When the going is good, everybody feels great. By most measures it's been a heady ending to a good year for India's economy and business. Things looked particularly bright in the second half of the year-perkier GDP growth, buoyant trade and a boom in industry and services. Even the government did quite well-tax revenues hit a new high and policymaking chugged along satisfactorily. Assuming that most of our readers read this magazine front-to-back and not the other way round, you will have noticed the largely uptempo mood of our writers, editors and guest columnists. That feeling is also reflected in our poll that covered groups from different strata of society. While people still worry about issues like corruption and population growth, the poll shows an all-pervasive optimism about the reforms and about India's future.

Amidst such cheer, it is easy to overlook creeping problems, some of which could be hurdles for the rise of India's economy. To my mind, the most serious of them is that of shortage of manpower. Paradoxical as it may seem in a country of over a billion, businesses across the spectrum today face an acute shortage of employable people. In a cover story that we had done recently (Soaring Salaries, Vanishing Workers, September 24, 2006), we had mentioned some startling numbers that merit a quick recap. In Indian industry's crown jewels, the IT and ITEs sectors, our survey showed manpower shortage could touch 500,000 by 2010; in telecom, it could be nearly 450,000; in retail more than 200,000 and in healthcare and life sciences, a staggering 1.5 million.

Alarmingly, these shortfalls are not projections for 15 or 20 years from now but just three or four years down the line. In the short run, this has meant skyrocketing wages. But the more serious long-term consequence is about whether India's ambitions of growing at 8, 9 or 10 per cent annually would get stymied by the emerging manpower crisis. These shortages point to the woeful inadequacy of our education system's ability to produce skilled or trained people.

We may be enthused by the impact that economic reforms have had thus far but it is also a fact that a fifth of the world's poor are Indians. The real reforms that are needed to change their fortunes and also to ensure that we are not thrown off the growth trajectory are in education. Literacy rates have to increase and more people have to be empowered with skills that they need to become employable in an increasingly global Indian economy. Without that, the hopes of becoming an economic superpower will remain a dream.

If that sounds like a grim way of beginning a new year, let me remind you that 2007 promises to start with a bang. For one, there are deals-in-the-making to watch, like the Tatas' bid to buy Corus or the contest to take over Hutchison-Essar. A battle royale could also be brewing as Bharti-Wal-Mart and Reliance foray into organised retailing. On the bourses, expect more flutters as the Sensex continues to flirt with 14,000. Of course, you could watch for a burst of new reforms that an emboldened Congress-led government may have in store for us as it embarks on the second half of its five-year tenure.

Meanwhile, here's wishing you a very Happy New Year!

SANJOY NARAYAN