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India's Economic Mood Turns Optimistic

  • Anjana Pasricha

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As India's economy begins to recover from the impact of the global financial crisis, companies have again started recruiting staff and handing out pay raises. The mood is in sharp contrast to a year ago, when the global economic downturn put an abrupt end to a five-year economic boom in the country.

Twenty-five-year-old Trishna Mukherjee is a post-graduate business management student at one of India's premier business schools in New Delhi. When she began her course work this year, she was worried that it might be tough to land a job when she graduates.

She had reason to be concerned. Nearly half the class of 2009 did not find suitable jobs when they graduated in April. That was not surprising. Just as in many other countries, Indian companies had stopped recruiting staff as they coped with the global economic downturn.

But Mukherjee says the mood on college campus is now much more upbeat.

"When we went there, a lot of our alums [alumni] had not gotten placed. So we would still see them constantly coming to campus, still taking their interviews. And, obviously, somewhere we were a little worried as to what would happen when we get to that point. Now, it's much better. We already have people coming to campus. There is already a buzz around. And, now we see things are getting better. So people are much more relaxed," said Mukherjee.

As India emerges from the global downturn faster than many countries, companies here have announced plans to start hiring again. And, as people gear up to celebrate the country's main festival, Diwali, next week, employers are handing out pay hikes and bonuses to staff.

Although India was less affected by the downturn, compared to Western countries, many hard hit-sectors downsized in the past year. Almost all companies had put salary raises and bonuses on hold, as profits declined.

But, now, sectors such as finance, insurance, services, information technology and retail are back to hiring.

Naresh Malhan, who heads the job consultancy firm Manpower India, says a recent global survey shows that India's job market is more buoyant than that of other countries.

"India is on top. The maximum number of employers who had positive intent to hire is highest in India, in comparison to any other country. In order of sequence, India is leading, then would be Brazil, then will be Colombia, then will be Peru, and then will be China, Australia, and then Singapore," said Malhan.

The government says the economy is back on track and is eyeing growth of more than six percent, this fiscal year. In the last year, it has passed three stimulus packages and cut interest rates and taxes to boost spending. These measures have helped bring consumers back to markets and industrial activity has picked up.

An economist at the Federation of Indian Chambers of Commerce and Industry, Anjan Roy, says business confidence is higher than it has been in the past year.

"Indian industry has turned around and the slowdown is wearing out. These are the early days, when the expansion growth triggers are once again operating and we expect this should go on, provided there is no reversal of these basic policy parameters," said Roy.

Concerns remain. Businesses are worried that the government could raise interest rates to check rising inflation and food prices. A drought in much of the country and flooding in other parts has hit agricultural growth and will dampen the rural economy. And, there are fears that any reversal in the tentative economic recovery being seen in several Western countries could stall momentum in India.

Economists also warn that the economy may be improving, but it is unlikely to reach the levels of over eight percent growth witnessed for four years prior to the global financial crunch. At that time, Indian industries were turning in huge profits and rising salaries had brought new affluence to the middle class.

Business management student Mukherjee says the expectations of her class are more modest than those of students who graduated during the economic boom India witnessed between 2004 and 2008.

"Definitely our salaries and our remuneration will not be as good as it was three years back or two years back, but I think we should be okay this year," said Mukherjee.

India is Asia's third-largest economy. International institutions, such as the World Bank and International Monetary Fund, have said that countries like India and China will help pull the global economy out of the worst recession seen in recent decades.