NEW DELHI: A few weeks ago, T. N. Ninan, publisher of top Indian financial daily Business Standard, asked in a column: “Are Indian companies on steroids?” after record-breaking quarterly profits.
Now he might want to ask: “Is the Indian economy on steroids?” Last week, India posted unexpectedly strong second-quarter economic growth of 9.2 per cent, powered by a surge in manufacturing and services, and the Mumbai stock market index, the Sensex, streaked to a record high of 13,844.78.
“India is in take-off mode,” said Harish Fabiani, director of the Indian advisory arm of global investment firm Americorp Capital, who attended a three-day India Summit of the World Economic Forum in New Delhi last week.
The Sensex benchmark stock index is up by 47.3 per cent so far this year, led by foreign funds eager to buy into the “India growth story,” and analysts see it sprinting higher, although politicians stress the wealth must be shared to avoid a backlash by those left behind.
“Strong GDP numbers and sustained growth in the software and automobile sectors continue to push the index forward toward the 14,000 level,” said Manoj Kakaiya of brokerage ULJK Securities. But even if the Sensex holds at current levels, it will mark a record year-on-year rise.
“You can feel things have changed. India seems to have moved onto a new growth plane,” said Madrid-based Fabiani who was among some 700 leading business figures from India and abroad who attended the summit.
In cities and smaller centres, commentators talk about a growth “buzz” with hotels booked solid, people jabbering on mobile phones, roads clogged with new cars, a red-hot property market and an increasingly affluent 300-million-strong middle class splurging on consumer goods.
The number of households in Asia's fourth largest economy with annual incomes of at least 10,000 dollars a year is jumping by more than 20 per cent a year, according to global consultancy McKinsey.
Everywhere building is under way to modernise decrepit highways, ports, airports, power projects and other infrastructure, with the government saying it needs 50 to 60 billion dollars over the next five years just to improve the roads.
“Once new highways and other transport facilities and other infrastructure get built, you will see growth getting even faster,” said Fabiani.
Already India, the second fastest-expanding major economy after China, is forecast to increase car production to two million units by 2010 from 1.1 million.
Exports of the powerful outsourcing sector are growing at a steady 30 per cent annually and are projected to hit 60 billion dollars by 2010. The government forecasts 500 million phones by 2010, up from 164 million now.
The government is also predicting a record fourth straight year of eight percent-plus growth for this financial year (to March 2007). But ratings agency CRISIL chief economist Subir Gokarn said he expected full-year growth of nearly nine per cent “if the growth momentum is maintained”. However, speakers at the India Summit warned of a possible social backlash among the population of 1.1 billion people where nearly 25 per cent live beneath the poverty line, unless the rapid growth is “inclusive” in the long-term.
“There is an India of bursting growth and there is an India of widespread want,” ruling Congress party president Sonia Gandhi, seen as the final arbiter on many policies, told the summit.—AFP
