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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (9758)	11/24/1999 10:37:00 AM
From: Mohan Marette	Read Replies (1) \| Respond to of 12475

Software to turn India into Asia's next economic miracle-Credit Suisse First Boston Credit Suisse First Boston has predicted that India will be the next economic miracle in Asia, terming the country as the "stealth" miracle economy of the past half-decade. One major driver of this economic growth is likely to be software exports. According to CSFB chief regional economist P K Basu, software exports will soon be capable of funding a much higher level of imports and by 2005, annual software exports should be over $35 billion, which is equal to India's total exports this year, thus reducing the external financing constraints over this period. In its latest economic research article released last week, CSFB has raised its five-year GDP growth forecast for India to 7.5 per cent. While its current fiscal year's growth forecast remains unchanged, the forecast for 2000-01 has been raised to 7.3 per cent. CSFB expects the software industry to be the most important long-term phenomenon in helping India's external balances. On a conservative basis, it estimates that the software sector will grow at an annual compounded rate of 50 per cent over the next five years because of no constraints on supply of skilled labour and the significant labour cost differentials. "Software will have a significant impact on the economy by 2005, by substantially improving external balances and therefore, its ability to import capital goods. By 2005, software should contribute 5-7 per cent of GDP," the report states. The report further states that the decision by the BJP government to aggressively reduce the fiscal deficit through subsidy cuts and privatisation has the potential to set off a virtuous cycle, as a lower fiscal deficit crowds in private investment. "The potential for crowding in is evident due to the fact that banks' loan-deposit ratio is just 49.7 per cent while 38 per cent of banks' liabilities are invested in government securities. If the government can accelerate privatisation, the reduced public sector borrowing requirement will automatically free up incremental loanable funds for the private sector, enabling interest rates to fall. Such a virtuous circle is now a distinct possibility." CSFB expects the fiscal deficit to decline to 5.1 per cent of GDP this year and 4.2 per cent next year in its most cautious estimate. CSFB also, does not expect rising oil prices to derail external balances though its does project a higher current account deficit of 1.1 per cent of GDP this year, up from 0.6 per cent. The external balances are unlikely to go out offhand because it expects capital inflows from FDI and foreign portfolio investment to bridge this gap. "One remarkable factor is becoming increasingly evident to foreign investors is that one can make money in India, in distinct contrast to may other emerging markets," says Basu in his report. Source : MI Nov 24, 1999