Indian Economy Races Into 2006

Oft-derided as the slow-moving elephant of Asia, India's economy has been transformed into a star performer with booming growth and a stock market that rocketed 40% in 2005.

As India enters the new year, economists say the Asian nation of over a billion people is closer than ever to attaining its goal of being a global economic power.

"When people look at the region, they tend to concentrate on China," says economist Brian Hilliard at Societe Generale investment bank in London. "Now there's another player ... that can become a major economic power."

This world attention, backed by record foreign fund inflows, is based on growth running at 8%, a booming outsourcing sector, strong services, manufacturing expansion and consumer spending by a growing middle class. While much of India is still steeped in poverty, there is a new "shop till you drop" mentality among the middle class, estimated at 300 million. Buoyed by rising incomes, they are embracing consumerism with a vengeance, dropping the frugal legacy of Mahatma Gandhi, the conscience of modern India. Go into any of the big retail outlets in New Delhi, Bombay or Bangalore that are jammed on weekends, with swanky bars or restaurants and it is clear many Indians are making up for lost time after years of penny-pinching. Increasingly, commentators speak of "two Indias" -- one of free-spending affluence and the other where 250 million people survive grim poverty on under a dollar a day.

On the business front, from communication to software, real estate to auto parts, virtually every sector has been firing on all cylinders and is expected to keep on doing so. For instance in November alone, India, the world's fastest-growing mobile phone market, notched up 1.18 million new users, bringing its total to 72 million. The figures are set to rise as firms target the vast rural market.

Now economists are scaling up growth forecasts after the economy expanded by 8.1% in the first half and 8% percent in the third quarter. Some are predicting 8% growth for the year to March 2006. The economy grew 6.9% in the previous fiscal year. That would still make India the world's fastest growing major economy after China. What's more, the growth looks sustainable.

Copyright Agence France-Presse, 2005

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