"When you leave your hotel, the sights and sounds are so overpowering you can barely stand it. And when you get back, you're exhausted and don't want to go out again. We saw people who never left the calm and comfort of the lounge or the liquor bar."
 
We have never been to India. Nor have we ever ridden in one of Tata's automobiles. Perhaps it is better that way. Friends, recently returned from the subcontinent, report that it is a wild and wooly place.

Still, it is in wild and wooly places that businesses boom and fortunes are made. And India is booming. All the reports say so. The economy has been growing at more than 6% per year for the last 15 years. And it seems to be picking up speed. GDP growth over the last three years has averaged more than 8% per annum.

How did this happen? We will not venture our own opinion here. We merely note that many observers credit the new boom to reforms that eliminated the worst constraints of the "license raj" - as India's painful system of government permits and regulations was called.

We admit we know little of India's history. And what little we do know comes to us almost as oral history from Mohatma Gandhi's grandson, a dear reader of The Daily Reckoning, who lives in retirement in Massachusetts and corresponds with us from time to time.

What we gather is that as with so many British colonies that became independent, India was left to start her new life with an enormous administrative bureaucracy, to which the Indians themselves added enthusiastically. Much of it soon outlived any use it once possessed and began strangling the newborn country. Unfortunately, the new Indian leaders were also attracted to the progressive economic ideas of the period - all of them: Fabianism, Marxism, Socialism, Nationalism, and Keynesianism. Rather than simply choosing one or the other, they took up a bit of each, overlaying hornswoggle over boondoggle, stirring it all up with a dash of ethnic flavoring and a generous helping of linguistic chauvinism, and finished off with a dollop of regional power-brokering. Then, they allowed the whole spicy curry to ferment in the hot climate. Is it any wonder that the result was a rancid mess?

But India is a large, diverse country with a lot of smart people. By the 1980s, , enough smart Indians were tired of the mess that they decided to get out the brooms and dustpans. Many of the worst regulations were swept away, in a clean-up effort led by Manmohan Singh. Then, he was finance minister. Now, he is prime minister.

Since then, the country has been booming. The economy is throwing up droves of new millionaires and expanding the size of its middle class at a furious pace. Huge office complexes spring up every day in the big cities and the roads are crowded with more and more new cars. Rich Indians are splashing out on luxury items; wages are rising.

That is not to say that India is a country on a smooth road to the future, mainly because in India, roads are one of the biggest problems. According to the Economist, it takes eight days for a truck to make the trip from Kolkata (Calcutta) to Mumbai (Bombay) - a trip that includes 32 hours of waiting at checkpoints and tollbooths. But the problem is so obvious and irritating that India is bound to build new highways. And Indians are bound to buy more cars. And India's low-cost car manufacturers are bound to get much of the new business.

At our London office, we recently entertained two Indian businessmen who had raised about $3 million to start an auto business. In the Western world, the effort would have been laughably amateurish. But in India's freewheeling world, the two are already making more money than General Motors!

Colleague Lila Rajiva fills us in on some details:

"Bill - on an Indian road, there is no room for fence-sitting, you are either one of the quick or the dead. The `road showÃ,Â' in India is just that, a spectacular show - overcrowded buses with dashboards wreathed with jasmine garlands, compact Maruti cars, lorries (what you call trucks) painted pink and green, three-wheeled auto-rickshaws careening wildly from side to side, legions of scooters and cycles with saris or dhotis (the native dress most Indians wear) streaming behind them in the dust, oblivious pedestrians, bullock-carts, un-tethered donkeys, beggars, urchins, even a few random monkeys crossing the street. No observable lanes or rules. And all this on worn pot-holed roads that wash away or flood with every monsoon. The amazing thing is that people still get where they are going.

"But all that is changing rapidly.

"First, we now have the Golden Quadrilateral - an ambitious new highway project consisting of nearly 6000 kilometers of four to six lane expressways. It connects Delhi, Mumbai, and Kolkata (in the north) with Hyderabad, Bangalore, and Chennai (in the south) and costs about $12 billion. It's due to be completed this December, and it's going to be a major boon to drivers, car manufacturers, and businesses in India and abroad.

"Second, according to a BBC report in February 2006, the Indian car market is set to grow 10% this year

"That's not only because of burgeoning middle-class salaries. It's also the result of a change in habits: Indians have always been big savers, but they are now comfortable as big spenders as well. Last year, they proved it by buying more than one million cars.

"Third, manufacturers - domestic and foreign - are gearing up. The same report notes that Korean car maker Hyundai is planning to double its production in India and that Ford has become the fastest-growing car maker there this year, ahead of General Motors as well as the domestic giant, Maruti Udyog. Even Jim Cramer is betting on the Indian road, listing Tata Motors as one of his favorites in emerging markets. But I should tell you, Bill, that TataÃ,Â's growth is likely to be less about increased consumer demand than about increased commercial activity. TataÃ,Â's main business is making the lorries that carry things around.

"There is one more line of work that will boom, too. Hindu temples are going to be getting a lot of business going their way, too, because it's traditional in Hindu culture to invoke the patron deity of any undertaking, and the patron god of new vehicles is Ganesh. You've probably seen him - the cheerful, pot-bellied, elephant-headed god who rides...a mouse.

"That makes him a good fit for the new rat-race on the Indian road."

*** We remarked last week that among the many departure points from which the "flight from risk" has taken on passengers has been India. The Bombay stock market has fallen around 25% from its peak, one of the biggest losses among all markets. Tata Motors, one of India's top automakers, has seen its stock fall by almost as much.

As we pointed out, the flight from risk might be heading in the wrong direction. Are investors really wise to flee Mumbai and entrust their money to New York and London?

We think not.

In the case of automakers, an investor might hope to make money putting his money with General Motors. But it seems more and more unlikely. The company labors under such a burden of overhead, it is hard to see how it will ever make money. And how could it grow? Who doesn't already have a car in America...or two?

Compare GM's situation to that of Tata Motors. It is operating in a market with low labor costs, much less expensive management overhead, and virtually none of the health and retirement legacy costs that GM must wear around its neck. Nor does it have to go far to find new customers; it only has to look out the window. India is growing and so is its road system. So are its licensed drivers. Even modest growth is bound to bring millions of new drivers and millions of new cars onto the highways in the decade ahead.

In short, the difference between Tata Motors and General Motors is that with the latter you have to be a genius to make it prosper. With the former, you have to be an idiot not to.

A month ago, Tata stock looked like a bargain to us at $21. Today, it looks like an even better bargain at under $18. And if it goes lower with the summer, buy some more.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.