Sunil Mittal
After four years of high GDP growth, even a diehard optimist would be sceptical as to whether the economy would will be able to turn in similar numbers again next year. Given the fact that the present buoyancy is based on reasonably sound economic fundamentals, I have reasons to believe that the momentum is here to stay.
My optimism is, of course, based as much on the fundamentals of the economy as my inherent faith in the growth appetite of India Inc. As per the Mid-Year Review tabled in the Parliament in December, the economy has grown by 9.1% in the first half of 2007-08. But more than the robust growth figures, what actually strengthens my faith in the economy’s ability to sustain growth is the fact that inflation has eased below 4% after more than a year.
This surely augurs well for the economy in the coming days. I believe, like last year, industry and services will continue to be the primary drivers of growth. In telecom, we are quite bullish about another robust year. It will be interesting to observe how rural telephony shapes up. Rapid customer additions in the rural hinterland will be a key driver of growth for this sector. The operators, however, would be eagerly looking forward to the initiatives the Government takes to overcome the challenges of spectrum allocation.
Software exports and business process outsourcing too are expected to maintain the momentum despite some revenue pressure in the event of any further appreciation of the rupee against the US dollar. Agriculture will continue to complement the projected growth in industry and services. It is still the most critical sector as far as creation of purchasing power in the countryside is concerned. Sustained growth in the sector is likely to be driven by efforts towards crop diversification and accelerated introduction of technology.
The government too is expected to enhance allocation towards the sector in general and towards irrigation in particular. A few months back, rising international oil prices was a big worry for the industry. Fortunately prices have started cooling off and are expected to go down further as the year progresses. This will help control inflation and positively impact corporate profitability and take away the constant pressure of oil price rise on the economy.
Overseas acquisition by Indian firms during the year is likely to gather more steam in 2008. Conversely, India is likely to remain a preferred investment destination for global corporations during the year. Having already achieved approximately $20 billion in foreign direct investment during 2007, the country is expected to attract more investments in the coming year. Increased capital inflows however, could be a cause for some concern to the SME sector as this as this might further fuel appreciation of the rupee and thereby impact exports.
On an overall basis, the performance of Indian exporters, I believe, is expected to improve despite the appreciation of the rupee. The exporter community is steadily getting acclimatised to a hardening rupee. In fact, as per October 2007 data, exports have risen by more than 35% from a year earlier. Subsidised credit terms, tax breaks and hedging against an appreciating rupee are likely to aid the exporting community in their endeavour.
A possible slowdown of the US economy could provide some challenges for Indian exporters. However, given the fact that the exporting community has already started diversifying its market portfolio, the slowdown may only marginally affect their efforts. Notwithstanding the positive developments in the economy, policy-makers and corporate India would need to keep in sight some important developments. One possible irritant for corporate India during the year could come in the shape of over stretched infrastructure. We need to realise that sustained growth over the last four years has started putting pressure on our infrastructure.
This is aggravated by the long gestation period of some of the infrastructure projects currently under execution. Policy-makers need to monitor the progress of projects in the road and power sectors more closely so as to ensure timely completion. According to the Mid-Year Review, the high cost of power alone was affecting the competitiveness of the domestic industry by 3-5 %. Corporate India will be eagerly following developments on this front as the year progresses.
Another constraint that corporate India could face in the coming days is talent crunch.Sustained high growth is clearly leading us to a situation where too many companies are chasing the existing reservoir of talent. However, I believe Indian corporates are seriously trying to develop skills and retain talent as a means of negotiating this constraint. The capital market is in good shape today. Having delivered a 40% plus return consistently over the last three years, the Sensex is gearing up to move to the next level.
Corporate India can look forward to a buoyant capital market during the coming year that would provide a healthy stream of funds to shape their new initiatives. While forecasting a happy year for the Corporate India, my mind keeps back going to the fact that economic growth for a nation is not just about creation of wealth. It’s about making an impact on the lives of the poor and the marginalised and making them a part of the wider growth process.
The Mid-Year Review reiterates the view that current GDP growth has generally been inclusive in nature and making a discernible impact on key socio-economic parameters. I expect the same trend to hold true in the coming year as well.
The author is the chairman and managing director of the Bharti group
After four years of high GDP growth, even a diehard optimist would be sceptical as to whether the economy would will be able to turn in similar numbers again next year. Given the fact that the present buoyancy is based on reasonably sound economic fundamentals, I have reasons to believe that the momentum is here to stay.
My optimism is, of course, based as much on the fundamentals of the economy as my inherent faith in the growth appetite of India Inc. As per the Mid-Year Review tabled in the Parliament in December, the economy has grown by 9.1% in the first half of 2007-08. But more than the robust growth figures, what actually strengthens my faith in the economy’s ability to sustain growth is the fact that inflation has eased below 4% after more than a year.
This surely augurs well for the economy in the coming days. I believe, like last year, industry and services will continue to be the primary drivers of growth. In telecom, we are quite bullish about another robust year. It will be interesting to observe how rural telephony shapes up. Rapid customer additions in the rural hinterland will be a key driver of growth for this sector. The operators, however, would be eagerly looking forward to the initiatives the Government takes to overcome the challenges of spectrum allocation.
Software exports and business process outsourcing too are expected to maintain the momentum despite some revenue pressure in the event of any further appreciation of the rupee against the US dollar. Agriculture will continue to complement the projected growth in industry and services. It is still the most critical sector as far as creation of purchasing power in the countryside is concerned. Sustained growth in the sector is likely to be driven by efforts towards crop diversification and accelerated introduction of technology.
The government too is expected to enhance allocation towards the sector in general and towards irrigation in particular. A few months back, rising international oil prices was a big worry for the industry. Fortunately prices have started cooling off and are expected to go down further as the year progresses. This will help control inflation and positively impact corporate profitability and take away the constant pressure of oil price rise on the economy.
Overseas acquisition by Indian firms during the year is likely to gather more steam in 2008. Conversely, India is likely to remain a preferred investment destination for global corporations during the year. Having already achieved approximately $20 billion in foreign direct investment during 2007, the country is expected to attract more investments in the coming year. Increased capital inflows however, could be a cause for some concern to the SME sector as this as this might further fuel appreciation of the rupee and thereby impact exports.
On an overall basis, the performance of Indian exporters, I believe, is expected to improve despite the appreciation of the rupee. The exporter community is steadily getting acclimatised to a hardening rupee. In fact, as per October 2007 data, exports have risen by more than 35% from a year earlier. Subsidised credit terms, tax breaks and hedging against an appreciating rupee are likely to aid the exporting community in their endeavour.
A possible slowdown of the US economy could provide some challenges for Indian exporters. However, given the fact that the exporting community has already started diversifying its market portfolio, the slowdown may only marginally affect their efforts. Notwithstanding the positive developments in the economy, policy-makers and corporate India would need to keep in sight some important developments. One possible irritant for corporate India during the year could come in the shape of over stretched infrastructure. We need to realise that sustained growth over the last four years has started putting pressure on our infrastructure.
This is aggravated by the long gestation period of some of the infrastructure projects currently under execution. Policy-makers need to monitor the progress of projects in the road and power sectors more closely so as to ensure timely completion. According to the Mid-Year Review, the high cost of power alone was affecting the competitiveness of the domestic industry by 3-5 %. Corporate India will be eagerly following developments on this front as the year progresses.
Another constraint that corporate India could face in the coming days is talent crunch.Sustained high growth is clearly leading us to a situation where too many companies are chasing the existing reservoir of talent. However, I believe Indian corporates are seriously trying to develop skills and retain talent as a means of negotiating this constraint. The capital market is in good shape today. Having delivered a 40% plus return consistently over the last three years, the Sensex is gearing up to move to the next level.
Corporate India can look forward to a buoyant capital market during the coming year that would provide a healthy stream of funds to shape their new initiatives. While forecasting a happy year for the Corporate India, my mind keeps back going to the fact that economic growth for a nation is not just about creation of wealth. It’s about making an impact on the lives of the poor and the marginalised and making them a part of the wider growth process.
The Mid-Year Review reiterates the view that current GDP growth has generally been inclusive in nature and making a discernible impact on key socio-economic parameters. I expect the same trend to hold true in the coming year as well.
The author is the chairman and managing director of the Bharti group
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