Part - I

Indians have had their fair share of concerns in 2004: high fuel prices, large scale loss of life and property due to the tsunami, turnaround elections and volatile swings in the stock market. Oil prices dropped in December and the BSE Sensex, thanks to a string of gains in the fall, returned nearly 13% from the start of the year through mid-December. 2004 witnessed a turn-around elections which gave way to the UPA government under the leadership of Dr. Manmohan Singh. Touted as the dream team of reformers - Manmohan Singh, Finance Minister P. Chidambaram, and Planning Commission Deputy Chairman Montek Singh Ahluwalia; India walks tall once again in the comity of nations as a plural, secular multi-cultural, multi-lingual democracy.

The New Year 2005 has opened on a note of high optimism. The GDP growth rate in the July - September quarter is estimated at 6.6%. This performance is excellent given the decline of 0.8% in agriculture. Exports have shot up 24% in the first eight months of the financial year. FII investments are at a record $8.4 billion in 2004 despite a panic around the elections in May.

Will the good news continue in 2005? A few dark clouds are already visible on the horizon. We live in a globalised world, and our ups and downs can be traced more to global developments than domestic ones. India did well in 2004 mainly because the whole world did well. Global GDP rose 5.3%, one of the highest rates ever. If the world economy turns sour in 2005 then the global tide that currently lifts all boats will cease to ensure Indian buoyancy. India's booming merchandise and service exports mean that the country is steadily becoming more dependent on global markets. So whether India booms or fades in 2005 will have little to do with Manmohan Singh and a lot to do with global markets.

Global economy is booming and shows strong signs of confidence. Even high oil prices have not frightened economies. Fears of terrorist attacks have receded. "I think it looks reasonably good," said Wharton finance Professor Jeremy Siegel, referring to the US economy and stock markets. "I think we can have 3½% to 4% real growth [in GDP], with very moderate inflation - 2 ½%." Corporate leaders recently polled by the Business Roundtable survey have similar expectations, forecasting 3.5% GDP growth in 2005 for US.

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* Contributed by -
Ravi Birhman, B.E. (Computer Science), BITS, Pilani,
Kshitij Goel, B.Tech. (Mechanical), IIT Guwahati,
Post Graduate Diploma in Management (First Year),
Indian Institute of Management, Calcutta.