Rapid growth keeps India on an impressive run.
Investment bank Goldman Sachs predicts that if India continues at its current pace of expansion the economy may surpass that of the US and be second only to China by mid-century. It adds that within a decade India can overtake Italy, France and the UK to become the world's fifth largest economy.
According to the Global Intangible Tracker 2007 (GIT), the most extensive global study ever on intangibles assets by the London-based Brand Finance Institute, India has become the world's No 3, ranking after the US and Switzerland. With rapid growth in healthcare, personal care, pharmaceuticals and biotechnology, India's intellectual capital is only expected to grow further.
Forty-four per cent of the Top 100 Fortune 500 companies are present in India as it joins the elite club of 12 countries with a trillion-dollar economy.
According to a study by the McKinsey Global Institute (MGI), India's consumer market will be the world's fifth largest by 2025. Mumbai has been ranked 10th among the biggest centres of commerce in terms of the financial flow volumes by a survey compiled by MasterCard Worldwide.
India has also emerged as one of the most attractive investment destinations with an annual return of 38.36 per cent, which is the second highest in BRIC (Brazil, Russia, India, China) economies. India is also the fastest growing market in the data centre-structured cabling market in the Asia Pacific region.
According to human resources consulting firm Hewitt Associates Inc. Indians received the second-highest salary increase in the Asia-Pacific region in 2007.
Prime Minister Manmohan Singh affirmed that high savings and investment rates can step up India's growth to over 10 per cent along with the right policies. "It is possible that with the correct set of policies and dedicated effort by both the Central and State governments we will not only maintain this momentum of high growth but may be able to raise it to 10 per cent. The high growth rate has become possible because of historically high savings and investment rates."
He emphasised that the growth rate of the Indian economy is at a historic peak. The Prime Minister was addressing the 54th meeting of the National Development Council (NDC), which was deliberating the 11th Five-Year Plan. The central theme of the plan is Towards Faster and More Inclusive Growth. It runs from 2007-08 to 2011-12 and seeks to lower poverty by 10 percentage points, generate 70 million new jobs and reduce unemployment to less than five per cent. "Our savings rate, after stagnating for almost two decades, has touched 34 per cent of GDP (gross domestic product) and the investment rate has crossed 35 per cent," the Prime Minister added. "These are likely to go up in future because of our young population profile."
Finance Minister P. Chidambaram also expressed confidence about the economy growing by 10 per cent. He believes that India's exports would touch $200 billion (about Dh734.46 billion) by 2008. "In 1991 no one would have believed that some day India's economy would grow at 10 per cent. This is an open economy. But this entails huge responsibilities such as recognising our weaknesses, reducing dropout rates in schools, increasing enrolment rates in schools and colleges and utilising human resources."
India has allocated a good portion of the budget for infrastructure development and this could translate into a dramatic change for its citizens.
Chidambaram believes that India's per capita income will rise from $800 in 2006-07 to $1,000 at the end of fiscal 2007-08 provided the nine per cent annual growth rate is sustained. He predicts that India will be a middle-income nation by 2015. This could well happen, confirms Jack Dzierwa, global strategist for US Global Investors, "as politicians are very supportive of infrastructure growth because their electorates' quality of life is at stake."
India's Planning Commission expects the economy to grow 8.5 to nine per cent during the current financial year and expand to nine per cent in the 11th Five Year Plan period, said Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission. He points out that the final year of the current five-year plan would see a growth rate of 10 per cent. The focus of government policies, he continued, would be agriculture, health, education and infrastructure, and a greater participation of the private sector in the development of infrastructure.
A big boost to the economy is Non-Resident Indians (NRI) remittances to India which total more than $25 billion (about Dh91.8 billion) annually, the largest remittance amount globally. Reserve Bank of India (RBI) statistics reveal that purchases of shares and property by NRIs has grown from $930 million (about Dh3.41 billion) in 2004-05 to $6.3 billion (about Dh23.13 billion) in 2006-07.
As per recent estimates, private equity (PE) investments in India have grown to $10 billion (about Dh36.72 billion) in 2007 from $2 billion (about Dh7.34 billion) in 2005. The real estate and infrastructure sectors have emerged as a favourite of PE funds, garnering almost 50 per cent of the inflows.
The construction sector is also expected to grow to four per cent. According to Associated Chambers of Commerce and Industry in India (Assocham), the government plans to invest about $150 billion (about Dh550.84 billion) in the next five to six years for the development of infrastructure, of which $60 billion (about Dh220.3 billion) will be for highways, ports, power and airports.
The $100 billion (about Dh367.23 billion) Delhi-Mumbai industrial corridor has also been approved. It will be India's largest infrastructure project and will be built with the help of Japanese financiers who will contribute almost a third of the investment. The first phase of the 1,500-kilometre project, which will run from 2008 to 2012, will include six mega investment regions of 200 square kilometres each. The second phase will span 2012-2016. India plans to invest $320 billion (about Dh1.17 trillion) in the short term and over $500 billion (about Dh1.83 trillion) in the medium term on infrastructure.
The telecom sector is expecting an investment of up to $10 billion by 2015-17, and the civil aviation sector may see $4 billion (about Dh14.68 billion) worth of investment within the next decade.
The Indian retail market, estimated at $450 billion (about Dh1.65 trillion), has seen the entry of big players such as Bharti Enterprises, Reliance and foreign players. Special Economic Zones (SEZs) are also likely to emerge as major growth engines. In the 2006-07 financial year SEZs exported goods worth Rs30 billion (about Dh2.79 billion), about six per cent of India's total exports. In 2008 SEZ exports are expected to cross the Rs1 trillion (about Dh93.2 billion) mark. By 2009 the government expects investment of over Rs9 trillion (about Dh838.8 billion) to flow into the SEZs along with a promise of three to four million jobs.
India's stock market boom has also left market pundits agape. According to Malcolm Wood, who heads Morgan Stanley's Asia equity strategy team in Hong Kong, the rise in Indian stock markets was "extraordinary and retail investors are turning more and more confident that the Indian economy and the markets are able to withstand global headwinds."
In its global thrust, India is also hoping to become a world leader in nanotechnology, which is expected to be worth $1 trillion (Dh3.67 trillion) by 2015. "Nano is the boom science of the 21st century," says M.N. Vidyashankar who oversees technology industries in Karnataka. "It will become the key emerging technology in the 21st century." The government plans to spend Rs10 billion (about Dh932 million) to engineer applications using nanotechnology.
According to Vidyashankar, the worldwide market for nanotech-engineered consumer goods, from cosmetics and sporting goods to consumer electronics, is forecast to grow to $1 trillion by 2015 from an annual $15 billion (about Dh55 billion) now. India's nanotechnology build-up will help the country develop applications for industrial products, agriculture, healthcare and drinking water.
For Corporate India 2007 was a year of mergers and acquisitions (M&A). Led by the Tata's Corus takeover, the total number of M&A deals announced during 2007 increased to 661 with a total announced value of $51.17 billion (Dh187.9 billion). It reflected a whopping rise of 152 per cent in value terms. "The new and heightened deal activity is a sign of M&A becoming a key element of strategy for India Inc. There is a strong growth in cross-border deals as India Inc is going with gusto across the world buying up companies," says Harish H.V., partner in Grant Thornton (corporate advisory services).
India, evidently, is the flavour of the season.
Economy — 2006-07 in a nutshell
Growth rate: 9.4 per cent (against 9 per cent in 2005-06)
Sectorial growth rate:
— Industrial: 0.9 per cent (against 9.6 per cent in 2005-06)
— Service: 11 per cent (against 9.8 per cent in 2005-06)
— Manufacturing: 12.3 per cent (against 9.1 per cent in 2005-06)
— Trade, hotels, transport and communications: 13 per cent (against 10.4 per cent in 2005-06)
— Construction: 10.7 per cent
- Balance of payments: $36.6 billion surplus (about Dh134.43 billion)
- Foreign exchange reserves: more than $222 billion (about Dh815.27 billion)
- Cash inflow (est.): more than $15.5 billion (about Dh56.93 billion)
