Writing a year ago, I looked at sharply rising (and indeed, record) oil prices and forecast the safe thing: an economic slowdown in 2006, after three years of rapid growth. An unkind colleague mailed me that article the other day, to underline human fallibility.
As far as I know, only one person forecast anything like what the Sensex achieved: something like a 50 per cent gain in the past year, starting from the already high levels of December 2005.
In fact, the member of Sebi (the stock market regulator) who daringly forecast the Sensex hitting 16,000 was hooted out by most commentators.
Despite this failure last year to tell the good news before it happened, the safe forecast this year too would be to stay with the thought that the business cycle has not been abolished, and that a slowdown has to appear on the horizon before too long -- especially since interest rates have been climbing, loans for cars and housing have become costlier, and the United States (the world's "consumer of last resort") is slowing down.
But the nagging worry is that, in choosing what looks like the safe forecast, we may simply be suffering from a fear of heights.
Commentators like Larry Summers and Ajay Shah, both writing on Business Standard's editorial page in recent days, have said in essence that there is reason to worry because there seems to be no reason to worry!
In other words, that this is just too good to last, and it could therefore be the calm before some as yet unseen storm. Since that is the kind of forecasting that no one can deal with or prepare for, what about staying with the assumption that the economy will continue to soar, without meeting Icarus's fate?
What would that mean? Four more quarters of handsome corporate results, and the Sensex at 20,000 a year from now? Another year of 20 per cent pay hikes? And hiring in the tens of thousands by a dozen and more firms that are burning the rubber in many different sectors? More foreigners telling us nice things about ourselves?
Like Goran Ivanisevic sending down one service ace after another, permanent good times can sound monotonous and almost boring. Except that China has been sending down those aces for a quarter of a century, and the story of its dramatic rise is anything but boring.
Still, better than attempting risky forecasts, it may be more productive to understand mega-trends. "Mega" because they cannot easily be reversed, have large ripple effects, and which therefore will define the future. I can think of half a dozen such.
MEGA-TREND #1 is the acquiring of scale. The Indian economy, Indian companies and Indian markets were mostly small or tiny. Remember that the Ambani family wealth seven years ago was about Rs 5,000 crore (Rs 50 billion) -- the same as Jignesh Shah's today. Don't know about him? He is a first-generation entrepreneur who is not yet 40.
The telecom market was 5 million connections 15 years ago; now it is over 180 million, and the fastest growing in the world. The fourth-largest phone company in India is now being valued at $20 billion. Or take commercial space: all of India's cities used to have office space totalling 40 million square feet. Now we are adding that much as new commercial space every year.
The total Indian car market was half a million vehicles in 2000; by 2010, a single company will be turning out twice that number, and India will be a small car manufacturing hub for the world. Companies, when they hired, used to do so in the hundreds; now the big ones do it in the tens of thousands.
On a visit to India some years ago, the chairman of General Electric (Jeff Immelt) said that whenever his company had bet on the Indian market, it had failed them; but whenever they had bet on the Indian people (Indian skills, that is), the bet had paid off. But by his last visit to Delhi, Immelt had changed his view: now the market is working too.
MEGA-TREND #2 is the spread of connectivity and awareness. In John Naisbitt's original identification of mega-trends, back in 1982, he called it networking.
Imagine the difference between a country that has 5 million phones and another with 180 million; between a country with 10 million TV sets and one with 120 million; between a country whose trucks move at 25 km per hour on the highways (counting the time taken for stops), and 50 km per hour.
Think of the consequences as Country No. 1 morphs into Country No. 2: better supply chain management, just in time delivery, and therefore scale of production if you can start at dawn and give delivery 500 km away by dusk (tomorrow it may be 800 km).
Think different awareness levels and therefore a different quality of decision-making; and think speed of response because you can reach someone on a mobile phone anytime anywhere. In short, think productivity gains -- which is what the growth story is all about.
MEGA-TREND #3 is the growth of the middle class -- talked about and anticipated for 20 years, but finally acquiring true scale. In 2001-02, there were 61 million Indians belonging to families that earned more than Rs 2 lakh (Rs 200,000) a year; by last year (2005-06), that number had crossed 100 million.
In 2009-10, the National Council for Applied Economic Research forecasts it will be 173
For instance, could it lead to a different type of politics and politician, because the urban voter is usually not thinking caste? The middle-class will expect (and increasingly demand) reliable power, clean water, comfortable mass transport systems. . .
Look at the pressures on the government in Delhi in recent years, to provide clean air, uninterrupted power, fast traffic, and responsive government-and you can see what could happen elsewhere in the coming years.
MEGA-TREND #4 has to do with the growing problems of growth. There is the environment: the increasing pollution of air (all those additional cars), the dropping of the groundwater table, and the failure to renew resources (like forests).
There is the energy question: do we really think the world oil market will not go haywire if we treble our consumption? The fact is that we are locked into a pattern of increasingly energy-intensive, resource-gobbling production and consumption from which there is probably no escape any more because everyone wants the western middle-class dream.
As surely as night follows day, then, there will be consequences. As someone said, other than weapons of mass destruction, the only thing that can extinguish human life is environmental change.
The third problem of growth is disparity, which is almost certain to increase (think all the way from executive jets and Bentleys to luxury watches and multi-crore apartments). How will this play in a democratic system, if others don't have food to eat and are committing suicide?
Consider then how politicians are trying to mediate the tensions: reservations of seats and jobs, cesses of various kinds to finance big spending programmes. . . If the rich have thought they can secede into gated residential communities and offices in corporate parks, hang on because outside reality will intrude.
Two statements were made at a conference I attended last year. One said: "Globalisation is a market efficiency project, but badly prepared to handle its political fall-out." The other said: "The issues are emotional. The solutions are technical. The decisions are political."
I interpret that to mean the issues will not go away.
MEGA-TREND #5 has to do with India's increasing openness to the world. The number of US visas issued in India doubled in 2006, to over 800,000 -- more than in any other country, barring Mexico. More Indian students are studying in other countries than those of any other nationality, barring perhaps China. Neither of these was remotely true 15 years ago.
The foreign trade component of India's GDP (if you include trade in both goods and services, like software) is now about 55 per cent -- nearly three times what it used to be. Foreign institutional investors own about 25 per cent of India's listed stock. And Indian firms were buying three overseas companies a week, through 2006.
A country that is open to the world reacts in fundamentally different ways from a closed system (of the kind that India used to be).
There is greater self-confidence, faster acceptance of new influences and ideas, a willingness to accept global benchmarking, and a speedier response to changing circumstance. It is simply a more adaptive and therefore a more efficient system. Translate that to mean more productivity growth.
MEGA-TREND #6 the continuing dominance of youth. Something like half of India is under 25, and it will remain that way for some time. This is usually spun around into the economic fact that a higher percentage of people will be in the working age till the mid-twenty-first century, but that is only one facet.
Youngsters are different from oldies in a hundred ways, and anyone can make a long list of the differences. How this will affect Indian society cannot really be predicted, except to say that it will be more mobile (think more migrants), and more volatile (stronger responses to frustrations-- one manifestation being the spread of extremist Left ideology in some 60 districts).
It will adapt faster to new trends, and marketers will be encouraged to focus on low-cost products and services because youngsters usually have less money. It will probably mean that the two-parent home (for nurturing children) will remain the predominant norm for long, and that there will be a strong saving habit because families will be planning (among other things) for their children's educational future.
Four of these six mega-trends have almost entirely positive implications; one is clearly negative, and the last can cut both ways. There could be other negative trends too, like the steady collapse of governance and the country's politics shooting off the tracks.
The first is (one hopes) more easily reversible than these six and therefore does not affect quality; and the second is more a risk than a trend.
If, therefore, you were to outline a medium-term future for the country, you would paint a mostly upbeat picture. After that, whether GDP growth is 8 per cent or 9 per cent is really a matter of detail.