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India poised for growth, both in urban and rural sectors

India poised for growth, both in urban and rural sectors

Author: M. V. Kamath
Publication: Free Press Journal
Date: May 31, 2007
URL: http://www.samachar.com/features/310507-features.html

Conflicting reports have begun to appear in the media about the nature of Indian Economy and this calls for some serious study. a new paper Mint now being published in the country in an exclusive partnership with The Wall Street Journal recently (May 7) carried a lead story which wondered whether the Indian economy was moving towards a slowdown.

The results of more than 1,000 firms, said the paper, "seem to indicate this". The slowing rate of growth in net sales and profits between the third (October-December 2006) and fourth (January-March 2007) quarters" the paper noted, "is indicative of a slowdown in the frenetic rate at which Indian companies have been growing over the past few years".

The paper noted that 1,058 Indian corporations almost all the firms that had declared their financial results registered close to a 32% growth in their net sales and a growth of more than 47% in their net profit in the fourth quarter ended 31 March 2007.

The paper conceded that in absolute terms, the numbers show that despite hardening of interest rates and tightening monetary conditions, the corporate story is still intact. "However" it added, "if one takes a look at these corporations' financial performance in the previous quarter (October-December) there are tell tale signs of a slowdown", considering that in the same October-December quarter, the same 1,056 firms had registered a more than 38% growth in net sales and a close to 61% growth in net profit".

Having made its point, the paper quoted Bandi Ramprasad, a Consultant with Dun & Bradstreet, an information services firm as saying that "a 32% growth in sales and a 47% growth in net profit do not signify any slowdown". But apparently there are sceptics.

Mint also carried a Wall Street Journal report which said that though Indian companies are in the midst of announcing another quarter of great earnings growth, "many analysts and investment managers aren't celebrating" because they think that "India's once booming stock market is running out of steam".

"Warning signals are beginning to flash. Rising interest rates, a stronger rupee and waning international interest in emerging markets have analysts and investors increasingly wary about the market's prospects over the next year" the paper noted.

One does not necessarily have to be frightened by such comments. The job market is growing at a fantastic rate. The Tribune (25 April) for example, carried a PTI report which said that "defying all concerns over the falling dollar, weakening US economy, and soaring salary levels spoiling their party, the Indian technology firms continue to grow bigger when it comes to their employee strengths".

It appears that the total head count of the country's top five information technology (IT) sector flag-bearers Infosys, TCS, Wipro, Satyam and HCL have already grown past the 3,00,000 mark with an addition of over 20,000 employees in the first three months of 2007. The report said that "the numbers are set to grow even bigger with an estimated addition of another one lakh (1,00,000) people on their payroll over the fiscal ending in March 2008, when Infosys, the country's second largest IT firm is alone forecasting an addition of about 25,000 employees! It sounds unbelievable, but it is all there in cold print.

The country's largest IT firm, Tata Consultancy Services, has been the leader in terms of hiring activities as well as with gross addition of over 8,600 employees in the quarter, followed by about 6,000 new recruitments at Infosys.

Indeed, all the five IT firms have reported impressive financial results for the quarter ended March 31. Salary levels, too, have been moving higher and higher. Infosys Director and HR head Mohandas Pai is quoted as saying: "Last year we increased our fresher salary by about 12 percent. The hike could be near this level this year as well taking into account a 6% inflation in the country".

Then there is the report of the Mckinsey Global Institute which sounds even more optimistic. The report, published in Deccan Herald (7 May) said that "with the real average household income having doubled since 1985, rising incomes and emergence of new Indian middle class, the country is perfectly poised to become World's fifth largest consumer market by 2025".

The report added: "And with the Indian middle class predicted to reach more than half a billion and average income of Indians set to almost triple over the next two decades, this is as true as gold and no ballyboo".

According to the report, more than 291 million people will move from poverty to a more sustainable life, with the Indian middle class swelling by more than ten times from its current size of 50 million to 589 million people by 2025 and that is hardly two decades later. And just to remind the world what 583 million people mean, it is more than the sum of the population of the United States and the European Union put together.

In other words, prosperity will not be confined only to urban areas but will also extend to rural areas and India shining will become a reality throughout the length and breadth of the country.

Is all this hype? Are these figures believable? It was not long ago that India was going abegging to European countries for financial assistance and humbly accepting polite insults from the white man.

Even little and insignificant countries like the Netherlands and Belgium were ticking us off when it came to seeking financial assistance and the World Bank was looking down on us. In the 150th anniversary of 1857, when India succumbed to British cruelty and military assault, the time has come for us to tell the rest of the world that the 21st Century is going to be the Century of India and India will assert itself, and that the time has gone when India could be forced to kneel down to seek the White Man's largesse.

In this, the country must unite as never before. The country is greater than political parties.

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