In India, have the good times returned?

The Wall Street Journal reported on Oct 27th  that Tata Motors profits doubled in Q3, as as raw-materials costs fell and sales increased in India.  This followed a report ten days earlier that India’s largest software services exporter  TCS posted an unexpectedly robust 29% rise in its profits  and margin conscious Infosys, recorded a 7.5 percent increase in quarterly profit and raised its full-year outlook.

At the same time hiring in some sectors resumed its vigor prompting India’s leading business magazine, Business World to declare, “The Jobs are Back” and support it with an effusive cover story, see here.

We think the celebration is premature and a bit too loud. India did not suffer as much from the downturn of 2008 and its internal financial systems was not exposed to the US mortgage crisis. But domestic overexpansion in real estate and retail in particular have resulting in widespread job loss that is unlikely to be reversed by the gains of low-cost IT services providers.  Large fiscal deficits and a credit crunch continue to throttle Indian entrepreneurs.  Hopefully a stable government, elected in May 2009 can make up for these factors and dreams of 10% growth can become real.