KEY POINTS:
It doesn't need an economist to figure out the Indian economy is galloping along at a splendid speed. The proof of that is visible in the booming stock market, the fast-growth industries and the overcrowded shopping malls where the middle class is splurging like never before. But now
the evidence of our own eyes has been confirmed by the statisticians.
The Indian economy has outshone all the predictions from the economic forecasters. It has grown by a spectacular 9.4 per cent in 2007, outdoing even the best estimates. That's almost Chinese-style growth figures which few Indians had ever dared to hope for.
If that's not impressive enough, look at the manufacturing sector, which was once the class slowcoach. In 2006-2007, it put in a prize-winning performance with growth of 12.4 per cent. That's compared to 10 per cent last year.
The economy has exceeded all expectations and it is heartening to see manufacturing so strong, says Deepak Lalwani, director of Astaire & Partners, a London-based stockbroking house.
Turn to the service sector, which has been the star performer over the past decade. Here growth was at an even more impressive 13 per cent, up from 10.4 per cent a year ago.
Is there a dark side to this rosy picture? The answer is, unfortunately, yes and it is the reason why India still has a long way to travel on the road to prosperity. Growth in agriculture has slowed to 2.7 per cent. That's far worse than last year's 6 per cent.
Remember that more than 60 per cent of India's population still depends on agriculture. They aren't seeing much of the prosperity that has now reached some people in India's cities.
Corporate India is booming and agriculture is lagging. This great social divide is a problem.
The latest growth figures released last week underline the dramatic changes that have transformed the Indian economy in the past few years.
The fact is whichever way you look at it, the scale of the game has changed beyond recognition in a remarkably short time. India has been catapulted economically into a completely different league.
That was driven home when India crossed another economic landmark recently by becoming a trillion-dollar economy three years ahead of schedule.
How has that happened so suddenly? Quite simply, because the Indian rupee has appreciated sharply against the US dollar in the past year. The figure may not mean a great deal but India has now become one of just 12 trillion-dollar economies.
If all that's not enough, take a look at India's bulging foreign exchange kitty. Back in December 2003, when India's foreign exchange reserves crossed US$100 billion ($134 billion), the newspapers carried banner headlines. All the top economists were drafted to comment on the event and they reminisced about the grim start to the 1990s, when India's foreign exchange reserves were down to US$975 million with just enough for a few weeks of imports.
By contrast, when India's foreign exchange reserves zoomed past the US$200 billion mark a few weeks ago, it scarcely received a backward glance from the assembled army of economists and media pundits. Turn to the corporate sector and once again it is obvious that everyone's thinking bigger than ever before.
In 2003 Indian companies spent a relatively modest US$450 million on acquisitions abroad.
Cut to the present and an entirely different game is under way. There have already been 34 takeovers this year and Indian companies have spent about $11 billion on foreign buys.
Last year India's acquisition-hungry companies gobbled up companies worth US$23 billion. This created an unusual situation for a developing country where more money went out on foreign acquisitions than came in as foreign investment.
But foreign investors have also fallen in love with the India story and they are now willing to back that with cash. A few months ago Vodafone paid US$11.1 billion for fast-growth Indian telecom company Hutchison-Essar.
Vodafone announced last week that it will spend another US$1.98 billion on the company. That's about one-fifth of the company's capital spending planned for this year.
The changes in recent years have also been reflected in the stock market and the Sensex has climbed from a lacklustre 4,000 points in December 2003 to about 14,570 on Friday.
What's driving the changes? The answer is quite simple. India's middle class has more money and it isn't being shy about spending it. Lalwani says there is a structural change upwards in the Indian economy. The reason is the growing middle class and rising incomes.
But what about the future? Will the next decade be one of unstoppable growth like China has seen for the past 20 years? That is still in the balance.
The ruling Congress-led Government has played only a limited role in the current economic boom. Big moves, such as opening the telecom sector and starting a highway building programme, were kicked off by the BJP-led government which ruled until May 2004.
What's more, the Government likes to present itself as being pro-poor but it hasn't done anything for the agriculture sector. India's economy used to depend heavily on the annual monsoon rains which brought prosperity in its wake. That dependence has greatly reduced in recent years but India's growth story will continue to be lopsided if nothing is done for agriculture.
