Paran Balakrishnan: Frenetic progress beats all predictions

Looking into a crystal ball is always a risky game. But 2010 isn't far off and the numbers are emerging fast and furious from the misty future.

Just take one example: by the turn of the decade it's reckoned there will be 500 million phones in India as against 164 million now.

Not impressed? Take to the road instead and watch out for the traffic jam of two-wheelers and sedans roaring out of the factories. India is the world's second-largest two-wheeler market - behind China, who else - making about 7 million two-wheelers annually. Production is revving up and is slated to hit 12 million by 2010.

Many Indians, though, will be upgrading from two wheels to four and manufacturers reckon that vehicle production will climb from 1.1 million to nearly 2 million.

"Change is taking place at a very rapid pace. In some areas you find tremendous growth taking place," says D. H. Pai Pannadikar, president, RPG Foundation, a Delhi-based think-tank.

So, is India about to go pelting down the economic superhighway like China? This is an unpredictable country but the numbers indicate that growth in the remainder of the decade will outstrip all that has gone before.

The seminal report published by Goldman Sachs in 2003, which outlined how Brazil, Russia, India and China will play a major role in the global economy this century, reckoned that India's GDP would touch US$1 trillion ($1.5 trillion) by 2010. Since then the economy has been in the fast lane with about 8 per cent annual growth and GDP has soared to about US$600 billion.

"The economy is moving much faster than the BRICs level of 6.5 per cent," says Roopa Purushothaman, a co-author of the BRICs report. Purushothaman has since left Goldman Sachs and is now chief economist and strategist with the Mumbai-based Future Group.

In other industries, too, growth is zipping ahead of all the predictions or, at the very least, meeting all targets effortlessly. Take the all important high-tech industry where growth has been at between 25 per cent and 30 per cent annually for several years.

About 1.3 million people - mostly youngsters - are seated at their terminals currently raking in business worth about US$23 billion from around the world. That number of people is projected to rise to 2.3 million by 2010 while the business worth is seen hitting $60 billion. Industry association Nasscom (the National Association of Software and Service Companies) reckons that the high-tech sector will also provide employment to about 6.5 million indirectly by the end of the decade.

The high-tech sector's blistering growth means that it is also sparking a construction boom on a spectacular scale to seat the extra million people. Nasscom is even moving beyond software parks and talking about 'integrated townships' and 'knowledge cities' built around the biggest facilities.

India's construction industry, powered by the high-tech boom and the middle-class appetite for new homes, is growing at around 12 per cent annually.

"There'll be more of everything. Special economic zones, new world-class buildings, more supermarkets, more shopping malls," says Andrew Holland, managing director, Merrill Lynch in Mumbai.

Can this country take this spectacular pace of growth? The answer in many sectors is probably no. This is still India, the Third World giant famous for its rickety infrastructure, its electricity outages, its potholed roads and ports where ships get stuck for weeks.

Says Pannadikar: "There are certain sectors where growth will be phenomenal. And there are other sectors where we will be lagging behind."

In fact, in some sectors it will be a race against time. Take a look at the fast-growing aviation sector where half-a-dozen new competitors are trying to outfly their rivals. Aviation is also growing at about 25 per cent annually and the number of passengers lured by low-cost fares is likely to climb from about 25 million to 60 million by 2010.

Two airports are being built in Delhi and Mumbai to cope with the rush - and both promise to be world-class facilities to compare with the best in Asia (Delhi's airport is scheduled to be operational before the Commonwealth Games in 2010). But smaller cities will still be struggling to cope with the rush in antiquated aerodromes.

There are other giant trouble zones where the lights are already flashing red. India's imports and exports are, for instance, growing at 25 per cent annually. That means capacity at the ports needs to double by 2010. New ports are being built but not that fast.

The fact is that India's creaky infrastructure is not geared to tackle the 25 per cent increases that are happening in sectors like aviation or high-technology. Says Pannadikar: "By 2010 one cannot expect much change. Shipping, air transport, airports will all be a problem."

There's also a crucial question mark hanging over the agriculture sector, which accounts for 25 per cent of GDP and where growth is stumbling.

Rice production fell by about four million tonnes this year and wheat is being imported for the first time in six years.

Says Future Group's Purushothaman: "There are a lot of problem areas. Agriculture, power and the rural sector in general."

How does one explain these dichotomies of high growth and low growth sectors? Pannadikar has a ready answer to that one. "Wherever there is government, growth is low. In sectors where the private sector dominates, growth is very fast."

Purushothaman says that "Growth will be in fits and starts."

But nobody questions that high-speed growth is on the cards. Says Purushothaman: "These are realistic trend numbers. Even with a correction corporates can plan along these lines." And that is the bottom line.

* Paran Balakrishnan is the associate editor of the Telegraph, Kolkata. His column appears fortnightly in the Business Herald, alternating with Dan Slater's Eye on China.