As this article goes to press, Moody's has upgraded India's foreign currency rating to investment grade, and while the stockmarket is in a volatile tizzy over the fear of restrictions on investments by foreign funds, the sun is still shining on India. The few third quarter results that have come in look good, industry is, generally, happy, and macroeconomists are busy revising their predictions for the rate at which the economy will grow next year, up, up and up. Will the boom last? Well, given that most economists couldn't see it coming, we are loath to ask them that question. Instead, we look at four lead indicators of economic performance and the state of the rest of the developing world to draw our conclusion.

India & The World
The Indian economy will grow faster than most others next year. But hold the bubbly just yet.

India rising. India shining. The BRICS report...

Sounds familiar? it will, if you have been reading the papers, publications such as the one you hold in your hands, even billboards on the way to work. After discounting hype and the Bharatiya Janata Party's propaganda in the context of the coming elections, the original question remains: Is India really rising and shining? More importantly, does it shine brighter than its competitors (read other emerging economies)?

First, the good news: India is probably at an inflection point from where it appears like a now or never situation for the billion-strong democracy. Growth rates are healthy, inflation is under control, FII (foreign institutional investors) inflows seem to be breaking all former records, forex reserves are at an all-time high, outsourcing to India has caught the imagination of the world, and the government seems to have perfected its own effective version of laissez faire. To continue in the same vein, India, it appears, will emulate China's J Curve in mobile phones, two wheelers and car sales by 2006 (China saw car sales jump 2.6 times, two wheeler sales, 6 times, and mobile subscribers 58 times around 1997). That takes care of a burgeoning domestic market, the first requisite of a strong economy.

Now for that question about India and its competitive position among its peers: this is a critical question given the fact that India competes with several emerging economies for its share of global capital.

The most discernible pattern in the global economy today is one where a cluster of developing economies are slowly aligning themselves to form a gigantic supply chain that touches everything from information technology (it) services to auto component manufacturing to research in drugs. The buyers are largely in the United States, Western Europe and Japan. "There is just one question that global customers ask today-what can we do to integrate India into our global supply chain?" says Sudip Banerjee, President, Enterprise Solutions, Wipro Technologies, who sees companies in Japan and South Korea wanting to take advantage of China's emerging it skills. "Take that bloc out and I see India faring alright," he adds.

Cut to an unrelated sector, automotive. Here too, key players are seeing a pattern emerge. "We would look at Malaysia, Singapore or Philippines for electronics expertise whereas India is more suited to labour intensive work, like castings and forgings," says David Friedman, MD & President, Ford India. "China, with its economies of scale, is suited to electrical components." Extending that logic to Latin America, Ravi Venkatesan, Chairman, Cummins India, says, "It is Brazil for engineering capability, Mexico for its access to North American markets, China for high-volume low-skills labour, and India for engineering skills (behind Brazil)." Outsourcing is clearly one area where India has arrived.

India also seems to have arrived in terms of FII inflows. Just why are foreign investors turning to markets such as India? "The general consensus is that the US currency outlook is not particularly good. So investors are looking to diversify their exposures and are moving into emerging markets ," explains U.R. Bhat, Head of Equities, JP Morgan India. The markets of choice are China, South Korea (inflows of $11.8 billion in 2003), Taiwan ($15.7 billion), Brazil ($11 billion till September 2003) and India (over $6 billion). "India commanded 15 percent of the FII flows last year, which is ahead of its index weight of 5 percent," says a senior exec at a Mumbai-based FII. "Investments in India saw better return on equity (roe) than all the other emerging markets at 18 percent last year; the average for other markets was about 11 to 12 percent."

Does that mean the fundamentals of the Indian economy are better than, or at least similar to those of other emerging economies? "India's growth is largely because of the domestic market with exports accounting for just 10 percent of its GDP, unlike China which is much more dependent on exports and, as a consequence, on the US as a buyer," says Bhat. "As for the Latin American economies, the huge problems with currency and inflation are still fresh in many investors memories." And the Russian and Eastern European story, as everyone well knows, comes with more than a dash of political instability. One reason for the relative solidity of the Indian economy could be the cost of capital in the country. India, explains Surjit S. Bhalla, Managing Director, Oxus Research, has seen interest rates fall by as much as 6 per cent over the past three years. In most other emerging economies the corresponding figure is 3 per cent.

That the Indian economy isn't there yet is evident in economic and social indicators (see India vs Emerging Markets). One dekko is enough to turn all arguments of the preceding paragraphs around on their head. Then, there's the issue of jobs. Pranab K. Bardhan, a professor of economics at the Department of Economics, University of California, Berkeley, points to the fact that employment growth in India has not kept pace with Gross National Product (GNP) growth, a phenomenon economists term jobless growth, resulting in large-scale unemployment.

India's problems don't end there. The country's investment in infrastructure has been, at best, inadequate. Economists like Saumitra Chaudhuri of ICRA, however, point to a silver lining: "One positive is that the economic management of the country has followed the classical balanced approach that has saved it from the Asian meltdown or the various currency crises plaguing the Latin American countries." And the world is coming around to the opinion that India's services-driven economic model could fly. "The service industry as a driver of economic development is a new phenomenon, most effectively used by Ireland, in terms of output per capita growth. If this model is applied as successfully in India, then it will become one of the largest economic powers in the world," says Jephraim Gundzik of California-based investment advisory firm, Condor Advisors. Hear hear!

-Priya Srinivasan with inputs from Ashish Gupta

B For B-Schools, B-For Boom
There's one on in campuses.

The class of 2004 at IIM Bangalore: It can look forward to a fairy-tale ending

These days, the man with arguably the biggest smile in Bangalore is Prashant Sood. The 25-year-old class of 2004 student at the Indian Institute of Bangalore is one of the school's 23 that have managed pre-placement offers. His comes from HSBC Bank in London where he worked last summer. The mere fact that 49 students out of IIM B's graduating batch of 220 have landed jobs already-apart from pre-placement offers, 26 have bagged lateral placement offers; these typically go to students with significant and relevant prior work experience-doesn't mean that recruiting companies expect the current economic boom will last. What does, is the expectation of Ganesh Prabhu, Assistant Professor and Chairperson, Placement, iim Bangalore, that there will be a substantial increase in the number of companies that recruit from the campus this year (around 60 did last year). And what does, is the fact that placement co-ordinators, chairmen, and whatever in campuses around the country are singing the same tune.

This common belief doesn't arise from hope but from two tangible factors. The first is a bumper summer placement season across B-schools. "Given the stellar summer placements this year, we expect our (final) placements to be very positive," says Saikat Sengupta, Student Member, Placement Committee, Indian Institute of Management, Ahmedabad. The second is the fact that more companies have confirmed their participation in the great recruitment jamboree. At XLRI, Jamshedpur, between 65 and 70 companies have confirmed participation, as against the 50 that recruited from campus last year, a skew in the demand-supply equation that prompts Placement Secretary Harshvardhan Singh to say, "We cannot guarantee recruits for every company." That sentiment finds an echo on the outskirts of Kolkata where the Indian Institute of Management, Calcutta, is located. The 241 students of the school's class of 2004 have carefully marked out March 14, 2004, on their calendars; that's the day the placement season kicks off. "Last year we hosted around 80 companies during the recruitment season; this year, we expect more," says Abhishek Sharma, a member of the school's placement cell. Some of these could be companies that have never visited the campus before.

Mumbai's Jamnalal Bajaj Institute of Management Studies, for instance, is preparing to welcome Infosys, Tata Strategic Management Consultancy, Biocon, Bharat Serum, and Singapore's Temasek Holdings, all first-time recruiters at the school. The placement cell has run an analysis on the basis of the companies that have expressed interest in participating in the placement process and estimates that the offers per student will increase from 1.2 to 1.6. Delhi's Faculty of Management Studies has conducted a similar exercise and Sudarshan Sengupta, Student Co-ordinator, Media, expects the offers per student to increase from "1.4 to more than 2," and the average annual salary by around 20 per cent from last year's Rs 6.88 lakh.

It isn't just the it companies that are hiring, although their return to campuses is only to be expected. "We have had a good season as seen in our Q3 numbers," says Hema Ravichandar, VP, HR, Infosys. "As indicated, we will be hiring around 1,500 people from engineering and management campuses." ICICI Bank, for instance, plans to hire 170 to 180 people from B-schools this year as compared to the 70 it did last year. "There will be solid analytical jobs going in BPO firms and jobs in it companies with strong banking verticals," says K. Ramkumar, Head, Human Resource Management Group, ICICI Bank, detailing the kind of new jobs that will be created. We're convinced: 2004 will be a good year on campuses.

-Arnab Mitra, Priya Srinivasan, Kushan Mitra, and Venkatesha Babu

The Colour Of Money
Fresh capital investments are underway in India. Just what the economy needs.

A lot at Hyundai's plant near Chennai: The company is investing $220 million to expand capacity

If anyone can rest on his laurels, Baba N. Kalyani, the 53-year-old Chairman and Managing Director of Bharat Forge, can. In November 2003, with the acquisition of Carl Dan Peddinghaus GmbH, Bharat Forge became the second-largest forgings company in the world. But Kalyani wants more: over the next 24 months he will invest around Rs 350 crore in expanding capacities. His target? The #1 spot. "The capacities will help us meet growing domestic and international demand for products," he says. Then there's the story of Hyundai Motor India which plans to invest $220 million (Rs 1,034 crore) to expand the capacity of its factory near Chennai to 2,50,000 cars a year from the existing 1,50,000 "to make it a global export hub for small cars and to cater to upcoming launches in India," in the words of its President, B.V.R. Subbu. It isn't just automotive: across petroleum, electronics, steel, and cement, companies are investing in upping capacity or building afresh. Shell India, for instance, is investing Rs 3,000 crore in building a liquefied natural gas terminal at Hazira, Gujarat. And Tata Steel is investing Rs 1,800 crore in expanding the capacity of its Jamshedpur facility. Is the great investment drought over? Sachin Mathur, the head of research at cris infac thinks so. He claims that between 2003 and 2008, India will see investments to the tune of Rs 500,000 crore, up from Rs 200,000 crore between 1998 and 2003. Companies in sectors such as steel, cement, paper, and petrochemicals, he adds, will have to operate at utilisation levels beyond 100 per cent by 2005 should demand grow at its existing rate. "The real big investments will happen from 2004 onwards," he says. Happy?

-Ashish Gupta

Blue Dart On The Boom: Yes, It's On

Moving Force
The freight industry is cautiously upbeat.

Last year, blue dart turned 20, invested Rs 8 crore in infrastructure to meet rising demand, acquired a fourth aircraft, and did just about anything a company coping with a boom would do. "The changing economic scenario in India, an increase in trade and commerce, and our own investments in infrastructure are yielding results," says Tulsi Mirchandaney, Senior Vice President, Marketing & Finance, Blue Dart. At another logistics major AFL, Chief Operating Officer E.N. Venkat is budgeting for a 20 per cent increase in business next year. If the experiences of Mirchandaney and Venkat are any indication, the boom in the Indian economy looks good to last for at least a year. After all, freight companies are the economy's own water diviners. And if things look good for the industry-Vineet Agarwal, Executive Director, Transport Corporation of India, says they are, on the strength of an upsurge in truck sales-it bodes well for the economy. Figures provided by the Society of Indian Automobile Manufacturers show that the sales of heavy commercial vehicles have increased by 42 per cent between April and December 2003 as compared to the same period in 2002. Surely, not all of that can be explained away as fleet-upgradation activity. Carrying the argument forward to its logical denouement, operators must be investing in expanding and upgrading their fleets because they see an increase in demand. Fact: We're on a roll.

-Supriya Shrinate

Pack-Boom
It's happening, say companies.

The Indian packaging industry was riding the boom before it happened. With companies modernising packaging and a mini-revolution on in the processed foods business, the industry has been growing at around 15 per cent a year for the past few. "The Indian packaging industry has exhibited a fair degree of dynamism in terms of product innovation," says G. Shanker, President, Madras Consulting Group. Now, things get even better. Companies in the processed foods and fast moving consumer goods business work closely with packaging firms, often communicating any knowledge they have of a future increase in demand. So, when Essel Propack CFO R. Chandrasekhar says that his company expects to grow by 3 to 4 per cent in the short term but sees a substantial jump coming in the long term, it means the company's customers, predominantly FMCG companies, see a long-term increase in demand. "We do see a pick-up in volumes happening post-monsoon, mainly in products catering to the oral care business," explains Chandrasekhar. "For products catering to the cosmetic care business, there is a more direct impact of the feel-good factor and we are seeing a slow improvement in the last few months." This is the official line of India's and the world's largest lamitube packaging company. Remember our question: Flash in the pan or 24 carat? Definitely 24 carat.

-Dipayan Baishya