Like a typical Bollywood film, the Indian economy in 2004 had a happy beginning and a happy ending-with lots of suspense, action and high drama thrown in between. The opening sequence was the headiest. The year dawned with the NDA government singing the tunes of India Shining. If not many believed in the campaign, it was because the economy was indeed having a dream run. This is what the economic landscape of the country looked like in the beginning of the year: urban consumer price inflation of less than 4 per cent-the lowest in a decade. Rates of interests in the 6-10 per cent range-the lowest levels in many decades. Foreign exchange reserves at an all-time high of $100 billion and rising. And the mother of all economic indicators, the growth rate in gross domestic product (GDP) at more than 8 per cent-the highest in 15 years. In terms of a household budget, the situation was like getting a record hike in salary at a time when inflation remains exceptionally low and borrowing historically cheap. Clearly, even if India wasn't shining, the Indian economy was shining bright.

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THE TRINITY: (From left) Manmohan Singh, Chidambaram and Ahluwalia

Stockmarkets reflected the mood and the BSE Sensex topped the 6000 mark in mid-January, another all-time record. That was about the time when, thanks largely to a series of IPOs, small investors had made more than Rs 7,000 crore in the stockmarkets. The months to come would see many more IPOs with just three of them-ONGC, TCS and NTPC-raising Rs 20,000 crore from the market and each being over-subscribed several times over.

UP

GDP growth rate scales a 15-year high of 8.2 per cent in 2003-4. FOREX reserves at an all-time high of $130 billion. INTEREST rates touch the bottom, before rising marginally. FII inflows cross $8 billion during the year. EXPORTS rise by 24 per cent after a double-digit growth in 2003. INDUSTRY on a turnaround; manufacturing grew by 11.3 per cent in October 2004. NEW JOB creations across all sectors of the economy. DOWN FISCAL deficit of the Centre and the states uncomfortably high. OIL prices breach all previous highs. A BLANKET BAN on privatisation.

Thankfully, the government did something more than just take credit for the boom. The then Union finance minister Jaswant Singh abetted the "feel good" factor when he slashed taxes in January, announced massive investments in rural development and infrastructure and offered a goody worth Rs 3,500 crore to government employees through a hike in dearness allowance. Presenting the interim budget on February 3, Jaswant claimed, "The country's macro-economic situation is better than it has ever been in the past 50 years." Surely such statements were as much a reflection of faith in the economy as an exercise in pleasing millions of voters who were to decide the fate of the government in April and May.

But before that, the NDA government performed its last small but defining act of economic management-the sale of Rs 14,000 crore worth of government equity holding in public-sector units between February and March of 2004. It included the biggest public issue in India's stockmarket history-the sale of 10 per cent government holding in ONGC worth Rs 10,000 crore. With the UPA Government clamping down on privatisation, March 2004 would stand out not only as the biggest one-time sale of public-sector shares, but also as the country's last brush with privatisation for years to come.

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NDA NOT SHINING: Much to the surprise of several BJP leaders like Jaswant (above), very few believed India was indeed shining

April was the month of lull before the storm. The results of the 14th Lok Sabha elections were to retest a recurring hypothesis in the country: does good economics mean good politics? By design and by default the economy was in the pink of health after six years of NDA governance. But that did not ensure the NDA's return to power. The verdict of the electorate on May 13 surprised and confused many. Among them were foreign investors who had been pouring money into Indian stockmarkets. The confusion caused a 900-point fall in the BSE Sensex in just two trading sessions-May 14 and May 17. The apparent party poopers were some vociferous left leaders who all but assumed control of the economic policies for a few days after the election results.

A combination of personalities and pressures brought back sanity and some clarity by May-end. The personalities were Prime Minister Manmohan Singh, Union Finance Minister Palaniappan Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia. The fact that the reformer trio of the early 1990s was back at the helm of economic policymaking was reassuring, even though the baggage of the Left weighed heavily on each one of them. But a bigger assurance of continuation of reforms came from the pressure of people and circumstances.

The wild gyrations of the Sensex every time a left party leader made a statement on economic policies and instant protests of people on Dalal Street-both covered extensively on TV news channels-brought home an enduring realisation: even though good economics alone may not be good politics-as the nda's exit proved-bad economics is undoubtedly bad politics. That is primarily because the benefits of reforms have begun to trickle down to the common man. Although the benefits vary widely across different sectors, regions and professions, 2004 provided enough evidences to the fact that the common man has begun to enjoy the fruits of an economy reformed over several years. The best proof is the boom in consumer spending spread across all income classes.

TRENDSPOTTING

1 INDIA MOBILE: Number of mobile phone connections overtook the number of fixed phone lines. 2 ROAD RUSH: More than a million cars bought. Over six million two-wheelers sold in 2004. 3 GOING GLOBAL: Indian companies acquired firms across the globe-from China to the United States. 4 RETURN OF RETAIL: Thanks to a spate of IPOs, retail investors returned to stockmarkets in large numbers after almost a decade. 5 OFFSHORING: The opposition to outsourcing in the US peaked in the run-up to the presidential elections. A Republican victory warded off fears of a clampdown. 6 THE NEW SMALL CAR: Alto overtook Maruti 800 as the largest-selling car model in April.

For the second year in a row, Indians splurged money on products and services like they had never done in the past. In 2004, close to two crore cell-phone connections were bought. That is an expense of more than Rs 10,000 crore in a year. Before the year ends, Indians would have bought more than a million passenger cars and six million two-wheelers. According to latest available figures, ICICI Bank's retail loans surged from Rs 27,500 crore at the end of September 2003 to Rs 52,300 crore by the end of September 2004-a 90 per cent jump.

This scale of spending is driven by two fundamental changes. Consumption is no longer a function of monthly income alone. Cheap and easy loans have increased the affordability of almost all products. Higher affordability alone may not have resulted in the spending spree if consumers were not secure about their job and future income. An AC Nielsen survey conducted at the end of 2003 found Indians most confident of their country's economic performance in the entire southeast Asia. That confidence was rooted in the fact that 2004 was also a good year for Indian producers. After many years of iffy growth, the Indian industry, especially the manufacturing segment, posted a remarkable turnaround. Between April and October 2004, manufacturing production climbed by 10 per cent over last year.

The growth numbers show just one dimension of India Inc's resurgence. A spate of Indian companies acquired businesses abroad in 2004. Most of them have reduced their capital and labour costs substantially and are now competing or collaborating with the world's leading brands in global markets.

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RED HANDED: The Left casts its long shadow over UPA's policies

In many ways, the economy in December 2004 is the mirror image of what it was in January 2004. Most sectors of the economy are on a growth spike. Inflation has begun to cool down. Interest rates have risen very marginally, but won't rise further in the next three months. Foreign investments have turned into a deluge. As it was in January, the "feel good" continued to pervade consumers, producers, investors and exporters in December as well.

But there is one subtle but significant difference between the beginning and ending of 2004.

Unlike in the past when two-three years of high economic growth were followed by a period of anaemic growth, the hope now is that the Indian economy can maintain a high growth rate of up to 8 per cent a year for many years to come. Both government and private investors share this optimism.

As for why such growth numbers should matter to the common man, here is a fact: A 6 per cent annual rise in the GDP will double the per capita income-currently about $520-every 18 years. If GDP growth rate rises to 8 per cent, per capita income will double every 11 years.

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