Once again, a new year has knocked on our doors and we have welcomed it with all the fervor and excitement as ever. But it also has arrived in the flashback story of 2007 which was one of the most volatile years in the modern world economic history. In the 2007 edition of the Indian growth story, India has continued its bull run and shown that the growth which the Asian elephant had shown in 2006 was not just a mere blaze of flash. Amidst the rebelling macro-economic risks, India pulled out an unprecedented growth rate of 9.4% and became the second fastest growing economy next only to China. Amidst the fireballs of high crude oil prices, spiraling inflation and the relentless rise in rupee, India catches its seat in the exclusive trillion dollar club. Though the IT and cloth industry had to run to their breath to maintain their margins, the rising rupee made raw materials and capital goods cheaper. The year 2007 will be also remembered for the revival of agriculture. The agriculture sector has grown exceptionally well, showing 3.5% growth in excess than the last year. Also, due to the rising prices of power and petrol, the price indices of commodities and food items surged sharply. So much so that India had to import wealth to tide over the demand and supply gap. Macro-economic factors remained positive in the year which helped in creating better infrastructure for the agro-sector. Import duties were taken off on many commodities and future trading was banned on many pulses. Many political parties demanded to keep a ban over the future trading in agriculture. To protect the growth of infrastructure from the various macro and micro-economic factors, many steps were taken by the government. Cement manufacturers were asked to check cement prices to check inflation. The entry of cement MNCs was given a green flag to further keep a check over the cement prices. Manufacturing Industry saw sad days due to the adverse effects of high interest rates; they were already coping with the high rising rupee.
The high crude oil prices created turbulence in the air-fares and the pie of petrol price in the overall operating cost reached 60%, making it the decisive factor. The lowering margins of the air-companies were further hit by the government’s direction for giving all facilities to the passengers in case of delay in flights. Further, more transparency was introduced in the price mechanism of the air companies by illustrating the government taxes separately. The largest air company Air India made its place in the first 30 airlines of the world after the mighty merger with the Indian Airlines. Also, the biggest passenger plane of the world, A380 super jumbo, came to India and left many front liner airlines of India gasping. The air-infrastructure attained a milestone when a mass renovation work was started for the airports. The IGI airport of New Delhi and the Mumbai airport are on their way to become truly world class. But Bangalore stole the show by building the first airport in India that meets global standards. Furthermore, the government is all set to start a series hosting airports even in small destinations such as Dharmshala. The aviation industry also saw an unprecedented show of M&A in the year 2007. The Jet Airways took over the Subrato’s Sahara and Kingfisher-Deccan launched a joint venture. Also Kingfisher’s Mallya also made headlines on sports pages. The telecommunication biz continued to show a lucrative future by touching an all time high tale-density of 22%. Also, the price war induced by increasing competition made the sector most competitive in the world in terms of tariffs. The government also showered the budding industry with hopes of more investment, allowing up to 74% FDI in the sector. The year will also be remembered because of the entry of the first MNC, Vodafone, in the tele biz of India. But the sector also witnessed a beating by the largest mobile manufacturing company Nokia when it recalled its defected battery from markets due to risk of over heating. But ripples were felt many times over the spectrum allocation issue. The transfer of spectrum from forces to telecom companies made news frequently during the end of the year. The method adopted by TRAI and DoT was also questioned by many applicants. Some times it was due to the issue of late applicants and sometimes it was about the entry of new players. The old giants, Airtel and RCom, appealed for PM’s intervention in the matter and TDSAT also failed to provide a proper solution. But good news for the sector was that the number portability between multiple service providers could well become a reality in 2008. The auto sector continued to be in top gear amidst high interest rates. The auto motor share plan was presented by the Prime Minister which was welcomed by the industry. Suzuki announced to set a plant in Maneser from where it will generate its next world car. Tata Motors and Mahindra&Mahindra got foreign partners. And Tata is on its way to hunt the Auto majors Jaguar and Land rover. If it succeeds, then it’ll be the second largest M&A news from the Tata group after the Corus merger.
The Indian markets made a run from 15k in July to 20K in December, claiming to become the most attractive investment destination in the world. Ambani brothers and L.N.Mittal emerged as one of the richest men on earth. Some large companies made their way to the markets by IPOs such as Powergrid, DLF and Mundra Port. SEBI made the markets a safer place by banning participatory notes. Indian companies continued to acquire more muscle and horizons of reach. RCom acquired the US’ major tele company. Tata acquired Corus, thereby jumping from 57th position to 5th position in steel biz. RIL acquired an OMC in Africa. The largely acclaimed Special Economic Zones (SEZs), which are said to be the gateways for faster development, made their way to become sources of open opposition. Nandigram and Posco’s mega steel plant in Orrisa made headlines because of the fierce opposition that took place there. The government also revised its policies on SEZs by making the maximum size of a SEZ to 5000 hectares and also by asking the companies to purchase land directly from farmers. Whatever said and done, but the SEZs opened up the debate between development and displacement. On the international level, dispute continued over the WTO meetings. The demands, on which India walked out from the Doha round of WTO, remained unresolved in 2007 also. India and Brazil also protested against the flaws in proposals put up by the developed countries. On the other hand, India-Asian free trade agreement was blocked over the policies on palm oil, pepper and tea. This is expected to be signed in 2008 and will be a milestone for India’s ‘look east’ policy. India-EU also agreed to increase the bilateral trade and said that agriculture was not an issue between the two. India-Japan also signed in agreements to make the bilateral trade more comprehensive. SAARC’s free trade agreement also cemented most of the bilateral trades in the region except with Pakistan. The US reckoned the sub-prime crisis while the world felt the heat of the chances of recession in the world’s largest economy. MS Windows Vista was launched with promises of faster e-connectivity and security. MS founder Bill Gates made news again, this time by slipping to the second position as the richest man for a few days after years of ruling at the top. The virtual giant Youtube tied up formally with the media major CNN. The Apple sung a new song in the end of the year by launching its new touch-screen i-Pod. A combination of geo-political factors made the oil prices to surge from $55 in January to $100 in November. OPEC refused to increase the supply of crude oil and thus proving the old saying – Blood is thicker than water but oil is thicker than both! Thus ends the glorious year 2007 with all its ups and downs and leaves the word hoping for an even better 2008, as ever!