A year ago, the Bharatiya Janata Party in power, the economy was 'shining', the stock market was soaring to new heights, the global economic environment was benign, animal spirits were back in businessmen, inflation was low, and things were on a roll.
Now, as 2004 winds down, it is more of the same -- other than the Congress replacing the Bharatiya Janata Party. This is unusual; India has not had good years in succession since the mid-1990s.
In fact, the story has only got better. Growth has been sustained despite the double-whammy of a below-normal monsoon and record oil prices.
Sectors that were not part of the growth story last year have now been caught up in the buoyancy: travel and tourism, textiles, capital goods, cement. . . It is hard to find a businessman who is grumbling. And India is once again the international flavour of the season.
But some things are different. The message from the government is not the celebratory one of a year ago. Instead, it is one of work in progress, of grappling with fundamental problems and the constraints of coalition politics.
The policy debate is about knotty issues: employment guarantees, infrastructure investment, subsidies. Today's message: there is so much to do. In a way, this is more reassuring than the ads about India shining.
When there is no immediate crisis, there are only two substantive questions to be answered about the Indian economy.
First, are we on to a higher growth path and can the system accelerate further to, say, 7 per cent annual growth? Second, can the growth be made more inclusive (supposedly the issue on which the electorate replaced the BJP with the Congress)?
The first is fairly easy to answer. With many manufacturing sectors joining the growth bandwagon in the way that services did earlier, the sustainable rate of economic growth in a benign global environment (and that is an important qualification) is probably getting close to 6.5 per cent.
The continued surge in software and business process outsourcing contributes on its own about a half of 1 per cent of GDP growth, and this didn't exist five years ago.
Large elements of the manufacturing sector have become internationally competitive, so the scale of domestic demand is not a constraint and exports have become a growth engine.
When car sales cross a million, when computer sales grow 35 per cent, when Indian companies do large-scale overseas acquisitions, and when airlines talk of buying as many as 100 new aircraft, it's even tempting to believe that scale change is creating a transformational economy.
However, getting up to a 7 per cent rate of sustainable growth is still a stretch, and the hard reality is that we're not there yet.
There are too many reform issues being shelved (labour law, privatisation, agricultural policies, the pricing of public services, the creation of quality infrastructure, subsidy curtailment), and this comes in the way of getting rid of inefficiencies and poor productivity.
So it would be a leap of faith to believe that we are about to become a tiger economy. The rates of domestic savings and investment are too low, and there isn't enough foreign investment coming in. The effectiveness of the government itself is a constraint, since it is failing to deliver on health and education.
Finally, there is the point of not leaving the poor behind: the subject of the liveliest debate of the year. In international rankings of economies on inequalities in the system, India is a middle-ranker.
It is not as egalitarian as the East European or Scandinavian countries, and it is not skewed in its income structures as some Latin American countries. It would seem therefore that the focus of policy should not be on distributional issues.
This is not to argue against job guarantees and social safety nets, but to make the simple point that better results will be achieved by expanding the size of the cake, especially because the phenomenon of jobless growth was probably a transitional feature.
An economy growing at more than 7 per cent a year from now on is unlikely to have serious employment problems. In short, even if we are primarily concerned with poverty removal, we need to focus on the reform issues.
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