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Last Updated: Monday, 23 February, 2004, 05:24 GMT
India bets on election boom
Analysis
By Jeremy Scott-Joynt
BBC News Online business reporter

Indian Prime Minister Atal Behari Vajpayee
Vajpayee is betting on economic health for election victory
One of the oldest rules of politics is that, more often than not, the state of the economy can decide an election.

So Prime Minister Atal Behari Vajpayee's decision to send India to the polls this April should come as little surprise.

After a tough few years, borne of droughts which ravaged the country's massive agricultural sector and confronted many of its billion-strong population with the risk of famine, things look to be on track.

The latest figures show economic growth to be topping 8%, a rate only matched by the powerhouse that is China.

The expansion not only embraces farming - back to solid growth thanks to the best monsoon season for a decade.

Industry is booming, as December's 6.2% year-on-year growth showed.

And the burgeoning services business is doing well too.

Change of strategy

For once, then, the Hindu nationalist coalition over which Mr Vajpayee presides might be able to pull off a win without having to put religion at the centre of its campaign.

The government itself talks of a "feel-good" factor on which it hopes to base victory.

An advertising blitz is filling hoardings and TV screens with the message: "India Shining".

A mini-budget before parliament was dissolved in early February made only a few modest tax concessions, a far cry from the more usual giveaway seen as necessary to win the economic vote.

Even international credit rating agency Standard & Poor's - never the greatest friend of India's once socialist economy - gave it good reviews.

Shopping mall in Delhi
Fancy shopping malls cater to newly-enriched consumers
"While (the budget's) projections are based on expectations of 8% GDP growth," S&P analyst Ping Chew wrote, "it is a positive sign that the looming general election has not led to a significant loosening in fiscal policy."

In other words, things are good enough that the government does not think it needs a wholesale giveaway to win votes.

Buy, buy, buy

But where is this new-found boom coming from?

And just how deep into this massive country, a majority of whose population still live off less than a dollar a day, does the prosperity penetrate?

On the surface, certainly things have changed radically. Most big Indian cities can now boast shining shopping malls, the shelves groaning under consumer goods sourced from companies both at home and abroad.

Familiar international brand names - in sportswear, clothing, beauty, electronics - are everywhere.

A far cry indeed from the days little more than a decade or so ago, when it took half a decade to get a phone line, or when every second car on the roads was a locally built, boxy Ambassador.

As many as 300 million people now count as middle class in India, and although wages are way below their Western counterparts, the difference in purchasing power means standards of living are shooting up.

In another very modern symbol of development, there are now 30 million mobile phones in India - a figure which is confidently expected to triple within a year or so.

Learn to win

With Indian higher education turning out 2.3 million graduates fluent in English every year (twice as many as the US produces), the effects of India's economic revival are being felt overseas.

Combined with the relatively low cost, the upsurge in highly-qualified personpower is creating a sweet spot that many employers in Europe and the US are trying to exploit.

The most high-profile - and controversial - are probably the call centres, which are rapidly hollowing out large chunks of the business.

An employee in a call centre in Bangalore, India
Call centres are one growth industry
But professional jobs are fleeing offshore too, with Indian computer programmers in particular in high demand.

International consulting firm BearingPoint announced in mid-February setting up a software centre in Madras which within a couple of years will house 3,000 staff.

Their work, and that of a 2,000-strong centre in Shanghai, will underpin the company's efforts worldwide, according Executive Vice-President John Condon.

"This enables us to go for jobs we wouldn't be able to bid for otherwise," he said.

In effect, it means the people at the sharp end of a particular project can get on with managing it and earning the big bucks - leaving their Indian colleagues to provide the back-end programming muscle at far lower cost than doing the job in the same location as the project itself.

None of which means the country does not have its own thriving export industries, including software houses such as Wipro and drugmakers like Dr Reddy's.

And car firm Tata is making Rover's new supermini - itself a derivative of one of Tata's own designs.

Trouble in store?

All is not entirely rosy, however.

The huge weight of India's agricultural sector is a concern.

With much of it still based on subsistence, India's opposition to opening farming to imports - and its consequent leading role in opposing fresh trade talks without significant concessions from the richer nations - comes as little surprise.

The boom has yet to make much of a dent in a public deficit that S&P, for one, fears is too high for comfort at about 9% of GDP.

Privatisation plans designed to ease public spending have generally run into the sand - partly because of opposition from the more strident nationalists in the BJP-led coalition.

But for the moment, the boomtime perception is likely to dominate the economic headlines.

For once, then, the government may be able to sell itself on protecting Indians' pockets, rather than defending its Hindu constituents from perceived ethnic or religious threats.


SEE ALSO:
India's economy 'to grow by 8%'
09 Feb 04  |  Business
Maruti sees car sales rise by 30%
02 Feb 04  |  Business
Asian markets start 2004 on high
02 Jan 04  |  Business
India firm rolls out next Rover
17 Sep 03  |  Business


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