By the editors of Wealth Management Exchange

Visitors to India for business and pleasure are uniformly struck by how many different faces that country presents. There is the sublime and dignified image of the majestic Taj Mahal. Then there are the teeming, poverty-laden back streets of some of its largest cities, and the poverty that exists in the countryside.

There is an emerging highly-skilled and motivated professional class of managers, entrepreneurs and scientists. But then there are the crumbling bridges and rickety trains.

The Organization for Economic Cooperation and Development recently stated that India in 2006 became the world's third largest economy after the United States and China, based on purchasing-power parity. Over the next five years India will be responsible for over 25% of the increase in the world's working age population, according to a report by the World Bank.

So which is the real India?

No one knows for sure, but as investors take aim at the hot emerging markets, India has to be on their radar screen. Economic growth has averaged about 8.6% per year for the past four years and that growth could accelerate.

According to a report by Lehman Brothers, "India: Everything to Play For," India's economy could grow by 10% or more over the coming decade.

But while savvy investors are generally bullish on the near-and long-term prospects for investing in India, all who would like a piece of India's future need to do their homework. And if you do, you can't help but notice more contrasts and mixed signals.

Take, for example, an eye-opening report, "What's Next for India: Beyond the Back Office," courtesy of the Boston Consulting Group (BCG) and Wharton. It found India's infrastructure a major roadblock.

"The government estimates that India will need to spend $150 billion over the next seven to eight years to bring its infrastructure up to par," says the report.

And, if  India can get it roads, ports, power and airports in better shape its annual GDP rate can jump from 7-8% in recent years, to a sustainable 8-10%, says BCG.

Investment Boom

India's stock markets, known for their volatility, have generally done well, up as much as 45% over last year and fueled mainly by a young, wealthy and expanding middle class who are only too happy to be in on India's glowing growth prospects.

Foreign investors have bought about $16.7 billion in India's shares this year, notes Bloomberg--about 43% of that amount since the Federal Reserve Board lowered interest rates on September 18th. In India, regulators are confronting a problem often facing other hot emerging markets: too much money coming in.

India's companies would also like to play their part. June was marked by the public offering by the large real estate company, DLF.

"Just as the emergence of China's economy was marked early this decade by a sudden increase in the size and number of listings, so too Indian companies are starting to turn to the stock markets on a scale never seen before,"  noted the Financial Times.

Recently  Indian investors flocked to  the country's largest ever public share sale, a $5bn follow-on offering by ICICI Bank. It is the country's biggest private sector financial institution, on local and international markets.

Bankers managing the offering received more bids than shares available for the domestic part of the offering within 20 minutes of its opening. The same occurred with the U.S. part of the listing, which was covered within hours of the opening of trading in New York.

ICICI's strong performance was matched by Sterlite Industries, a mining company owned by UK-based Vedanta Resources. Its $1.75bn American depositary receipt issue, the largest new listing in New York by an Indian company, soared on its recent debut.

Growth of India's markets has been strong. In 2004, the Bombay Stock Exchange Sensex Index passed the 4,000 mark. In June 2007, it stood at 14,203.73.

Many Indians with money want to get into the act. The amount of Indian households total savings invested in equities and mutual funds rose to 5 percent from 1 percent just 4 years ago.

KV Kamath. ICICI managing director said that his customers, typically the largest Indian companies, had a pipeline of about $500bn of investment planned over the next few years, reported the Financial Times.  This was equal to half of India's gross domestic product and as much as the sum of their investments in the preceding decades

Mutual Funds Rise

India's mutual fund industry continues to boom. In 2006, it boasted an average growth rate of 63% in assets under management. That number was double the 2005 growth rate, according to the Association of Mutual Funds of India.

"There has been a sea change in the way people are approaching savings and investments, according to Sanjay Prakash, head of HSBC's mutual fund business in India. He points out that many people have become rich over the last five years.

"India has learned a great deal from its structural policy reforms of the past decade and we believe those lessons will be carried forward and built upon, in the coming years," says Tarun Jotwani, chairman and chief executive, Lehman Brothers India.

The Lehman report points out that consumption, exports and investment are feeding off one another. This environment is helping to improve fiscal finances and strong capital inflows are providing more resources for infrastructure spending. "The liberalization of foreign trade and investment, and the rapid development of the financial sector are among the most important structural reforms," notes the Lehman report.

The BCG-Wharton report definitely sees India's industry performance as a mixed bag. On the one hand, manufacturing is stagnating because of poor infrastructure, bureaucratic red tape and restrictive labor laws. In the past 15 years its contribution to the economy went from 25% to a mere 27%.

Service Sectors Shine

On the other hand, services are flourishing. Shares of services went from 37% to 52% over the same period. And what about the manufacturing sector of India's economy. That is surely of concern to investors. Could it eventually dampen the interest?

Most believe it will come around. "Slowly but surely they have started to build a globally competitive manufacturing base in industries like pharmaceuticals, auto components, cars and motorcycles," notes the BCG-Wharton report on India. What's more, there are opportunities for investing in India's infrastructure.