Year end is usually the time when busy executives hit the stop button to do two things: One, rewind and go through the year's events frame by frame. Two, fast forward and try to figure out what the year ahead may have in store. Unless you are either omniscient or reckless, you, dear reader, are in the middle of one such exercise yourself. And a hundred bucks says that you absolutely love what you recall of this year. Indeed, 2003 has been the best year we've had in a long, long while. This was a year when the economy truly heaved. We had a wonderful monsoon, thanks to which farmers are staring at a bumper harvest (agricultural production will grow 20 per cent this year). Corporate earnings in the first half of this fiscal (for a sample of 3,287 companies across industries), rose a handsome 43 per cent, robust consumer spending has lifted fortunes of even beleaguered sectors such as consumer goods and automotive, exports in the first half have jumped 12 per cent and the Sensex, of course, has been on a roll. At last count, the bellwether index had gained 1,939 points, or 57 per cent, over last year's closing. The result: There are more takers than ever for India's growth story. Be it manufacturing companies that are beating a path to the country to source products, be it buyers of information technology products and services or simply back office operations, or foreign institutional investors, who made a net investment of more than Rs 30,000 crore this year alone.

The question, then, is: where do you go from a great year like 2003? Will 2004 be better than this year, or will it be worse? If worse, how much worse? These are all incredibly difficult questions to answer. So we decided to do something simple: Break up this overwhelming question into smaller, manageable parts-10 of them, to be precise. And we also commissioned research agency NFO India to poll 304 executives (manager upwards) across the six metros of Bangalore, Chennai, Delhi, Hyderabad, Kolkata, and Mumbai, to gauge the dominant mood. To answer the 10 questions for 2004, BT quizzed economists, CEOs, analysts, and other industry experts. What did we find? Optimism, and loads of it, that 2004 will be better. That stockmarkets will continue to boom, that the economy will quicken its pace, and that, by and large, good times are here to stay. There were some concerns, too. Especially of the BPO backlash continuing, of foreign direct investment staying stunted, of reforms and disinvestment suffering in an election year. No doubt, there will be challenges. But India Inc. today has one thing it didn't have until recently: A conviction that it can and will prevail. Happy 2004.

The Bombay Stock Exchange: The party's on

Q. 1 WILL THE SENSEX TOUCH 6,000?

No doubts about that. Dalal Street analysts are so gung-ho that some even expect the Bombay Stock Exchange key index to cross 6,000. For some, like Navin Agarwal, head of research at Motilal Oswal Securities, the reasons are many. Prime among them: An appreciating rupee (it protects dollar returns), relatively undervalued stocks, interest rate differential, strong corporate earnings, and an economy that's the fastest growing after China's. "No doubt, India is the place to be for FIIs," says Agarwal. Some others like Surjit Bhalla, an economist and advisor to emerging market funds, are so cocksure that they are even willing to bet when the Sensex will touch 6,000. Bhalla, for instance, says end of March, 2004.

A majority of the executives polled by BT-NFO India do believe that the Sensex will touch 6,000 points. In fact, one could argue that even the current stockmarket boom doesn't quite capture the fundamental growth driving the economy. For instance, most of the companies in boom sectors like construction, BPO and auto-say, DLF, Daksh eServices, or Hyundai, respectively-are not listed. The only thing that could spoil the stockmarket party (See Getting Sold On India, page 52) is a revival in developed markets like the US or Japan. Since investments chase higher returns, some funds may switch focus. But for now, D Street seems confident of reaching 6,000 with or without them.

Reforms: Markets are waiting for oil company sell-offs

Q. 2 WILL DISINVESTMENT/REFORMS RESUME?

Just look at the accompanying chart. A staggering 82 per cent of the respondents across the six metros think that reforms will resume next year. Indeed, going by its success in the recent assembly elections in the states of Chattisgarh, Rajasthan, and Uttar Pradesh (only in Delhi did Congress make a comeback), the BJP may feel emboldened to take some of the controversial decisions it has been soft-pedalling. Disinvestment of the oil companies, for example. Or implementing the Vijay Kelkar Committee report on tax reforms, or even labour reforms.

But let's get real. We are talking politics here, and even the bravest party would rather err on the side of caution than risk pushing anything remotely controversial-especially in a year when general elections are to be held. Says a Delhi-based economist: "Why would the government unnecessarily ruffle feathers at this juncture when it is well known that many of its allies are uncomfortable with reforms?" Therefore, the fate of reforms hinges on the outcome of the 2004 general elections. Industry is hopeful. Says Tarun Das, Director General, CII: ''I think the next few months will witness a speeding up of reforms." Indeed, should the BJP return to power stronger than before, expect reforms to get kickstarted. History, after all, is replete with examples of newly-elected governments-be it Narasimha Rao's Congress or Atal Bihari Vajpayee's BJP-pushing through most controversial measures in the first two years of their election.

Growth: Betting big on a bumper harvest

Q. 3 WILL THE GDP GROW BY 7.5%?

When we say 2004, we really mean the next fiscal (2004-05). While in the current fiscal, GDP is expected to grow 7 per cent or so, the verdict is not yet out on the next year's. A big imponderable is India's notoriously whimsical monsoon. Deficient rainfall could easily pull the economy back to the 4 to 4.5 per cent rate of growth of the last two fiscals. Besides, manufacturing and services sectors would need to rev up for India to enjoy a 7.5 per cent growth. What are the chances of that? Actually, pretty good. There are strong indicators that the US economy is reviving, and for the first time in 12 consecutive quarters, America's growth has been spurred by industry spending. Once demand revives in the US, India will be able to export more products and services. "The playground for Indian industry is the globe today," says Sunil Sinha, Consultant, NCAER, implying that there are wider growth opportunities for industry to tap. A key to domestic consumption staying buoyant is low interest rates. That is what has really triggered consumption of everything from housing to automobiles to consumer goods to travel. What are the chances of interest rates firming up? For a detailed answer see question No. 5, but the bottomline is that the economy seems to have attained some momentum and it would take some doing to slow it down.

BPOs: Growing despite the protests

Q. 4 WILL THE BPO BACKLASH WORSEN?

Most analysts-and most of our respondents-seem to agree (like Nasscom's President, Kiran Karnik, never tires of saying) that the BPO backlash is just a "temporary blip'', never mind that the state of Indiana in the US recently cancelled Tata Consultancy Services' $15.2 million offshoring contract. In fact, international research firm Gartner forecasts that the resistance could peter out by as early as end-2004. Agrees Gautam Thapar, Managing Director of Ballarpur Industries: "The backlash will continue until the US presidential elections are over.'' Point: Even if it's the US of A, politicians will be politicians. Therefore, private companies are showing no signs of letting popular anger get in the way of sound business. Even companies in relatively conservative countries such as the UK and Sweden are setting up their back offices in India. British Rail is expected to do so sometime soon (British Airways already has a huge back office in India), and Sweden's ABB also plans to relocate accounting and payroll work to India. "For most companies, doing what is the best and most cost effective is the only survival mantra in these competitive times and there's little governments can do about it," says Karnik. But it's not about cost alone. Talent is really the issue. Which is why companies like GE, Intel, Cisco-and shortly Google-have set up engineering centres in India. In a free market, companies that choose not to take advantage of cheap and skilled labour wherever it is available, will do so at their own peril.

Housing rush: Falling rates have given a boost to the housing sector

Q. 5 WILL INTEREST RATES FIRM UP?

The answer, from most analysts, is a simple "no''. There are still no obvious signs in the economy that interest rates could go back to the 10 per cent-plus rates that were so common in the 1980s. Inflation is still a benign 5.08 per cent, there is no liquidity crunch in the system, and global markets are still accessible for funds. Therefore, at least in the short term, rates may actually go down a few basis points-especially in housing loans, where fierce competition is another factor-because of the RBI-mandated switchover to a benchmark prime lending rate. Says Arun Kaul, General Manager (Treasury), Punjab National Bank: ''In the short-term, interest rates are going to be range bound, between 5 and 5.5 per cent. Even in the medium-term, it is unlikely to cross 6 per cent because of the ample liquidity in the economy."

The thing to watch would be credit offtake. Right now, there's more money in the system than takers. Unless India Inc. embarks on a massive investment binge next year, bankers will think twice about raising rates. However, some analysts expect interest rates to start moving up in the second half of next calendar. Here's why: At the moment, a lot of FII and NRI money is flowing into the country because India offers a higher rate of return, be it debt or equity. Once the bigger economies-particularly the US-revive, there will be less money coming India's way. That may prompt banks in India to up their rates. So, if you have a housing loan, it may make sense to lock into a fixed rate.

Jobs rush: People are banking on a services boom

Q. 6 WILL JOBS AND SALARIES BOOM?

Although the poll treats the question as one, in reality it is two separate questions, since it's possible for salaries to go up without jobs being added. Therefore, we will answer the question in two parts. Let's take salaries first. According to the BT-Omam Consultant survey of corporate compensation (done separately every year for the four segments of CEO, Senior, Middle and Junior Management), salaries for the middle management have been projected to grow by 15 per cent, while those of senior and junior-level managers are expected to rise 9-18 per cent and 10-18 per cent respectively next year. In the senior management segment, it-enabled industries led the pack in 2003, offering an average 18 per cent hike, followed by telecom, entertainment and automotive sectors where growth in salaries averaged 15 per cent. Wage increases are significant for senior and junior-level managements, too. Says R. Sankar, Country Director (South Asia), Mercer, a global hr consulting firm: "If the economy continues to be on the upswing and companies maintain their bottomline growth, salaries should go up.''

As for jobs, that's a different issue. Post the mid-90s, jobs in the public sector have been dwindling. Although the private sector has added jobs, most of it is in the services sector. The problem with that, however, is it only employs skilled labour. For the unskilled workers to gain, the manufacturing sector will have to undergo a services-like boom. That, however, seems unlikely at the moment. Says Santrupt Misra, Director (HR), AV Birla Group: "Our adding more jobs will depend on the economy." The best hope on the job market, then, is BPO, which is expected to generate 1.5 million jobs by 2010.

Cellular boom: Reaching new heights

Q. 7 WILL CELLULAR SUBSCRIBER BASE TOUCH 60 MILLION?

The possibility is very strong," says Sunil Bharti Mittal, Chairman, Bharti Tele-Ventures. Mittal should know. He runs the biggest cellular phone company in the country. Besides, the cellular market is booming. Some two million subscribers are scrambling on to the mobile bandwagon every month. At the end of November this year, there were 26.5 million cellular subscribers. Do the arithmetic and it's easy to see that another 26 million subscribers will join the ranks next year. No wonder, our poll respondents seem overwhelmingly confident. (For once, even pessimistic Chennai seems confident-the most, actually.) Some analysts even think that the rate of growth could get accelerated because of the price war that cellular companies so love to wage every now and then. Consider the rate cuts that Bharti announced for subscribers in western India middle of December. Its rivals Hutch, BPL and Idea not just followed suit, but actually announced rates lower than Bharti's. With growing prosperity, a new category of subscribers could help the market grow wider and deeper. One happy story this.

Stronger by the day: The rupee gets firmer

Q. 8 WILL THE RUPEE STRENGTHEN TO 45?

There seems to be an all round belief-our 304 executives in the poll included-that the rupee will continue to harden versus the dollar even in the next year. Jamal Mecklai, CEO & MD, Mecklai Financial and Commercial Services, predicts that the rupee will touch 44.50 by the end of 2004. The reason, he says, is simple: America's huge current account deficit ($500 billion) combined with an all-time low rate of interest of 1 per cent will continue to keep the dollar weak against other major currencies. Even in the case of an upturn in the US economy, Mecklai argues, the US Fed may not necessarily increase the rate of interest. Besides, if China agrees to devalue its yuan (current exchange rate versus dollar is 8.28), the rupee may grow stronger still. At the moment, though, it is safe to expect the rupee to remain in the 45 to 47 band.

Foreign investment: Hesitant still

Q. 9 WILL FDI TOUCH $5 BILLION?

Actually, the figure in question should have had a zero after five. Because a $5-billion target is nothing to aspire for. But such has been India's track record in attracting foreign direct investment that even $5 billion (or Rs 23,000) seems like a tall order. Hurdles? The usual stuff: high tariff rates, rigid labour policies, poor infrastructure, bureaucratic hassles, etc. No wonder, India received just $3.9 billion in FDI last year. Asks Arvind Virmani, CEO, ICRIER, an economic think-tank: "Why shouldn't foreign investors flock to other countries like China or Malaysia where they not only get a red carpet welcome but also have world-class infrastructure facilities?''

Yet, some think FDI could be the next big story for India. Reason: Some of the infrastructure issues are beginning to get sorted out and more sectors are being opened up-like airport development. So far this fiscal, 452 proposals worth Rs 2,609 crore have been cleared. But there's many a slip between the FDI cup and the lip. Typically, four out of 10 of the proposals never get implemented. Therefore, despite the $5 billion being a modest target in absolute numbers, it's unlikely to be met next year. Give it a couple of more years at the least.

Woman on top: Shattering the glass ceiling

Q. 10 WILL INDIA GET A BT-100 WOMAN CEO?

It may not happen in 2004, but sooner than later, one of the top 100 companies, maybe more, will have a woman on top. Our survey sample thinks so, with 69 per cent expecting the momentous event (for that is what it is) to come to pass in 2004. With more companies becoming equal opportunity employers and with more women entering the workforce, the mathematical probability of the event has definitely increased. Our guess: outside of family-owned enterprises, it'll probably be a bank; and given that there are no women-CEOs-in-waiting in the higher reaches of the BT 100 (think HLL, Reliance, Ranbaxy, Infosys, ITC, HDFC), the company will probably be in the 80s or 90s. Still, that's something.