India's Economic Boom Likely to Continue in 2008

Anjana Pasricha

India witnessed impressive economic growth for the fifth straight year in 2007. As Anjana Pasricha reports from VOA's New Delhi bureau, the surging South Asian economy is attracting the attention of foreign and domestic investors.

Signs of growing prosperity in urban India were easy to find as the New Year began - shoppers crowded up-market malls, and new highways were being constructed at a frantic pace to accommodate the cars being snapped up by the middle class.

Analysts say economic growth in 2007 might be slightly slower than the previous year, but it will still be among the fastest in the world at around eight percent.

D.H. Pai Panindiker, who heads an independent research group, the RPG Goenka Foundation, says the economy flourished, despite earlier fears that it was overheating.

"I think, there is considerable optimism, particularly among the business community, that the economy is on sound footing, that consumer demand is expanding. 2008 should be a fairly good year," Pai Panindiker.

In the first half of 2007, the central bank raised interest rates on concerns that a credit boom was fueling inflation. However, by year-end inflation had cooled, and a slowdown did not come to pass.

Foreign businesses and investors swarmed to cities such as Mumbai and Bangalore. Foreign investment last year is expected to total $30 billion.

Stock markets reflected the faith in the future of the economy. Share prices gained more than 40 percent in 2007. Mumbai's Sensex index closed the year at over 20,000 points.

The services and manufacturing sector led the growth. Confident Indian companies also began to move beyond the domestic market.

T.K. Bhaumik, an economist at India's biggest conglomerate, Reliance Industries, says Indian companies invested nearly $50 billion in acquiring companies overseas.

"All the big corporates are trying to expand their global operations, be a global player…. They think they are competent enough to operate globally. There is a lot of confidence," said Bhaumik.

But the optimism is tinged with caution. There are fears that the rupee's 15 percent appreciation against the dollar in 2007 could hurt the information technology sector and reduce exports.

And there is little sign the economic boom is trickling down to impoverished villages in many parts of the country. It is estimated that more than one-third of the country's one billion people still live on less than $2 a day. There are concerns that the rising disparity between booming cities and villages could trigger social discontent.

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