The Business Standard writes: “Your favourite car [and] laptop [are] cheaper in New York than in New Delhi.” No kidding. The India-is-cheap meme holds true only as long as you talk about human services. For anything else, it’s not. Pizzas are cheaper in Sofia, microwaves are cheaper in Taiwan, laptops are cheaper in the US, and even relatively highly-taxed England puts India to shame when you compare prices for automobiles and non-grey-market RAM.

For cheaper-to-import items like RAM, cellphones and laptops, the unusually high prices — in a country where the cost of retailing is much lower — can be blamed on the mindset of Indian retailers.

Still thinking along supply-driven market lines, they sell globally substandard items at “affordable Indian prices” and are astonished when they see demand is not high — and why should it be, given that all but the most desperate customers can see what’s on offer isn’t good value for money? Why would one buy, say, 3 megapixel digital cameras for INR 6500-8000 when one can get 4 megapixel cameras for this price abroad? Yet, Indian vendors insist on pricing 4 megapixel cameras at over INR 15000.

To confound things, they sell globally entry-level items at 2X+ markups, thus ensuring that value-conscious buyers stay away or shop abroad. Most egregious example: the $300 Bose noise cancellation headphones cost INR 23000 ($500) at the Bose store in Madras.

For bigger-ticket items, the lack of end-to-end local manufacturing is probably the biggest bottleneck in price reduction. You’d think the big players would build local capacity in a country that has the potential to be a huge market. Think again. The article quotes a GM manager whining about the high duties and “distance” from manufacturing hubs like Mexico. Well, whatcha doin’ importing stuff from Mexico for cars in India? Oh wait, this is the Chevrolet Optra (Suzuki Forenza in the US, Daewoo Nubira in Europe) we’re talking about, and supply-driven markets again indicate that GM can safely pitch it as a luxury family sedan to impoverished Indians; after all you have to earn something like 44X of India’s per capita income to be able to afford one. Hence, especially given that India’s rich are numerous enough for GM to meet their low sales targets, there is no real incentive for them to optimize on price.

I am not going to expect India’s marketplace to improve anytime soon: red tape on the government’s side and lack of a genuine desire to give a good deal to the customer on vendors’ side together conspire to make sure that India is years away from being a consumer nirvana like the US or even China.

I am not an economist; these are my off-the-cuff observations on a Saturday night. Feel free to flame correct me in the comments.