Saturday, April 23, 2011

The Big Story - how true?

T. N. Ninan in the Business Standard

.... people have tended to forget that the big story in India, the truly exciting story, remains rapid economic growth. That was underlined by the Planning Commission formally adopting on Thursday a 9-9.5 per cent annual growth target for the five years beginning next April — building on the average of 7.8 per cent in the preceding 10 years.

...companies have become demonstrably more efficient. One indication: prices of manufactured goods have been going up less than general inflation. Couple this with rising incomes, and you have halved the number of months’ salary that it takes the average executive to buy a basic car. Ergo, dramatic growth in sales as the consuming class burgeons in numbers. At the same time, companies have delivered greater surpluses; corporate savings have more than trebled in relation to GDP, from 2.7 per cent a decade ago to about 9 per cent (their share in total national savings has, therefore, doubled from 12 per cent to 25 per cent). This kicks into the macro story of more savings and investment, and therefore faster growth. Finally, in yet another indicator of improved competitiveness, Indian exports have grown at an annual rate of 19 per cent through the past decade — three times the global average of 6 per cent. The conclusion seems inescapable: Corporate India’s DNA has changed.