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The great growth story

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New-generation companies are spearheading a resurgent India. And it is changing the Mumbai skyline like never before.

Mumbai, a microcosm of today's India. Shashi Ashiwal
Mumbai, a microcosm of today's India. Shashi Ashiwal

N.K. Kurup

SOMETIME ago, a Kerala newspaper carried a picture of a housemaid driving a Scooty, sporting an imported handbag and talking on a mobile. This may not be news any longer. But this scene was unimaginable a couple of decades ago when one had to book a Bajaj scooter two years in advance, or wait years for an MTNL connection.

Today, India's Hero Honda is one of the world's largest producers of motorcycles. Recently, cell-phone major Nokia announced plans to set up a manufacturing plant in the country. And cell-phones and two-wheelers are just a tiny part of the great growth story that is within the reach of even a housemaid.

Welcome to Resurgent India, spearheaded by new generation corporate promoters such as Biocon Ltd's lady boss Kiran Mazumdar Shaw. Hardly known outside the biotech field till two years ago, she is the richest woman in India today. Her Bangalore-based company has become the darling of stock markets. And not without reason: India, with a large pool of scientists, world-class information technology and a vibrant pharmaceutical sector, is well positioned to become a major player in the global biotech arena.

But the seeds of change for a vibrant India were sown way before Shaw and her biotech venture came into the limelight by IT pioneers such as Narayana Murthy of Infosys, Azim Premji of Wipro and Shiv Nadar of HCL. Bharti's Sunil Mittal made it big in telecom while Subhash Chandra of Zee put India on the global entertainment map.

India today is the largest maker of software in the world, with exports exceeding over $17 billion last fiscal. Indian software companies have become multinationals in their own right. Tata Consultancy Services, with a presence in 32 countries, became the first Indian IT company to report sales of over $2 billion in 2004-05.

Despite the backlash against outsourcing, the BPO business is growing fast. Call centres providing thousands of youngsters their first job is thriving, with several international companies finding that hiring English-speaking Indians is cheaper than employing men in their country of operations.

Entertainment has become big business. According to audit services firm KPMG, the sector is poised to grow from Rs 22,000 crore to Rs 58,000 crore by 2010.

Driven by the changing environment, India Inc has started looking for overseas opportunities. Even those in traditional sectors such as steel, automobile, auto-ancillaries, pharmaceuticals and telecom have gone global.

The Tatas, Birlas and Ambanis have made major investments abroad. Many companies have raised large equity funds overseas and listed their shares on the Nasdaq, New York and other stock exchanges.

India, the fourth-largest economy in terms of purchasing power parity, is a growing market of one billion people, of which 300 million are middle-class consumers. Significantly, over 50 per cent of the population is below 25 years the vibrant segment for any market.

India's production of automobiles is projected to go up from seven million to 10 million over the next couple of years.

The Indian economy has been growing at an annual rate of more than 6 per cent for the past few years. Global investment advisor Goldman Sachs has predicted that India would continue to grow by 5 per cent for the next 50 years.

The country's macro-economic indicators have been positive and stable for some time now. Inflation has been hovering around 5 per cent, though rising oil prices took it close to 6 per cent.

Lower interest rates have triggered a boom in housing and consumer spending. Retail lending has become the major growth area for banks. The Indian rupee, backed by a fat forex kitty of over $140 billion, has been appreciating against the dollar.

Foreign institutional investors, the big supporters of the Indian growth story, invested $8.5 billion in Indian stocks last year and another $3.63 billion in the last three months.

Global fund mangers, too, have bet on Indian investors. Fidelity Mutual Fund, the latest to set up shop in India, reportedly raised around Rs 1,700 crore in April through its maiden scheme.

Global pension funds are waiting for the details of the regulations to enter India. The volume of public issues rose roughly five times in 2004, with companies mopping up over Rs 33,000 crore compared with Rs 6,682 crore in the previous year.

Foreign direct investment too is growing. With FDI limits in key areas such as banking and telecom increasing to 74 per cent and the Government allowing automatic route for 100-per cent investments in many sectors, foreign investment is expected to grow considerably from the $2.6 billion last year. Swiss cement maker Holcim last month announced investment of $800 million to acquire the country's oldest cement company, Associated Cement Companies.

On the agriculture front, India has achieved rapid progress. With the UPA Government giving fresh thrust to developing the farm sector, the flow of bank credit to farmers has improved significantly. The most significant development in the agri-sector in the recent past has been the establishment of online commodity futures exchanges, which is expected to help price discovery in several farm commodities.

Indians are growing rich and one of the most visible signs of this is the increasing number of people travelling abroad. Indians were the highest spending tourists in Singapore last year, with an average daily spending of $200-300 per tourist. With more domestic private airlines starting overseas services and slashing fares, more middle-class Indians would leave their crowded local cities to foreign shores.

(This article was published in the Business Line print edition dated April 27, 2005)
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