credit. Something that’s led to significant problems further down the track, as executives struggle to manage and keep a handle on the growing debt.

India too is already feeling the pain, with currency reserves at an all time low and with foreign investors exposed to significant currency risk as the economy splutters.

Many observers believe that India’s financial pain is self-inflicted, with annual growth declining over a three-year period as investors tire of corruption, bureaucracy and a chronic under investment in local infrastructure.

That’s not stopped some investors from continuing to commit of course, with Goldman Sachs having recently deployed $135m in local developer, ReNew Power – a commitment that follows an initial $200m capital injection in 2011.

The investment for many, underlined a bullish commitment to the market, during a time when many of its peers had paused to review and take stock.

Whatever the case, Goldman’s Indian investment remains a rarity in a market where only a few years ago there was a scramble to gain a foothold and commit.

This, combined with the country’s renewable energy credit system (REC) left hanging by a thread following insufficient enforcement and falling manufacturing and technology costs, presents India with a mountain to climb.

Especially when it comes to regaining international financier and investor confidence and trust.

Sure, blame for the freefall of the rupee and India’s wider political and economic malaise by no means sits solely at the feet of the domestic wind energy market.

Nevertheless, with much of the recent growth built on the availability, access and ease of cheap credit, it’s increasingly clear that future market growth cannot be driven by developer ambition and sheer bloody-mindedness alone.

Rather sector success is dependent on a long-term shift in domestic energy policy, coupled with a wider commitment to infrastructure investment.

Time then to rebuild. BRIC by BRIC.