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India is a fast-growing up-and-comer, but the country’s poor infrastructure and political wrangling may be holding back its ETFs. The highways, airways and railways are all outdated and hindering economic efficiency.

Economists calculate that India may achieve long-term annual growth rates of up to 10% if the country heavily invested in transportation, reports Vikas Bijaj for The New York Times. However, the modernization of India’s railways seems to be hampered by politics, with politicians more interested in winning elections than investing for the future.

The 40,000 mile, 150-year-old, Indian Railways is seen as the country’s backbone, moving seven billion passengers and 830 million tons of cargo a year. Traffic between large cities like Mumbai and Delhi runs at more than 120% of planned capacity, which translates to slower speeds and greater wear-and-tear.

Political analysts believe that current railway minister Mamata Banerjee has been blinded by political ambitions that are at odds with modernization and capital investment.

India’s backlog of rail projects is short $17 billion in required financing. The oldest incomplete project started in 1974 and has since been delayed because the government hasn’t handed over all the land. Another includes a delayed railway project that was added to the budget in 1997, but still needs $13 million in financing.

All that aside, India still boasts a strong economy that is projected to grow more than 8% in fiscal 2011. ETFs that track the economy are perched well above their long-term trend lines. But how much more could it grow if it had the right systems in place?

  • PowerShares Emerging Markets Infrastructure (NYSEARCA:PXR): India is 4.5%
  • WisdomTree India Earnings (NYSEARCA:EPI)
  • PowerShares India (NYSEARCA:PIN)
  • iShares S&P India Nifty 50 Index (NASDAQ:INDY)

Max Chen contributed to this article.

Disclosure: None

Source: India's Fight for Modernization