It's remarkable what timely and good monsoon can do to sentiments. Barely three months ago, economy pundits were sulking and predicting dismal growth for 2003-04. Today, it's a totally different story. Agency after agency has been revising its growth estimates for the economy. First, it was the Reserve Bank of India that hinted at the possibility of the gross domestic product (GDP) growing at 6 per cent-plus. That was followed by NCAER's upward revision in estimates from 5.6 per cent to 5.8 per cent. Then CMIE and Crisil came out with even rosier forecasts, predicting 6.5 per cent and 6.4 per cent growth, respectively. Dalal Street, on its part, has had no trouble believing that this fiscal growth will zoom. In the last two months alone, the Sensex has gained 700 points, or 24 per cent.

Are the optimists right? It seems so, the reason being a stupendous agriculture turnaround that's in the offing and continued growth in both services and manufacturing.

According to the Met department, the monsoon is going to be normal this year. In fact, in stark contrast to last year's drought (the worst in 15 years), the total rainfall received (till July 9) is 5 per cent above normal. That means farmers can sow their crops more or less on time and hope to reap a rich harvest. Estimates are that agriculture will grow 8 per cent. That's impressive, even though the number is exaggerated by the fact that last year agricultural production actually shrank 3.2 per cent.

For services, the general estimate is a 7 per cent growth. That seems only fair. Despite fears of backlash, the ITEs and BPO (business process outsourcing) industry is growing at an enviable 50 per cent. And according to Nasscom, it and it-enabled services will fetch $12 billion, or Rs 55,200 crore, in exports this fiscal. Besides, consumer demand within the country is looking up. There's an upturn in the number of international tourists arriving into the country. In June, for instance, tourist arrivals jumped to 256,000 compared to 218,000 same month last year. Then, the healthcare sector is beginning to attract more and more customers, thanks to an unbeatable price-quality equation.

As far as the manufacturing sector is concerned, we would like to stick our neck out and say that it may do better than the 5 per cent growth projected by most of the agencies. The conservatives' argument hinges on the fact that a revival in agriculture does not immediately boost demand for manufactured goods. But here's the interesting bit. Industrial output recorded an increase of 5.7 per cent in May 2003-1.6 per cent more than that of May last year. Buoyant exports of products like auto components and diamonds, among others, means that sales for most of the manufacturers could be higher this fiscal.

The Dun & Bradstreet Optimism Index for q3 2003 reveals as much. Three-fourths of the survey's respondents expected an improvement in their volume of sales, with capital goods-makers showing the most optimism. An equal number of respondents expected their profitability to improve. The only area where business didn't seem confident, though, was on the pricing front. But from the economy's point of view that may actually help spur demand, which means the eventual growth in industrial output may be higher than the projected 5 per cent.

Now for a question that inevitably follows every report of optimism. Can the trend sustain in the long term? In the medium term, certainly; in the long term, maybe not. No doubt industry has become much more efficient and confident (when was the last time you heard the "Bombay Club" crib?), but the macro-economic factors-such as low rates of interest, modest inflation and comfortable foreign exchange reserves-that are so critical to making business competitive, may not stay that way for a long time. For growth to accelerate to 8 or 9 per cent a year, India would need to invest in infrastructure, spend more on education and healthcare and introduce major financial sector reforms such as privatisation of public sectors and tackling of bad loans. Until then, we'll continue to look skywards to know our future.