Why Wilbur Ross Likes India

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" A price war, combined with those unhedged jet fuel costs, has left competitors vulnerable. "I think the [price war] will end because the other companies will run out of money and will run out pretty soon," he predicts. And already there has been some sign of consolidation with airline carriers Kingfisher and Deccah pairing up.

A Veteran of Korean and Japanese Markets

India isn't Ross's first foray into Asia. The investor, whose company runs almost $8 billion in investments worldwide, has been in Korea and Japan for many years. He operates in Vietnam and his portfolio companies have a dozen factories in China. But India's combination of fragmented industry and legal protections for creditors makes it an attractive market not just for setting up factories (as both his textile and auto parts companies have done) but also for bankruptcy and work-out investing.

While the service sector and skilled workers have fared well in India's economic rise, a strong rupee and weak rail and truck transportation have held back India's manufacturers, many of them smaller, local companies. "They are having a hard time competing on the international scene," says Ross. "To do a big global business, you have to have a large company, and we think there's a consolidation opportunity in India."

Ross's interest in the slow side of the Indian economy coincides with renewed government focus on expanding those sectors, says Jay Swaminathan, a professor at the University of North Carolina's Kenan-Flagler Business School. To correct the lopsided growth of the economy, Swaminathan says, New Delhi is paying more attention to businesses like manufacturing, infrastructure, and agriculture that help the rural and less educated who have been largely left out of the growth that has so benefited the urban intelligentsia.

Balance Sheets Burdened With Nonperforming Loans

Consolidation isn't a slam dunk, says Standard & Poor's (MHP) director Joydeep Mukherji. Laws protecting workers can make U.S.-style "rightsizing" tough to pull off, though Mukherji notes that companies can get around those by negotiating an acceptable deal with the union.

India has begun to work out some of the billions of dollars in nonperforming loans on bank balance sheets, the legacy of lax lending practices in the 1990s and early 2000s. Ross's single purchase prior to SpiceJet, of tweed maker OCM India, came via India's Arcil, an asset reconstruction company modeled partly on the Resolution Trust Co. that the U.S. set up for thrift assets in the 1980s.

Byrnes is a senior writer for BusinessWeek in New York.