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By Ravi Velloor, South Asia Bureau Chief
NEW DELHI, INDIA - Mr Deepak Puri, a resident of the South Delhi lawyers' enclave of Niti Bagh, has been calling friends this past week asking if they would be interested in buying his Honda CRV. The reason: Toyota has just launched the Fortuner in India and the 56-year-old is sorely tempted to buy the sports utility vehicle.
Mr Puri says he is willing to let go of his 15-month-old CRV for 1.4 million rupees (S$41,200) against the on-road price of 2.2 million rupees for a brand-new car. He will then top up an additional 600,000 rupees to buy the Fortuner.
'This is the car I have been waiting for,' says Mr Puri, who frequently commutes to his farmhouse in the capital's southern suburbs. 'Nothing wrong with the CRV, but I simply want the Fortuner much too badly.'
Consumers like Mr Puri are keeping car factories humming in India, where auto sales zoomed 26 per cent last month, helping to boost industrial production - which is fuelling employment and consumption.
The Society of Indian Automobile Manufacturers says carmakers sold 120,669 units last month, compared with 96,082 in August last year. Sales of two-wheeler vehicles surged by more than a quarter to 776,777 units.
Meanwhile, India's key stock benchmark, Mumbai's Sensitive Index, topped 16,545 last week, the highest level recorded since May last year.
The auto data and the stock market's ebullience suggest several things.
First, that demand is radiating from not just the bottom of the pyramid, which buys scooters and motorcycles, but also further up the ladder, such as those with significant investments in property and stocks. What is more, truck sales rose by about a fifth, suggesting strength in the wider economy that needs to move goods and people.
Second, because stock prices reflect assessments of future returns on assets, investors clearly expect things to get significantly better for companies.
Little wonder that Harley Davidson recently announced plans to sell its expensive machines in India starting next year.
All that is breeding optimism about India's US$1.2 trillion (S$1.7 trillion) economy, which got a spot of good news recently. The life-giving monsoon has had a late revival, easing fears of a severe drought.
While the late monsoon has definitely impacted the summer sowing, as farmers braced themselves for parched times and planted fewer seeds, the subsequent filling up of reservoirs indicates that farmers may have the confidence of assured water for the winter crop. That eases the woes of the nation, two-thirds of whose people depend on agriculture for a living.
'I had said our central assumption is about 6.3 per cent growth, but you know, it could be a little bit more,' says Mr Montek Singh Ahluwalia, deputy chairman of India's Planning Commission.
The commission is a policy advisory body chaired by Prime Minister Manmohan Singh. More than any other significant Asian economy, what India has going for it is strong consumption at home.
According to a recent study by McKinsey Global Institute, India's private consumption as a share of its gross domestic product was 57 per cent last year.
That is the highest among major regional economies and a full 20 percentage points higher than China's domestic consumption rates.
FDI picks up, signalling rosy future
All this has cushioned the impact of a steep fall in exports, which account for 15 per cent of the economy excluding the services exported by back-office and software companies.
Merchandise exports were down by about 30 per cent in the first eight months of the year, with the steepest fall of 33 per cent registered in March. The declines have eased since. Commerce Secretary Rahul Khullar now says: 'There is a glimmer of hope. Some products registered positive growth in August.'
Indeed, there are some straws in the wind that suggest a larger Indian profile to come on global export markets.
India, the land of the Nano - the world's cheapest car - this year surpassed China in auto exports and is gaining on Thailand. Honda says it will export steering rods and crank shafts next month from its Indian plants for the Jazz and City models it builds in Japan. Suzuki and Hyundai are raising capacity here to make India a hub for their small-car exports.
Meanwhile, foreign direct investment (FDI) flows into India were US$3.5 billion in July, 56 per cent higher than in the same month a year ago. At that pace, FDI during the fiscal year to March 2010 could top US$40 billion. India, it would seem, is set to ride comfortably into the future.
This article was first published in The Straits Times.
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