In this year’s economic survey, you get to read the story of an economy that is quite different from what you hear about the rest of the world.

The Indian economy is most definitely bruised by the global recession, but stands confident of growing at the fastest pace in the world by March next on its own domestic strength.

The $1 trillion plus economy grew 6.7 per cent, the second fastest after China, in 2008-09. This was in sharp contrast to the global contraction, particularly in OECD and other emerging economies.

It could grow by about 7 per cent this year. The World Bank has projected India to surpass China and become the fastest growing economy in 2010.

The Indian economy has acquired a unique place in the world, primarily on account of its successful growth run of the past five years at an average of 8.8 per cent. The slowdown of 2.1 percentage points in 2008-09 may be only a blip that does not mark a halt to the growth story.

It all boils down to India’s vastly expanded domestic market in the past five years and a strong investment rate of 40 per cent of GDP, drawn primarily from a high savings rate of 38 per cent.

The two together ensure that the economy grows at over 7 per cent in the normal course.

Despite India’s slowdown last year, the consumer market absorbed 140 million new telephone connections, over 1.5 million passenger cars and around 7.5 million two-wheelers. The automobile industry has had an annual growth of 11.5 per cent in the past five years and telecom industry 30 per cent.

Indian markets were no doubt hit by the global financial tsunami, and plummeted from the stratospheric levels to the shallows between January and October last year. However, since last March they have recorded the smartest rise among all global bourses. At Thursday’s close of 14,658, the Bombay Stock Exchange benchmark Sensex has seen more than threefold increase in the past five years. During 2008 indices went down across Asian markets, with the SSE Composite Index (Shanghai, China) falling 65.4 per cent to 1,821 at the end of December last year. The fall in Sensex was lower at 52.4 per cent.

From the survey, you get a glimpse of India’s several strengths that can help an early mitigation of the adverse impact of the global financial crisis and recession. To begin with, more than half of India’s GDP comes from services. Historically, across countries, services tend to be less affected by cyclical downturns than manufacturing.

Second, India has had six years of average 4.4 per cent agriculture growth. As a result of the scaling up of rural development programmes, farm loan waiver, employment guarantee scheme and higher support prices for crops, rural income and consumption are strong.

Third, India continues to be a preferred destination for investments. Foreign direct investment flows into India, according to a recent Unctad study, went up from $25.1 billion in 2007 to $ 46.5 billion in 2008, or up 85 per cent, the highest increase for any country.

Finally, over the past five years of growth in India, exports net of imports (-17 per cent) were a drag on domestic demand. That means India can expect to get a boost to domestic demand from imports falling even faster than exports. There are downside risks arising out of the deepening linkage of the Indian economy with the world (India’s global trade of goods and services have grown to as much as 39 per cent of its GDP).

Equity disinvestments and repatriation have reduced the availability of risk capital for the corporate sector. Second, medium-to-long term dollar inflows are likely to be lower as long as the de-leveraging process continues in the US. The delayed revival of the OECD economies will continue to have negative effects on export-oriented manufacturing sectors such as leather products, garments and gems and jewellery.

The survey brings out clearly that those who argued in favour of the “decoupling” theory were wrong as Indian markets surely got impacted by world markets. At the same time, those who were quick to write off India’s growth story in the wake of the global crisis too were grossly off the mark.

In the last two decades, fluctuations in India’s economic growth were not closely linked to the cycles of the rich OECD countries. The upward hump in Indian growth in the past five years, however, coincided with a similar hump in global and OECD growth.

Following the global recession, certain global market analysts, who believed that much of the expansion of emerging economies was driven by excess cash floating around in the world, saw a collapse in India’s growth to 4 per cent. They were wrong.

“An analysis of the growth history of India suggests that this superficial generalisation of a plausible global analysis to India is erroneous,” the survey notes.

The Indian economy slowed but did not shrink unlike most others. The overall GDP growth at 6.7 per cent in 2008-09 surpassed all estimates and forecasts, mostly ranging from 5.5 per cent to 6.5 per cent, made by international agencies and analysts.

The prospects of Indian economy are somewhat different from most other countries, says the Survey. No wonder most global theories could fail when it comes to India.