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The good times are back

Gaurav Srivastava is smiling again. This former project manager at an MNC IT major, who lost his job during the worst of the slowdown last year, has found himself another job – after a gap of eight months – in a leading Bangalore-based Indian IT major.

india Updated: Apr 28, 2010 00:28 IST
Mahua Venkatesh

Gaurav Srivastava is smiling again. This former project manager at an MNC IT major, who lost his job during the worst of the slowdown last year, has found himself another job – after a gap of eight months – in a leading Bangalore-based Indian IT major.

Like Srivastava, Hetal Parekh, a sub-broker with Kolkata-based C T Mehta & Co., is feeling relieved. The two dozen-odd clients he services are again investing large amounts in shares through him – and he’s again earning the kind of “good money” he was before the slowdown reduced his income to a trickle.

Since March 9, 2009, the benchmark BSE Sensex has more than doubled to 17,691 (on Tuesday) and Federation of Indian Chambers of Commerce and Industry Secretary General Amit Mitra expects it to cross 20,000 in the not too distant future.

Strong base

This rise is based on solid economic fundamentals.

A quick analysis of 63 companies on BSE 500, which have announced their annual results, reveals that they have posted a profit growth rate of 26 per cent on a revenue growth rate of 50 per cent.

Industrial production is up (See graphic).

And Finance Minister Pranab Mukherjee’s proposal to lower income tax rates will put more disposable incomes in the hands of taxpayers and provide a further fillip to consumption, demand and growth.

“Overall, it seems the recovery in the economy is real and sustainable,” Mitra tells Hindustan Times.

Bigger raises

This growth will lead to an acute need for additional manpower for India Inc. And salaries in some sectors — such as IT, telecom, automobiles, infrastructure, retail, capital goods, energy, finance and consulting — could rise steeply in the absence of adequately trained personnel in these sectors.

Says Mohandas Pai, director, human resources, Infosys Technologies: “About two million jobs could be created in these sectors. The fears of the crisis are over. Job seekers will look for money and then security this year.”

Employees across India Inc., on average, are expected to get 15 per cent increments as companies open their purse strings and show an urgency to retain key talent.

Most companies had frozen salaries last year and many, like Srivastava, had lost their jobs.

Possible impediments

Mukherjee has projected a very healthy growth rate of 8.5 per cent for the Indian economy in 2010-11, compared to 7.2 per cent last year.

But this is critically dependent on a normal monsoon, a fact that the government and the central bank accept.

Besides a healthy monsoon, rising global oil prices could also spoil

the party. If crude prices shoot up, it would put more pressure on inflation, which was at 9.9 per cent for March 2009.

The Reserve Bank of India (RBI), however, has pegged it at 5.5 per cent for the whole of 2010-11. Mukherjee is more optimistic; he has said it will be much lower — at 4 per cent.

High inflation rates will force the RBI to increase interest rates and this, beyond a point, will lead to higher rates on housing, car and personal loans, among other things. This will lead to higher EMIs and could shrink demand in the economy.

But that stage — if it does come about — is still some way into the future.

The bottom line, for now, as Angelo Pinto, head, human resources, BNP Paribas, says, is: “The economy is back on the growth path.”