T N Ninan: All in a week's work

WEEKEND RUMINATIONS

Another week, and another week of upbeat news: the Sensex hits another all-time high and industrial production records another month of double-digit growth. Infosys gets ready to break into the Nasdaq-100 with the largest issue of American Depository Shares by an Indian firm, and Mahindra gets set to join the big league in automobiles, following its three-way deal with Renault and Nissan to make half a million small cars. There's more: a new record in phone sales (7 million in a month), while Videocon plans a second South Korean acquisition and Tata buys up yet another American hotel. Even that's not all: one-sixth of India's listed companies seem set to double profits this year, and 250 troubled ones have turned the corner.

The range of breakthrough news is in itself a comment: many sectors, different business houses; investment coming in and investment going out; markets soaring and financials shining; the troubled ones prospering, and the successful ones climbing new peaks. Of the lot, the one with the maximum significance is probably Mahindra""because it symbolises the transformation of old-style manufacturing into a modern powerhouse, because it is a big-ticket industry like cars, and (with the success of diversifications into ventures like Tech Mahindra, whose business has doubled in a year, with a share price performance to match) because a successful Indian conglomerate seems set to join the 'A' team of Indian manufacturing enterprises.

In a story that will find echoes in other corners of Indian manufacturing, an average company with moderate manufacturing capabilities has transformed itself over the past decade, seized leadership of the tractor business, gone global with tractor plants in China, the US and Brazil, developed new, better-quality utility vehicles and is now set to join the big league of Indian car manufacturers by starting the volume production of small cars""in partnership with Renault and possibly Nissan. So far, India's car industry has had the big three, in Maruti-Suzuki, Hyundai and Tata; soon there will be a fourth. (Disclosure: Mahindra has a small equity stake in Business Standard Ltd.)

While that is impressive enough, what we see some of the international companies doing in India is quite breathtaking. General Electric hopes to more than quadruple its business in India by the end of the decade. ABB has already been a tear-away success these past few years, and continues to clock growth rates of 50 per cent and more. It is hard to believe that most western observers were saying till the other day that India had missed the bus in manufacturing and should focus on services, because no one could compete with China; why, many Indians believed that too. The difference of course is that India has become a magnet for investment in engineering factories that have a greater technological input. Nokia, Samsung and many others have made a bee-line for Chennai, to make everything from mobile hand-sets to TV monitors, with Samsung announcing a second factory this last week. One can only imagine how much better the story would be if India could repeat China's success in low-technology, high-volume sectors like clothes and shoes.

Manufacturing is more dependent on the country's physical infrastructure than service activities like software exports. And for all the questions that dog the subject, there were some other bits of goods news on this front too in the past few days""like the substantial reduction in charges by the country's largest port, reflecting the efficiency gains that have been made in recent years. And the head of a large logistics company said that his trucking time between Delhi and Mumbai has halved after the completion of the most important stretch of the Golden Quadrilateral.

It is possible that people get carried away with overdone optimism because the times are good. But it is hard to believe that the degree of momentum now on display is happening in an economy that is growing at only 8 per cent. When the GDP numbers are finally in, it should not be a surprise if we are told that growth this year was 9 per cent, the highest ever.