Of underwear and reform

Brand awareness amongst the average Indian consumer has increased sharply in recent years.

Reading about this phenomenon and experiencing it first hand during recent visits to Chennai, once a tradition bound city where even the rich preferred plain white cotton (silk for the special occasion) cloth, explained a small problem that I was having in recent months.

Over the last 18 years of my life in America, I purchased my supply of underwear in India during my visits there. For one simple reason -- it was cheaper. Not anymore.

My most recent purchase not only cost me pretty much the same as in America it also has since been the source of much confusion. The ones I purchased earlier had a small nondescript label 'Tantex,' the brand name, on the inside. The latest installment, however, has 'Tantex' running repeatedly and prominently across the elastic band and on the outside.

For this glory, I have to pay double the price.

As a creature of habit, I found this change really confusing. Luckily, I am currently unemployed (there is a silver lining). Else, the few extra minutes I spend in the early hours correcting the initial error (of wearing the wrong side out) would most certainly cause me to miss the standing-room-only train ride from Princeton Junction to New York.

Mahatma Gandhi reportedly once said: 'If Indians were to ape the West in materialism, they would suck the world like leeches,' or something to that effect. Well, sucking we certainly are. Although lagging far behind the West, consumption (of pretty much everything -- energy, commodities, goods, water, food, consumer goods. . .) is increasing sharply, funded by the best of American imports -- consumer credit.

But there is a difference -- credit growth to an extent has been accompanied by rising wages in contrast to the American situation. Strong domestic consumption is supposedly a key difference of the Indian story from the Chinese one. Hopes are high for decades-long period of sustained growth close to 10%. But these hopes will remain just that in the absence of further reforms.

Everyone knows the laundry list of reforms that need to be put in place. The current administration, however, since taking over in 2004 has enacted exactly zero reform, so talk of pace of reforms in mute. In this context, the rise in asset prices in India since 2004 is a puzzle.

Prime Minister Manmohan Singh and Finance Minister Chidambaram are held hostage by both coalition partners, including the Communist party, is the widely held script. But few acknowledge the role in this inaction of a behind-the-scenes party leader who is very much a 1950s European style socialist.

Prime Minister Singh for his part has merely gone with the flow making speeches about the vast sums of investment required for India's infrastructure needs. The re-rating of asset prices in India reflects both reforms past and anticipation of reforms to come (and, of course, the generous supply of liquidity by central bankers globally).

Should anticipated reforms continue to stall, there will be much heartache, not just for investors but for the average Indian on the street. The damage it would cause to the Indian psyche and to the improving sense of self-worth (which is after all what drives sales of branded merchandise) will be incalculable.

Prime Minister  Singh should act decisively. His legacy is intact as the one who set in motion the sweeping changes of the 1990s. At 71 years, he can act without concern for political power. Global capital is waiting on the sidelines. Talent is abundant. Foreign governments are eager partners. It is time to act.

If not, it will soon be time to put the label back on the inside.