India, which will soon be the most populous nation on Earth, is prepared to support the rise of one massively profitable set of services that Americans have been enjoying for decades. Do you know which set?
It's not a set of regular consumer services, nor a grouping of luxury products. India -- my home for the present -- suffers from no shortage of either.
What India desperately needs right now is to clean itself up -- across the board. If it does, I envision a much, much better future for Indians and some very impressive returns for shareholders of select companies.
One day, Indians are going to wake up to the fact that despite their emerging political and economic clout, most of their urban cityscapes are filthy. Walk down just an average street in a major city here and you inevitably stumble into heaping piles of trash and streams of urine pooling into mosquito-filled wastewater. It's disgusting.
Filth of various forms engulfs a bustling lower-income neighborhood in Mumbai. Photo by Nick Kapur.
Indians produce first-rate work in science, technology, medicine, business, and various other commercial and artistic fields. Yet the only way to describe the general sanitation situation in this country is Third (or Fourth) World. This particular deficiency spans the spectrum of basic civil services from trash removal and pest control to water and wastewater services.
State of the republic
India does not lack the money to better manage its own cleanliness. Between its elite classes and a government growing fat off of the broader economic success of a giant country, India can absolutely afford to clean things up. The issue is simply a cultural phenomenon.
The parking lot outside of a prized national monument in New Delhi. Photo by Nick Kapur.
For whatever reason, it's generally OK to litter in the streets, to pee on the sidewalk, and to do all sorts of things that are widely unacceptable by Western standards. And it's generally OK for the government to not do anything about it -- either to prevent it or to deal with it after. Everyone just seems to turn a blind eye. Walk into a nice restaurant, hotel, or golf club, however, and you'll strain to see even one stray piece of paper.
Reason has nothing to do with it
The irony is that most Indians abhor dirtiness. Many people here employ workers to mop floors and dust furniture in their homes on a seemingly hourly basis. Yet these same well-to-do individuals implicitly support the filth that exists in the public by not doing anything about it. In my opinion, there is no other way to explain it than an utter lack of civic responsibility.
The real problem is that the issue is only going to get worse unless it is dealt with directly. One estimate shows India's waste output more than tripling by 2030. My suspicion, based on ever-improving per-capita income ratios, is that this number is terribly low.
Fortunately, there are a few hints that things are beginning to turn around.
In 2010, New Delhi played host to the spectacle of the Commonwealth Games, an event that helped transform the city from a nauseatingly polluted metropolis with terrible infrastructure to a relatively well-functioning capital in a remarkably short period of time. While much work remains, the city has made several giant strides forward -- all thanks to one very powerful tool: embarrassment.
Embarrassment (or at least the threat of it) has been crucial in developing small portions of this vast country. Therefore, I believe I have identified a very powerful catalyst.
Change on the horizon
My thesis is that as the collective pressure from Indians seeking foreign capital and international recognition mounts and trickles its way onto the streets and into the offices of bureaucrats, we're likely to see giant swaths of public, urban India moving toward a more global standard of cleanliness.
Thinking broadly, the more India wishes to challenge various attractive alternatives in South America and Southeast Asia for the sweet lucre of investment capital and global fanfare, the more it will need to actually look the part of a developed nation.
Several well-known companies could succeed based on this larger trend, which should interest Fools everywhere. Two things will need to happen before that, however.
First, India will need to seriously recognize the scope of the issue. Second, it will have to create appropriate incentives to attract the companies that have the expertise needed to fix problems of this magnitude. Fortunately, I think both will happen thanks to the powerful effects of social pressure.
The names to follow
Waste Management (NYSE: WM ) is an obvious candidate for large-scale contribution here. The company has a tremendous track record. It currently operates only in North America, but I know of no other market outside of India more ripe for this $18 billion company's strategic entry. Competitor Republic Services (NYSE: RSG ) is similarly provincial. But both should consider pursuing bigger fish -- immediately.
India is also in desperate need of large-scale wastewater processing and transmission. Veolia Environnement (NYSE: VE ) is a French firm with global expertise and great experience in the water sanitation business. Plus, it has already done work in India's market directly. Danaher (NYSE: DHR ) is another name with past work under its belt here in India doing similar things.
As far as the transmission of wastewater to processing facilities goes, one name to follow is Northwest Pipe (Nasdaq: NWPX ) . This is, once again, a domestic-focused entity, but all of these names are very well-positioned. Keep them in mind.
Finally, let's not forget pest control, an absolute necessity thanks to the lack of serious operators in the aforementioned spheres. Two companies that are pretty much the names to beat in this particular segment are Rollins (NYSE: ROL ) , which owns the famous Orkin brand across the world, and Ecolab (NYSE: ECL ) . Both companies have built fortunes on the elimination of the exact same pests that run wild in India's streets and alleys. Why not bring their services here?
The Foolish bottom line
The transition of a nation from "developing market" to "global player" is categorized by many smaller transitions. For sure, one of the most important ones includes looking the part. India's cities need to evolve from filthy to gleaming if the larger nation wants to be considered among the global elite. In time, I expect India to make that leap and I trust that several companies will take advantage.
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