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Industry goes boom-boom

Mumbai - The Cassandras have been shoved aside — and India Inc has started to crow about one of its best boom-boom growth phases in recent times.
Reliance Industries Ltd today stunned forecasters with a 57.6 per cent growth in net profit for the third quarter (October–December 2006) at Rs 2,799 crore.
Put that in perspective: not even the most optimistic analyst had forecast that Reliance would post more than Rs 2,400 crore.

Reliance’s blowout growth in the bottomline caps a week that has seen a robust stream of report cards from Corporate India. That has set the sensex on another roller-coaster ride, cresting to new peaks at the start of what looks to be another eventful year.
When Infosys kicked off the earnings season last Thursday, there was just a tiny ripple of worry that the growth numbers would not be as impressive as they had been in the first two quarters.

If anything, the third quarter is showing all signs of being the best quarter this fiscal. “All the numbers should be good in the third quarter,” says Manish Sonthalia, VP (equity strategy) at Motilal Oswal, a boutique brokerage. “The outlook will improve in the next fiscal if the budget lowers taxes. The broad feeling is that if the current momentum continues, we should be in for a positive surprise.”

The technology titans — TCS, Wipro and Infosys — have all posted over 40 per cent growth in net profits in the third quarter. The three together are expected to hire about 1 lakh new recruits this year. TCS alone will draft 35,000 people this year. Infosys and Wipro are expected to take in between 25,000 and 30,000 new hands each.

Corporate India is also lining up to make big-ticket investments. Bharti Airtel has just announced plans to invest $2 billion over the next two years to expand its networks. All the big telecom players have signalled investments at the rate of Rs 5,000 crore a year over the next five years.

Foreign companies are also ready to pump in funds. Ericsson said it would invest $100 million every year over the next five years in India.

This week, Mahindra & Mahindra unveiled plans to invest Rs 2,500 crore in a facility in Pune that will manufacture medium and heavy commercial vehicles. It also signed a Rs 550-crore deal with Maharashtra to produce Renault’s Logan, an entry level C segment car, at its Nashik facility.

General Motors Corp is setting up a new vehicle manufacturing facility in Talegaon, near Pune, at an investment of over $300 million. German carmaker Volkswagen is also investing $300 million. Then there is DaimlerChrysler which intends to set up a manufacturing facility in Maharashtra at an estimated Rs 250 crore.

All of which suggest that confidence in doing business in India is at a high.

So, what could poop the party? The RBI meets on January 31 to review its monetary policy. Governor Y.V. Reddy has already flagged concerns about inflation and “overheating” in parts of the economy. Companies are spooked by the prospect of an interest rate hike that could slam the brakes on the go-go growth phase.

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