LEADER ARTICLE: Get The Big Picture Abheek Barman TOI 2 Feb 2008
Years ago, our policymakers had little faith in models of export-led growth which worked for small countries like Japan, South Korea or Taiwan, models later embraced by the rest of South East Asia, and then China. Today, these nations lean on global growth for support, but India can chug along on its own steam. Our decoupling is real because it's based on the brick-mortar-and-hydraulic crane world of the domestic economy, not on fickle importers and currency swings.
Actually, this nuts-and-bolts economy was the context in which ‘coupling' - railway-speak for hitching wagons to locomotives - was discussed in the mid-1970s. Then, faced with a global slowdown, the OECD pushed something called the ‘locomotive theory of growth' as a cure. It asked the US, West Germany and Japan to cut taxes and spend to pull other countries out of a slump. Only the US followed the prescription with mixed results and 1970s' oil price shocks soon choked growth. The jargon lived on. Most of our 9 per cent growth is being pushed by investments in infrastructure. Everybody with a stake in this - companies making towers for mobile phone operations, those making high-voltage cables for electricity, companies making pipes to carry oil and gas, or crane-makers and financiers of infrastructure projects - is prospering.
You can't build all the roads, ports, schools and power stations in a day: Orders will keep coming and profits grow for years. On the flip side are businesses still focused on the US and Europe, companies too myopic to see that the West could slump while India grew wings. These are yesterday's stars of reform, our IT and BPO businesses, fattened on years of export sops and a falling rupee that padded profits after changing strong dollars into weak rupees. Putting money where the mouth is, here's the story in investment returns.
If you'd bought the stock of Larsen & Toubro, our largest engineering and construction company a year ago, you would have made more than 130 per cent today. Reliance Industries, a textile-to-oil exploration empire, has gained over 80 per cent in a year. Thermax, an engineering company that's now cleaning up water, has returned more than 60 per cent in the same time. This is the India story and there are hundreds more. Meanwhile, companies hitched to the US are crawling. If you'd bought and held Infosys, the poster boy of India's outsourcing companies, for one year, you'd be poorer by 30 per cent now. TCS, India's largest IT company, has lost a similar amount in the same time.
The real decoupling yarn is the story of India - its growth, its prospects and the investment story that follows. Today, a financial crisis in the US might look like the end of the world, but it isn't if you're betting on sectors that help build India. If not, you could be out of what could be the biggest growth story of the century. (The writer is a business television anchor. He has no financial interest in any of the stocks mentioned.)