The sunny side of the story

In the nineties, when the Indian economy was desperately struggling to keep itself afloat, I remember one day my editor-in-chief telling me, "Boy, nobody's interested in reading your doomsday stories. It's quite gloomy everywhere [in the economy, he meant]. Look for bright spots. Sunny side up. That's the way you must tell your story."

Sunny side up - that seemed quite interesting to me. But when I turned around to find some "sunny" stories, I found none. There was hardly any story whose sunny side could be turned up.

From 1950-51 to 1980-81, India's GDP grew at an average of 3.6 per cent per year. In the eighties the reforms process kicked off and the growth rate accelerated to 5.6 per cent - a sunny side up story there.

That tapered off in the nineties, averaging at 5.8 per cent till up to 2000-01, and along came the usual menace. India's economic performance was bedevilled by scary levels of fiscal deficits and sinking foreign exchange reserves. Stock markets crashed.

And the worst that can happen to any country happened to India - uncontrolled inflation. The sunny stories were all gone.

Inflation

Let's pan to today's India. The sunny side up stories seem to have vanished again, mainly because the economy once again is shrouded in double-digit inflation. Average price level has climbed to a fresh high of 11.63 per cent for the week ended June 21. And there seems no respite in sight, blame it on the continued rise in international oil prices.

The pricey oil will exert huge pressure on the country's balance sheet of inflows and outflows of resources resulting in a three-fold increase in the current account deficit to 4.7 per cent of GDP in fiscal ending 2009, a Goldman Sachs report said.

But this time around, there are a few things to cheer. One that made me think of the "sunny side" was a report in India's Economic Times newspaper: Six Indian companies among BusinessWeek's top 100 infotech firms. Bharti Airtel, Reddington India, Reliance Comm, Wipro, Satyam and HCL Technologies have made it to the top list. Surprisingly, China has the same number to boast of. US dominance has fallen from 43 in 2007 to 33 this year.

Despite the macroeconomic fundamentals taking a battering in the past few months, India's excellence in information technology has continued to show the economy in brightness. That's the "sunny story" this time despite plataueing growth rate, stock market mayhem, deficit worries and so on. It's different this time.

But the lag effect on the economy of rising inflation - experts say it will reach 13 per cent by the end of the year - is yet to be known. The pundits are doing their bit. Sceptics say the brightness of the infotech companies may fade. But for now, this is the sunny side of the story.

The pricey oil will exert huge pressure on the country's balance sheet of inflows and outflows of resources.