The young associate global Economist at Goldman Sachs was thrust into the limelight when a report she co-authored with Dominic Wilson, Global Economics Paper No. 99, Dreaming With BRICs: The Path To 2050 caught (almost) everyone's fancy. BT's Roshni Jayakar caught up with Purushothaman when the latter visited Mumbai recently. The two discussed Brazil, Russia, India, China, and the economist's next project. Excerpts.

Why these four economies?

Yes, it may seem a strange choice. But a year ago, when we wanted to first look at shifts in global dynamics and how that would impact spending patterns, we began with developed economies. Then we realised that a better approach was to look at today's largest emerging markets and see how they would grow in the long term. As of now, BRIC economies are the largest emerging markets.

Is there a must-do list for BRIC economies?

For each of these four economies there is a headline problem that has to be dealt with for long-term development to take place. For China, it is managing the transition to market economy. For Russia it is moving from a commodity-based economy to a more broadbased one and (tackling) the demographic challenge because its population is shrinking. Brazil has to contend with its huge public and fiscal deficit. For India's long-term development, education and institution-building are two huge challenges. By institution-building, I mean more flexibility in labour market, reducing red-tape, and increasing openness. India also has the pressures of public debt, but that's more of a short-term issue.

India, circa 2050: services giant or manufacturing powerhouse?

It is hard to speak specifics about the composition of economies in 2050. India is bit of a unique case where it is growing on the back of services while agriculture and manufacturing are a bit stagnant. Now, everyone is focusing on services, but you won't get this kind of explosion in growth if you depend on just one driver.

What next?

I am looking at longer-term issues in India. What are the differences between an economy that grows and develops on the back of services as opposed to manufacturing?

DOOM
...And Bad Too

Telgi time: He'll take others down

» The projected fiscal deficit for 2003-04, at 5.6 per cent of GDP, continues to be cause for concern.

» Investigations into the Telgi stamp paper scam continue to throw up unpleasant surprises for the government.

» The government's conditional access system legislation to regulate the cable television industry seems set to go the VAT way.

» With elections around, even 2004, it emerges, may not see the implementation of the Value Added Tax regime.

» Second generation reforms remain a non-starter. And the state of the power sector is, pardon the pun, shocking.

-Ashish Gupta

The Perfect Plot
Bollywood, if it cares to listen, can pick up a thing or two from 2003's releases.

Lesson #a from the b-o: No formula is good formula

It wasn't chance that made 2003 a better year for Bollywood than 2002. With the business of filmmaking becoming more professional (think data-driven rather than seat-of-the-pants decision making), any producer who cares to indulge in a simple exercise in extrapolation can reap rich dividends. Here, for the benefit of those who cannot or will not, is a sampling.

New genres work: Bollywood rediscovered gore-free horror with Bhoot and SFF (science fiction and fantasy) with Koi... Mil Gaya. The second returned Rs 48 crore on a budget of Rs 20 crore.

Trends don't last: However, filmmakers hoping to leverage the success of these two films (and several are; a clutch of fantasies are slated for release this year) would do well to realise that trends don't last. Sooraj Barjatiya's Main Prem Ki Diwani Hoon (another extended family drama) was one of the most high-profile flops of 2003.

Form rocks: Form, 2003 proved, can sell the stalest of content. Ravi Chopra's Baghban (top right), which dealt with the age-old plot of 'What shall we do with the parents?' in a different way, returned Rs 25 crore on an investment of Rs 12 crore. The trendily-shot Kal Ho Na Ho had earned some Rs 51 crore at the time this magazine went to press. And the four-hour war epic-wannabe loc, based on the Indo-Pak Kargil war and made on a whopping Rs 40-crore budget, but with scant regard for form, bombed.

There's money in multiplex movies: The availability of small auditoriums within multiplexes has made the niche motion pic profitable. Thus, Jhankaar Beats and Jogger's Park-the first, a story about two rabid R.D. Burman fans and their quest to win a music competition; the second about a relationship between a young woman and an older male friend-which were made with under-Rs 5-crore budgets managed to earn double that.

-Dipayan Baishya

MISSIONARY
Man-o-war

When reports said that the Indian Institute of Management, Ahmedabad, whose governing council Infosys Chairman N.R. Narayana Murthy heads, had refused a government grant-a step towards autonomy and away from the micro-management of India's HRD minister Murli Manohar Joshi-most people cheered. Murthy clarified that the school hadn't refused the grant, but mysteriously added that the money could be better spent on primary education. The battle is averted for now, but it is coming.

Bangalore or bust
That's the mantra for discount airlines.

John Wilfred Lobo, Director, Air One: Blue-sky visioning

It seems an irony of sorts that Bangalore, a city with an international airport project that has dragged on for more years than one can remember-the buzz is, the state government uses it as a doghouse for bureaucrats not in favour-should play host to not one, but two discount airlines. First, in August last, Air Deccan, modelled on Ryan Air and South West, took air. Now, by May this year, a second discount airline, Air One, will. The genre and the destinations (Mangalore, Belgaum, Hubli, Vijayawada, Vizag, and other such for starters), however, are the only things common to the two companies, says John Wilfred Lobo, Director, Air One. "Except for us being a low-cost airline, there are no commonalities between us; Air Deccan flies refurbished ATRs; we will fly brand new jets."

That's a significant difference: the range of a typical ATR is around 1,200 kilometres; that of a jet 2,500. Jets fly at an altitude of 30,000-35,000 feet (this minimises turbulence and lowers fuel costs); ATRs at 14,000-18,000 feet. "Internationally, most low-cost airlines fly only because of these advantages," explains Lobo. Still, Air One's bill of fare won't nudge Air Deccan's. Its tariffs will be somewhere between those of regular airlines such as Jet Airways, Air Sahara, and Indian Airlines and those of Air Deccan. Lobo believes there is a huge market waiting to be tapped out there: "If Malaysia with a population of 24 million can have 12 million air passengers a year, India, with a population of 1,050 million carrying just 12 million is shameful."

G.R. Gopinath, MD, Air Deccan: First-mover advantage

Original price warrior Air Deccan's Managing Director G.R. Gopinath is unfazed by the possible entry of Air One. "I agree that low-cost airlines are the future in India," he admits, "but the industry is capital intensive and Air Deccan has several advantages, including that of being the first mover." By April, Air Deccan hopes to service 20-plus destinations with 12 aircraft and 100 flights a day. Gopinath believes his company can stake claim for some of the credit for making Bangalore "an aviation hub''. He rattles off a sampling of the state's "progressive policies": a lower sales tax on aviation turbine fuel (4 per cent) as compared to other states (25 per cent to 33 per cent); spruced up second-tier airports; and night-landing facilities at Hubli, Belgaum, and shortly in Mysore and Hampi.

Will there be more discount airlines? Finance Minister Jaswant Singh may have just made sure there will be: in early January, he abolished the travel tax of 15 per cent on air travel (a legacy of India's socialist past when flying was associated with being rich-both sins) and reduced the excise duty on ATF from 16 per cent to 8 per cent. That should make air travel affordable and, sooner than later, engender a clutch of Air Deccan and Air One clones.

-Venkatesha Babu

Five Nos and One Aye
The fourth meeting of BITE shows macro-economists to be a pessimistic lot.

Team BITe: All that economic mind-power

This was a different kind of Board of India Today Economists (BITE) meeting. The context had completely changed: during the previous three meetings, the debate had revolved around an economy tentatively striving for growth; by January 2004, it emerged that the Indian economy had grown by 8.2 per cent between July and September 2003, and India Inc.'s net profits, 44 per cent in the first half of 2002-03. Then, there was the general feeling of good cheer all around. Was the boom for real?

Five of the panel didn't think so. Suresh Tendulkar, a Professor at Delhi School of Economics, said the momentum could be lost if tariffs weren't reduced to make industry more competitive. Indira Rajaraman, RBI Professor, NIPFP, and Bibek Debroy, Director, Rajiv Gandhi Institute for Contemporary Studies, discounted the 8.2 per cent figure pointing out to last year's poor growth as one reason for the impressive number. Rajaraman claimed the feel-good factor stemmed from the middle-class' ability to "find private solutions for public failure", such as water purifiers and generators. The absence of greenfield investments worried Subir Gokarn, Chief Economist, CRISIL. And Kirit Parikh, a Professor at the Indira Gandhi Institute for Development Research, raised the spectre of the unsustainable fiscal situation. The only representative of India Inc. on the board, Siddhartha Roy, Chief Economist, Tata Group, struck a contrarian note. He said the growth was led by consumer expectations and a genuine improvement in efficiency across companies. We'll buy that argument.

-Ashish Gupta

GROWTH FORECASTS FOR 2004-05

	6% The economy is growing now because in the last six years, it just grew by 5 per cent. Suresh Tendulkar/Professor/DSE
	6.75% Agricultural growth will come down to 3 per cent and hence the GDP will come down. Indira Rajaraman/RBI Professor/NIPFP
	6.5% The base will be much higher this year, ergo, growth will be more muted next year. Bibek Debroy/Director/RGICS
	6.5%-8% The industrial recovery is well under way in some sectors. But it is yet to spread to others. Subir Gokarn/Chief Economist/CRISIL
	7.5%-8% Even by the law of the averages, agriculture is expected to do well. Kirit Parikh/Professor/IGIDR
	7% If only the government carried out labour reforms, growth would be much faster. Siddhartha Roy/Chief Economist/Tata Group