Increase in net profit at 67%, and in net sales at 35% — this is not the figure of one company doing exceptionally well, but the average of more than 800 Indian companies during the third quarter (October-December 2006) of the fiscal year 2006-07. How the performance has improved can be gauged from the fact that the same set of companies had registered 19% increase in net profit as well as net sales a year ago, according to a study done by the financial daily Business Standard.

The strong performance was, in fact, spread across sectors such as information technology, telecom, metal, cement, construction, oil & gas, capital goods, pharmaceuticals etc. The benefits of the rising Indian economy growing at more than 9% are clearly visible in the balance sheet of India Inc. No wonder commodity related sectors were the biggest gainers in these quarterly results, with cement sector registering 472% growth in net profit and 60% rise in sales. The metal sector recorded 225% increase in net profit and 82% growth in sales. Telecom sector that continues to add record number of 6 million plus mobile customers (highest in the world) every month had its profit growing by 115% during the quarter, on the base of 41% sales growth. Electronics industry registered 71% growth in net profit and 64% increase in sales. Refineries, on quite a larger base and amidst the volatility of crude oil prices, surprised everyone with 62% rise in net profit and 30% growth in sales. Automotive ancillaries, engineering and man-made textile sectors have also recorded growth of more than 90% in net profit.

The sample of these 800-plus companies, however, was top-heavy, as 38% of these companies accounting for 51% of sales and 41% of the net profit of the total sample have grown faster than the average. One fourth of these companies have had their net profit more than doubled during the quarter. The improvement in the profitability was reflected in the profit margins too. Operating profit margin of the total sample moved up by 187 basis points (bps) to 209%, and the net profit margin also expanded by 212 bps to 11%, according to the Business Standard study.

These figures are hardly surprising, as the numbers are coming from an economy growing second fastest in world (among the large economies). India’s gross domestic product (GDP) grew by 9.2% during the quarter ended September 2006, and by 9.1% in the first half of the fiscal year. India's gross domestic product has been projected at $902 billion for 2006-07 by the Prime Minister's Economic Advisory Council headed by C. Rangarajan former governor of the Reserve Bank of India (RBI), India’s central bank. Indian economy is adding more than $100 billion year-on-year, as the GDP was estimated at $798 billion in 2005-06 and $695 billion in 2004-05.

Services and manufacturing have been the main growth drivers during the first half of the current fiscal year 2006-07, as the growth in the services sector accelerated to 10.6% from 10% during the same period of last fiscal year. The growth in Industrial production also improved to 10.6% during April-November 2006 compared with 8.3% a year ago. The manufacturing sector that contributed more than 90% of the growth in industry registered a double-digit growth of 11.5% during the first half of this fiscal year.

While the rating agency Moody’s has recently raised concerns regarding capacity bottlenecks and questioned the sustainability of the 9% plus GDP growth rate, the world’s largest securities firm Goldman Sachs believes that Indian economy's upsurge since 2003 has been more due to structural changes rather than any cyclical shifts.

India can sustain about 8% growth rate till 2020, and will overtake the U.K. as the world's fifth-largest economy by the middle of next decade, according to Goldman Sachs’s latest report released in the last week of January 2007. The original BRICs (Brazil, Russia, India, China) report published by Goldman Sachs had projected 5.7% growth rate for Indian GDP till 2020. The new report has highlighted that India would overtake the G6 economies faster than envisaged in the earlier BRICs report, and finally surpass the U.S. before 2050, to emerge as the second-largest economy after China. Goldman’s new projections for India's potential growth envisage an average growth of 7% from 2006 to 2050.

The strong growth in the economy coupled with a rising foreign exchange reserve has led the global rating agency Standard & Poor’s (S&P) to upgrade India's sovereign credit rating to investment grade. The New York-based rating agency announced on January 30, 2007 that it has upgraded India's sovereign rating to BBB-, the lowest investment grade rating, with a stable outlook from BB+, the highest junk rating. Just a few weeks ago, another leading credit rating agency Moody's Investors Services, had assigned India an investment grade Baa 3 foreign currency rating while keeping its domestic currency rating to speculative grade Ba2. Earlier, another global rating agency Fitch Ratings had also upgraded India to investment grade in August 2006.