Boom to Gloom: Indian Economy Saw it All in 2008

No other year in recent times saw such wild mood swings in the Indian economy than 2008, which started on a strong note but ended on a weak wicket in the wake of a general global slowdown and severe recession in some of the richest countries like the US and Japan. From economic expansion to performance of equity markets, and from export growth to industrial production, all indicators had the same story to tell: The year had started with a strong economic performance, but the momentum was lost as the months passed, as India faced the ripple effects of the gloom in the global economy. The indicator that captured the trend best was the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE), often seen as a barometer not only for investor mood but also the overall performance of the Indian economy and its corporate sector. On Jan 10 this year, the Sensex was ruling at an all-time intra-day high of 21,206.77 points. But as the year is drawing to a close, it is languishing at around the 9,000-point mark - a fall of over 50 percent in the year. Last year, the index had gained nearly 50 percent.

The Sensex apart, exports fell in October for the first time in seven years. Indirect tax mop up was down eight percent in October. Industrial production, which was among the main drivers of the economy, fell 0.4 percent. The rupee fell below 50 to a dollar in November to an all-time low. And, as per the government's own admission, some 65,000 jobs were lost between August and October.

The high cost of crude oil, which jumped from under $40 per barrel a year ago to nearly $150 per barrel in August, added to the country's woes in terms of higher import bill and accentuated the losses of state-run fuel retailers, which had to bear the burden of having to sell hydrocarbon products below cost.

As a result, the United Progressive Alliance (UPA) government, led by Prime Minister Manmohan Singh, which at the beginning of the year said the Indian economy would continue to grow at over nine percent this fiscal, had to tone down its target sharply, hoping to achieve an overall increase of 7-7.5 percent in gross domestic product (GDP).

"Two key sectors, agriculture and industry, were unable to maintain the pace due to the global economic slowdown. This will have a serious effect on our overall growth," said Dalip Kumar, head of projects at the National Council of Applied Economics Research, an economic think-tank.

The only notable saving grace was on the price front, where the annual rate of inflation fell from a 16-year high of 12.63 percent for the week ended Aug 9 to 6.84 percent for the week ended Dec 6 - but not without taking a toll on industrial growth on account of the tight monetary policy of the central bank during the months before.

"Inflation is not a concern any more. If the Indian government does not think in terms of long- term measures to contain the slowdown, the medium-term growth projection of 8-9 percent will be difficult to achieve," said Biswa N. Bhattacharyay, Tokyo-based special adviser with the Asian Development Bank (ADB).

As India Inc. cried hoarse, saying the credit squeeze due to the policies of the central bank was affecting its day-to-day business, policymakers appeared to be in a denial mode initially, with the prime minister maintaining that India remained largely insulated from the goings-on in the world economy.

But that was not the case. As official data on a host of areas started confirming the worst worries articulated by India Inc., Manmohan Singh had to himself intervene and unveil a Rs.30,000-crore (Rs.300-billion/$6-billion) package in December to bail out the corporate sector.

There is a fear now that the major pump priming of the economy by the government, the large-scale spending on infrastructure and the relaxation of the monetary policy by the central bank to open the purse strings for the corporate sector may threaten the country's fiscal deficit, which was kept at a moderate level during the past five-six fiscals.

The year, nevertheless, did not pass without some high points.

India Inc. came under the global media glare when the Tata group, the country's largest industrial house with annual turnover of $62.5 billion, showcased its little car 'Nano' in January, that would cost all of $2,500 at factory gates. Time magazine named it the most important car of the century since Ford's revolutionary Model T.

It was a different matter that the industrial house had to shift the production site for the small car from Communist-ruled West Bengal to Gujarat following violent protests by a section of farmers that claimed their land was acquired forcibly without adequate compensation.

The same Tata group announced a few months later the acquisition of two iconic British automobile brands, Jaguar and Land Rover, from Ford Motor Co for $2.3 billion in what was yet another high-notch buyout by a globally ambitious Indian group.

The international investor community also continued to bet on the Indian market. Norway-based Telenor, the world's seventh largest telecom operator, bought a new-generation telecom company Unitech Wireless by paying $1.29 billion for a 60 percent stake.

Similarly, another start-up, Swan Telecom, which did not have a single subscriber, sold a 45-percent stake to the UAE's Etisalat for $900 million, taking the company's book value to $2 billion.

In fact, the inflow of foreign direct investment between April and September amounted to $17.21 billion, representing a growth of 137 percent over $7.25 billion in the like period last fiscal. The services sector attracted the maximum foreign investment, followed by construction, including roads and highways, housing and real estate, and computer hardware and software.

The year also saw a record number of seven Indian firms make it to the list of Fortune 500 companies - two from the private sector, namely, Reliance Industries and Tata Steel, and the rest from the public sector.

This apart, the Indian telecom industry also witnessed unprecedented growth and started adding 8-10 million new mobile phone users each month to make the country's subscriber base of more than 300 million, the largest after China's, displacing the US. The stage is now set for the launch of 3G, or third generation services.

Looking ahead, economists and industry experts alike predict some tough times for the Indian economy, at least during the next two-three quarters. But they also maintain that India stands on a much better wicket compared with many other countries to weather the storm, particularly because of the strong push from some key drivers of growth, like savings and investment.

As Reserve Bank of India Governor D. Subbarao remarked recently: "A period of painful adjustment is inevitable. But once the crisis is behind us and calm and confidence are restored in the global markets, economic activity in India will recover sharply."

Key Business and Economic Milestones for India in 2008

Following are some key economic, business and financial milestones in India during 2008:

Jan 10: Tata Motors unveil Nano, the jelly-bean shaped small car touted as the world's cheapest, costing all of $2,500 at factory gates.

Jan 10: Sensitive index (Sensex) of the Bombay Stock Exchanges touches all-time, intra-day high of 21,206.77 points.

Jan 16: Supreme Court paves way for Reliance Power's initial public offering.

Jan 21: Investors lose $170 billion as Sensex crashes over 2,000 points to register steepest ever intra-day fall.

Feb 20: Report says Indian companies have invested $10 billion in US, creating 30,000 jobs.

Feb 20: Anil Ambani's Reliance Communications acquires Ugandan telecom firm.

Feb 23: PepsiCo's Indian-born chief executive Indra Nooyi among Forbes' list of 10 best women CEOs.

Feb 26: Railway Minister Lalu Prasad announces across-the-board cut in fares and projects record profits in his first fifth rail budget.

Feb 29: Finance Minister P. Chidambaram presents national budget with most ambitious loan-waiver scheme amounting to Rs.600 billion (Rs.60,000 crore) to benefit 40 million farmers.

March 2: Richard Branson's Virgin Mobile enters Indian telecom market.

March 11: A fresh graduate of the Indian Institute of Management in Ahmedabad offered record pay packet of Rs.14.4 million.

March 31: India's external debt rises to $201 billion.

April 1: International Monetary Fund warns of spiraling inflation and cooling of Indian economy.

April 11: Official data says India has second largest telecom subscriber base of over 300 million, ahead of the US and behind China.

April 29: India imposes export tax, bans overseas sales of some commodities like steel and cement to calm prices.

May 6: Bharti Airtel and South Africa's mobile phone giant enter consolidation talks.

May 11: Ratan Tata named by Time magazine among 73 biggest brains in business for conceiving small car Nano.

May 24: Bharti Airtel and MTN call off consolidation talks.

May 26: Reliance Communications and MTN say they have started talks for possible consolidation.

May 30: India's economic growth rate for 2007-08 revised upward to nine percent against provisional estimate of 8.9 percent.

June 2: Tata Motors formally takes over two iconic British automobile brands Jaguar and Land Rover from Ford Motors.

June 4: As crude prices spiral, India allows Rs.5 a liter increase in prices of petrol and Rs.3 on diesel.

June 11: Japan's Daiichi Sankyo says it is buying majority stake in India's largest pharmaceuticals company Ranbaxy for $4.6 billion.

June 20: India's annual rate of inflation scales the double digit level and touches 11.05 percent.

June: Heightened protests by farmers against Tatas' Nano project at Singur in West Bengal who claim their land was forcibly acquired.

July 11: International crude prices touch all-time high of $147.27 a barrel on the New York Mercantile Exchange.

July 12: Vodafone and Airtel say they will launch Apple's 3G iPhone in India.

July 13: Anil Ambani's wife Tina Ambani and L.N. Mittal's spouse Usha Mittal named by Forbes among top 10 billionaires' wives.

July 16: Hindustan Computers Ltd acquires British outsourcing firm for undisclosed amount.

July 17: Survey says revenues of top 20 Indian IT firms fell 24 percent in 2007-08 due to global slowdown.

July 18: Air India announces 15 percent cut in airfares to Gulf.

July 19: Reliance Communications stops consolidation talks with MTN.

July 29: India's central bank tightens monetary policy to tame inflation by hiking key lending rate and cash reserve ratio.

Aug 12: India's industrial growth halves to 5.2 percent in first quarter of current fiscal.

Aug 18: India's telecom regulator permits computer-to-computer voice calls.

Aug 21: India's annual rate of inflation spirals to 16-year high of 12.63 percent.

Aug 26: Overseas arm of Oil and Natural Gas Corp says it is acquiring British firm for $1.4 billion.

Aug 29: Government approves new Companies Bill, 2008, to fine-tune legislation to reflect developments in and requirements of present-day corporate world.

Sep 1: Finance Secretary Duvvuri Subbarao named next governor of the Reserve Bank.

Sep 7: Department of Telecommunications starts auction of frequencies for 3G telephony.

Sep 11: Government eases norms for FM broadcast to push growth.

Sep 17: US Food and Drug Administration blocks import of 30 generic drugs made by Ranbaxy.

Sep 18: India's cabinet clears proposal for foreign news magazines to start Indian editions.

Sep 20: Anil Ambani group and Steven Spielberg to set up $1.5 billion Hollywood studio.

Sep 23: Abu Dhabi-based Etisalat says it will acquire 45 percent stake in India's Swan Telecom for $900 million.

Oct 1: UN report says India is sixth largest investor in Britain.

Oct 3: Tatas say they are pulling the "Nano" project out of West Bengal despite investing Rs.15 billion.

Oct 7: Gujarat is chosen as new home for launch of Nano.

Oct 8: Indian rupee crashes to six-year low of Rs.48 to a dollar.

Oct 9: International Monetary Fund predicts seven percent growth for India in 2009.

Oct 9: Report says India Inc. finalized overseas mergers and acquisition deals worth $26 billion in first half of current fiscal.

Oct 10: Reserve Bank eases monetary policy, cuts cash reserve ratio by 150 basis points.

Oct 10: India's industrial production logs just 1.3 percent growth in August, says report.

Oct 15: Government says Indian civil aviation industry is $300 billion investment opportunity.

Oct 15: Central bank takes steps to inject Rs.650 billion into system to increase liquidity.

Oct 15: Jet Airways, Kingfisher announce pact to reduce costs, synergize operations and improve services.

Oct 15: Jet Airways says it is sacking 1,900 employees (but withdraws steps a day later).

Oct 15: US president-elect Barack Obama tells IANS India will be top priority during his tenure.

Oct 27: Sensex crashes to 7,697.39 points, lowest level since November 2005.

Oct 29: Norway-based Telenor, the world's seventh largest telecom operator, says it is buying 60 percent stake in Indian telecom start-up Unitech Wireless for $1.29 billion.

Nov 10: Satyam acquires Motorola's software unit in Malaysia.

Nov 10: International Monetary Fund lowers India growth projection for 2009 to 6.3 percent.

Nov 12: Japan's DoCoMo says it will acquire 26 percent stake in Tata Teleservices.

Nov 13: Forbes rich list says Mukesh Ambani has ousted L.N. Mittal as richest Indian.

Nov 19: Rupee falls to its lowest-ever level, below 50 to a dollar.

Dec 1: Data on foreign trade says India's merchandise exports fell 12.1 percent in October.

Dec 8: Government unveils Rs.30,000-crore (Rs.300-billion/$6-billion) package to pump prime economy.

Dec 12: Fresh data on industrial production says index fell 0.3 percent in October.

Dec 16: Satyam Computer Services says it is acquiring two infrastructure firms run by founder's sons for $1.6 billion, but withdraws move a day later following investor outrage.

Dec 19: Chanda Kochhar named ICICI Bank chief executive with effect from next May 1.

Dec 23: Wipro says it is acquiring Citigroup's Indian outsourcing arm for $127