India’s economic strength is good news for biofuels, a Biofuels Digest special report

by Joelle Brink, Biofuels Digest special correspondent

Back in January at the World Economic Forum, George Soros spoke about the coming global financial turmoil and predicted that it would usher in a major shift of economic and political leadership from the West to Asia.

There was general agreement among the finance ministers present that of all the Asian economies, India would probably emerge in the best shape because of its strong domestic growth, financial regulation, and the leadership of Prime Minister Manmohan Singh, a former senior economist with the World Bank.
So far this scenario appears to be more or less on track. The Indian stock markets took more of a hit than anticipated, suggesting that they are not as decoupled from global markets as economists had previously believed. But the banks, in which the Indian government typically owns a stake, remain sound and well capitalized.

The International Monetary Fund is projecting 7.9 percent growth in 2009, with a 30 percent increase in exports, most of which will go to trading partners in Africa and Asia whose economies are likewise less vulnerable to the Western financial meltdown.

One unique feature of the Indian crisis is that a biofuels producer came to the rescue very early in the game to stem the market panic. This was the $30 billion Tata Group, which is currently building the first sweet sorghum cellulosic ethanol plant in India and is about to launch its revolutionary Nano car later this month. Tata moved in quickly to guarantee AIG’s Indian policies and buy out Citibank’s orphaned Indian back office operations, saving jobs and buying the government time to mount an emergency response.

As time goes on, cash-rich global corporations like Tata Group may be big winners in this crisis, acquiring quality domestic assets left on the table by cash-strapped foreign investors, including biofuel plantations and refineries.

It is also possible that Tata and its partner, Vinod Khosla-backed ethanol specialist Praj Industries, may invest in ailing US and European biofuels companies, using their financial clout and expertise to help turn them around. There has even been talk of Tata coming to the rescue of Detroit automakers. For the moment all this is speculation, but one thing is certain. This crisis will produce some very surprising and far-reaching developments.