Our journey started in the bustling port city of Mumbai (Bombay), home to Asia’s oldest stock exchange. Then we moved on to visit high-tech campuses in Bangalore and Hyderabad. The latter is only miles from the ancient city of Golconda, once renowned for its diamonds. From there, we were off to green Kochi on the Malabar Coast, with its many coconut trees, rice paddies and slow-moving rivers. We wound up the trip in the north - traveling to Jaipur, in hot and dry Rajasthan, then to Agra to see the Taj Mahal and, finally, to the dusty capital city of Delhi.

In Delhi, I walked through the old market of Chandni Chowk, which I had read so much about. Once it was a destination for camel trains from Kashgar, traders carrying jasper and sardonyx, cinnamon logs from Madagascar and much more. Today, it’s still a busy market, lined with shops where you can buy just about anything.

I feel I got a good taste of what India’s all about - our itinerary was so packed it would take pages to tell you everything I saw and did. Of course, I also met with money managers and private equity firms operating in India. That’s how I learned some interesting - and surprising - things about investing in India.

For example, did you realize that India suffers from an acute shortage of hotels?

Our group stayed at wonderful hotels during our trip, such as the Rambagh Palace in Jaipur and the Oberoi Amarvilas in Agra. Still, the room rates were so out of whack with everything else. The supply-demand balance is so tight that the average room rates in some cities have reached the $400 level. Overall, room rates in India are higher than current average room rates for New York, London and Singapore. It was one of the most stunning economic facts of the trip. That $400 goes far in India, which is not true of the dollar in too many places of the world these days.

Hard to imagine paying that much for a hotel room in India, isn’t it? But it does make sense…the entire country of India has fewer hotel rooms than the city of Orlando!

This is why we had to book rooms nearly two years in advance to get the hotels we wanted. It’s not a situation that’s going to get a lot better anytime soon. The number of tourists visiting India will likely increase 10% per year through 2012, according to the World Travel & Tourism Council. That would make India one of the fastest-growing tourist destinations in the world, to say nothing about the business travelers. Some companies have gone ahead and put up their own hotels on land they already own. They run these hotels for employees and business visitors. They can’t afford to sit around and wait for government approvals to build new hotels.

So opportunity No. 1 for investing in India would be to develop and run hotels in India. Unfortunately, there is no way for you as an investor in publicly traded stocks to do that. We heard a couple of developers talk about hotel and resort projects they have on tap. These were attractive, I thought, promising 30-40% annual rates of return on modest assumptions for hotel occupancy and room rates. They also have recent success stories, such as a 250% gain on a project started in January 2006. The people on the trip with me will have a shot at investing directly in these projects if they choose, but for purposes of this letter, it’s a tough insight to act on.

The real estate market is hot in India all around, and it’s attracting some mega money flows. Goldman Sachs calls India “the most exciting real estate market in Asia." Overseas funds have raised $2.4 billion through September for investing in India. There’s another $1 billon ready to come on in the last quarter of the year. According to Private Equity Intelligence, investors will pour another $4-6 billion in 2008 into property funds with an Indian focus. All told, the market could grow from $15 billion to $90 billion by 2015. Kind of mind-boggling, isn’t it?

Even something like office space is in short supply. Commercial property space has doubled from 2002. Estimates call for another 150 million square feet over the next five years, and 500-650 million square feet over the next 10 years. That’s a lot of real estate.

In addition to real estate, there are many parts of the domestic economy that are attractive for those interested in investing in India. Unlike China and the Southeast Asian economies, India’s economy is not so dependent on exports.

The explosive growth in India’s economy is mainly a grass-roots-driven trend. There are about 200 million participating consumers in India, with tens of millions added annually. Needs are everywhere - for power, water, basic infrastructure.

Unfortunately, yet again, many of these opportunities are off-limits to public equity investors. This was a common frustration as I traveled in India. Investing in India is just not that easy. Foreigners cannot own Indian shares directly. Only institutional investors can. You can participate directly in certain projects, as I mentioned above, but that’s not helpful for our purposes here.

The easy way to invest in India is to buy the polite merchandise.