Sorry, Mr Richards…” Heard that one before? Well, yes, you might recall this reassuring visual of a young bright Indian joyfully tearing an offer letter from abroad and riding off on a brand new motorcycle in a country where 9.3 million customers bought two-wheelers last year.

“The ad depicts a new India and the new Indian who has confidence to say no to a job abroad. It is also about the attitude of a nation,” says Subroto Pradhan, vice-president for client servicing at JWT, who along with Surjo Dutt and Jitendra Dabas conceptualised the ad for Hero Honda, the world’s largest two-wheeler maker.

And while the imaginary Mr Richards may ponder this setback to his vanity and business, a million young Indians are set to join the domestic job market this year. For the record, India’s organised labour at last count stood at 69 million, making up 13.7 per cent of the 500 million-strong workforce, an equal number of whom also subscribe to mobile phone connections, 69 per cent of them in urban India.

Says E Balaji, chief executive officer of Mafoi, a job consultancy: “This year one million new jobs (a 22 per cent rise over last year) will be driven by IT companies, along with pharmaceuticals, healthcare, manufacturing and infrastructure. While pharma and life sciences together are likely to create over 200,000 job opportunities, the manufacturing sector is likely to generate a similar number.

Going forward, between 23 million and 25 million people will be eligible for jobs every year for the next 15 years, adding at least 365 million young work hands by 2025, according to Gamechanger, a thematic research series from Kotak Institutional Equities.

Fuelled by growing job opportunities and rising incomes, a more dramatic story is unfolding elsewhere, ushering in an unprecedented technology and knowledge revolution in the country. “India is already one of the biggest telecom markets that will only keep moving up… Our projections suggest 1.2 billion mobile connections in India by 2015, indicating 97 per cent density,” says Shiv Putcha, principal telecom analyst at international consultancy Ovum. What these projections mean is that not only will your cab be on call, but so will be your rickshaw puller, and going down, may be even your familiar roadside beggar. At this rate, mobile penetration will be breaching the poverty line barrier.

Says Sanjay Kapoor, chief executive officer of Bharti Airtel: “People-to-people contact will make way for man-to-machine communication and ultimately, machine-to-machine communication. This is what would unleash the new phase of reforms.”

Besides the 9.3 million two-wheelers we talked about, automobile companies also sold nearly two million cars and over half-a-million small and big trucks last year. By 2016, up to three million new cars are expected to roll out on Indian roads every year, under the automotive mission plan. Says R C Bhargava, chairman of the iconic Maruti Suzuki that sold 1.02 million cars last year: “In 1991, there were four car makers making just about 250,000 cars annually. Today, we have a situation where there is not one big global car maker who is either not already here or does not intend to be here.” Maruti today is the single largest driver of its Japanese parent Suzuki.

That Indians are on a spending binge is showing elsewhere too. LG Electronics India, whose dream run in India began almost as soon as it arrived here, is going strong well into its second decade, already contributing 6 per cent to the parent’s global sales. By 2015 it hopes to be the second biggest LG outfit after the US, doubling its contribution to LG’s overall turnover, says M B Shin, managing director of the India operations.

At the other end of demand generated by high consumer spending, RPG’s Spencer’s food mart is adding 20 stores this year to its existing 240 despite prolonged double-digit food inflation, while McDonald’s is looking at expanding to tier-I and tier-II cities. Say Vikram Bakshi, managing director of McDonald’s for north and east India: “We should be opening close to 100 stores across both the entitles with an investment of Rs 300 crore over the next couple of years.”

Even in the luxury segment, Tag Heur is gunning for the numero uno position among brands in India, hoping to double growth every three years,” says Manshi Sanwal, country head of LVMH watch and jewellery. That sentiment is not lost on the Mercedes Benz boss in India, Wilfred Aulbur, who adds his company is well positioned here, riding a robust GDP growth.

As we are consuming more, we are producing more. What’s making this happen?

THE GROWTH TRAJECTORY

India’s two-decade-old reforms story enters its 20th year on Saturday, July 24. And we truly have a story of epic proportions to tell here.

With the economy touching $1.4 trillion, or four times its size since the reforms started, we are set to outpace China’s growth story this decade, according to Goldman Sachs’ oft-quoted Bric Report. The country’s per capita income, which crawled up from Rs 5,708 in 1951-52 to Rs 11,535 in 1991, has quadrupled since. Last year, India moved from being an impoverished third world nation to a middle-income country with a per capita income of $1,000.

In the meantime, foodgrain production has grown from 176.4 million tonnes to 233.9 million tonnes, finished steel output from 13.5million tonnes to 57.2 million tonnes, cement production from 48.8 million tonnes to 181.4 million tonnes (and is set to scale 200 million tonnes this year), coal production from 225.5 million tonnes to 525 million tonnes, electricity generation from 264 billion kwh to 724 billion kwh.

Our merchandise exports have grown from $18.143 billion to 10 times that amount even as our foreign exchange kitty has grown from $2.2 billion to $285 billion.

THE INFRASTRUCTURE STORY

If the growth in the past two decades is anything to go by, this build-up must now give way to a massive scaling up, the likes of which have never been seen before in our history. The makings of the new-age India are already upon us, if we go by the giant prototypes for tomorrow’s India. The showpiece north-south-east-west highway network and the golden quadrilateral costing Rs 29,802 crore and Rs 20,235 crore, respectively, a first-world metro railway system in Delhi on which Rs 30,571 crore has already been spent and the capital’s spanking new Rs 12,700 crore airport terminal have not only catapulted the nation to the global front ranks but given it very valuable learning that will come in handy replicating similar success stories on a countrywide scale in the coming years.

The rapid growth and the massive scale of execution of these infrastructure projects have also boosted growth in the steel and energy sectors where giant plants are being set up fuelling a hunger for finance not experienced before. The steel ministry projects per capita steel consumption to go up from a meagre 30 kg now to 165 kg in 10 years, when domestic production of steel will go up to over 200 million tonnes from 57.2 million tonnes now, needing fresh investment of Rs 700,000 crore. Some 19 steel plants are already in the works to add 13 million tonnes in new capacity. Others queuing up with giant projects are SAIL, AreclorMittal, Posco, Tata Steel and the Jindal group.

Hemant Nerurkar, managing director of Tata Steel, says, “The Indian economy is expected to clock a CAGR of over 8 per cent in the years ahead. Among other areas, substantial resources will be deployed on development of infrastructure – roads, bridges, airports and seaports. This will propel the demand for steel. As such, the timing of our expansion plans was just right.” Tata Steel is investing Rs 40,000 crore to ramp up capacity to 16 million tonnes from 6.8 million tonnes now. Nerurkar is betting on big-time growth fuelled by demand from automotive and infrastructure sectors.

It’s equally big in the power sector where Rs 658,631 crore is being spent to create new capacity during the 11th plan period (2007-12), Rs 287,474 crore of that coming from the private sector. Today India’s power sector is the world’s fifth largest; 20 years ago it was only the 10th largest. Former power secretary RV Shahi believes that the momentum was generated only after the Electricity Act of 2003, the National Electricity Policy of 2005, the Electricity Tariff Policy of 2006 and a number of other sectoral reforms were effected. “Today more than 115,000 mw of power projects are under construction, of which 40 per cent is in the private sector,” he says.

Kamseshwar Rao, executive director and industry leader for energy, utilities and mining at PricewaterhouseCoopers, adds that two-thirds of the new capacity additions in the 12th plan will come from the private sector.

In the oil sector, on the other hand, as former petroleum secretary RS Pandey put it, much more needs to be done to meet our energy hunger, though some big-ticket investments have recently materialised. India’s largest private sector company, Reliance Industries alone has invested $8 billion in developing gas blocks in the Krishna-Godavari basin. “Because of the reforms in exploration policy, refinery capacities have been added and India has transformed from a net importer of petroleum products to a net exporter,” Pandey affirms. The country exported 1.70 million tonnes of petroleum products this April, valued at Rs 4,503 crore and 1.74 million tonnes in May worth Rs 4,897 crore.

India’s total installed refining capacity of 177.97 million tonnes is expected to go up to 255.78 million tonnes in another two years, and is projected to attract investments worth nearly Rs 250,000 crore by 2025, according to the government Vision 2025 plan. Yet, this is hardly enough. The country’s power generation capacity needs to grow to 778,095 mw by 2031-35 with annual coal requirement rising to 2.04 billion tonnes, according to the government’s integrated energy policy document.

The need for a massive infrastructure build-up also creates a gigantic appetite for infrastructure funding.

FINANCING A DREAM

Faced by this hunger, infrastructure companies are looking around for cash from every conceivable source – local banks, financial institutions, primary markets, external commercial borrowings and even overseas equity issues.

This is because, despite the high liquidity of domestic banks, their ability to participate in the infrastructure story on a larger scale is hampered by the regulatory cap of 25 per cent exposure limit in a single company and 55 per cent in a group. Even as this report was going to bed on Thursday night, RBI freed infrastructure lenders to go raise ECBs to buy out existing loans of other lenders. This will free up rupee resources of banks for further lending to infrastructure projects.

According to the latest RBI data, the total outstanding loans of all scheduled commercial banks to the infrastructure sector as on March 31 stood at Rs 380,122 crore, of which incremental loans in the past year were Rs 110,150 crore, or a 40.8 per cent jump over the previous year.

During 2009-10, the top five public sector banks that extended fresh loans to the infrastructure sector were Canara Bank (Rs 15,428 crore), State Bank of Hyderabad (Rs 10,672 crore) Indian Bank (Rs 7,129 crore), IDBI Bank (Rs 5,951 crore) and Central Bank (Rs 5,351 crore). The State Bank of India had the highest outstanding to the infrastructure sector at Rs 40,118 crore at the end of March.

The planning commission has estimated the requirement for infrastructure financing during the XIIth plan period (2012-17) at $1 trillion, with a resource gap of $100 billion.

Points out Pradeep Kumar, chief executive officer of India Infrastructure Finance Company: “The Indian financial sector can meet the bulk of the requirements, but there might be a need for external injection of funds.”

T M Bhasin, chairman & managing director of Indian Bank, says, “We would continue to lay emphasis on infrastructure funding. We registered a 140 per cent growth in 2009-10. For the current year, we have already sanctioned Rs 11,000 crore, of which Rs 7,000 crore is in term loans and the rest in working capital.”

Officials at SBI, who routinely do not want to be named, say infrastructure lending will form the bulk of the bank’s credit activity in the current year. In the first quarter of the current year, SBI sanctioned close to Rs 19,000 crore against Rs 5,000 crore in the same period last year. SBI’s total infrastructure book stands at Rs 155,000 crore, including sanctions and disbursements.

The government itself has been a major investor in large infrastructure projects. Till December last year, 199 public-private partnership projects with a capital investment of Rs 170,651 crore (about $37.3 billion) were in progress under the government’s viability gap funding scheme, where up to 20 per cent of the costs were met from the national exchequer.

Yet, such huge monies may still not be sufficient for funding India’s infrastructure growth. Srei Infrastructure Finance, a non-banking finance company in infrastructure financing, feels the government must suitably tweak the ECB policy. “We don’t have the availability of long- term funds that can be raised via insurance, pension and provident funds. There is also a need to change ECB norms so as to access long-term funds,” says Hemant Kanoria, managing director of Srei Infrastructure Finance.

Small wonder then, Indian companies have of late been increasingly exploring overseas funding sources. No fewer than 555 companies, cutting across sectors, obtained approvals to raise ECBs or foreign currency convertible bonds between June 2009 and May 2010, according to RBI data. This debt is for one to 13 years and valued at $18.44 billion, or Rs 86,600 crore. At least seven of them were directly or indirectly related to infrastructure projects.

In the current calendar, till June, Indian companies went abroad with 22 equity issues for Rs 2,848 crore, 10 convertible bond issues worth Rs 3,839 crore and seven non-convertible bond issues for Rs 11,147 crore, according to Prime Database.

Even the domestic primary market saw 33 public issues of equity and convertible securities amounting to Rs 31,702 crore ($6.8 billion) in the current calendar till June, against Rs 19,566 crore ($4.1 billion) in the whole of last year. While these issues came from all kinds of projects, Prime Database chief executive officer Prithvi Haldea expects the infrastructure sector alone to raise Rs 150,000 crore (about $31.9 billion) over the next three years from the primary market, going by the offer documents already filed with the Securities & Exchanges Board of India and future public issue intentions declared by companies.

MARKET MOVEMENTS

Mapping this tectonic shift in the country’s investment and growth priorities, the stock market too is anticipating a big boom ahead. Several experts Financial Chronicle have spoken to sense that, moving forward, the market is gearing up for a strong rally, though stocks could trade in a range in the near term.

Deutsche Bank has forecast that Sensex will touch 22,000 at year-end. LIC, easily the single biggest investor, with an investment intention of Rs 60,000 crore in Indian stocks this fiscal year, has predicted Sensex at 19,500 by March-end, according to its executive director for investment operations, N Mohan Raj, while IDFC Securities foresees the index at the 20,000 mark.

Sudip Bandopadhyay, managing director of Convexity, which he has floated as an equity broking and portfolio management services firm with funding from CX Partners, expects capital goods and infrastructure to take the lead in the next phase of the rally. Heavyweight Reliance will also play a key role with the automobile and financial services sectors lending support, he says.

So how should investors strategise ahead?

“We are making out a case for accumulation,” says Dipen Shah, senior vice-president of Kotak Securities. Foreign brokerage Morgan Stanley has also advised investors to adopt a ‘buy on dips’ strategy.

So much to do…so little time. So who’s the villain in this feel- good story?

SILVER LINING

Nothing really can play havoc, unless, of course, one is talking of high prices pinching the common man. Inflation, at this point is perhaps the biggest worry for the government, business and the man on the street alike. India in the past 20 years has experienced both high growth with low inflation and high growth with high inflation. But the price rise now is biting.

Suman Berry, director-general of National Council of Applied Economic Research, says, “We probably are going to suffer higher inflation than we have in the past. The high growth will continue, while the monetary conditions remain exceptionally loose.”

The man responsible for monitoring inflation thinks otherwise. Says Kaushik Basu, chief economic adviser to the finance minister, “I expect our growth to be not only high but sustained. On inflation the current situation is not good, but I believe, unlike growth, this will not be sustained.”

With the economy posting an average 8.5 per cent growth in the past five years and poised for a 9 per cent growth in the next five, it’s time to fasten your seat belts.

Come July 24, 2011 and we will have truly taken off for the long haul to sustained high growth and prosperity.

(With inputs from Rakesh Khar, Ranjit Bhushan, Rajesh Abraham, Sarbajeet K Sen, Ritwik Mukherjee, Rajesh Gajra, Manju AB, Falak Naaz Syed, Reji John, Thanuja B M, Sreerupa Mitra, Siddhartha P Saikia, Sarita C Singh, Parul Chhaparia, Jayashree Maji, Saahil Anant, Manisha Yadava and Priyanaka Dasgupta)