THE DEBATE ON the superiority of new economy companies over their old economy counterparts is about a decade old. And it does not look like it will go away any time soon. While the stock market tends to offer higher valuations to new economy stocks, old-timers, like the savviest investor in the world, the 'Oracle of Omaha', Warren Buffet, still prefer to put their chips on companies belonging to the old economy.

The late '90s saw the emergence of service-oriented sectors including IT, ITeS and mobile telephony in India. Since the turn of the new millennium, growing consumerism has given rise to new sunrise sectors such as media and retail. Most of these are emerging as sectors with high growth-high return avenues for the stakeholders.

The latest to join this bandwagon is the realty sector. This is not surprising, given that property prices have been soaring, thanks to cheaper credit, higher income levels of consumers and, of course, the demand for larger state-of-the-art office complexes and malls.

Given that IT and telecom already bear the sobriquet of 'New Economy', these sectors comprise what should perhaps be called the 'New New Economy'. Such is the lure of this new new economy, that these sectors are attracting better valuations on the bourses, given the high growth expectations that investors have from them. After all, while the old economy may grow at 20-25% and the new economy at 35-40%, the new new economy companies are expected to double every 18 months.

Given this classification of Corporate India, it becomes an interesting exercise to take a look at the performance of ET500 participants based on this segmentation. The cheerleaders of the old economy will be relieved to know that despite the big talk about new economy, 90% of ET500 comprises good old economy companies. However, on the growth front, new economy and new new economy companies delivered a superior performance. Their year-on-year (YoY) growth in sales and net profit exceeded that of the total sample. Moreover, companies in these segments, led by realty and telecom, offered better returns to investors during the year ended July '07, as reflected in a robust rise in their market capitalisation (m-cap).

When median numbers are considered, old economy companies are larger in size in terms of sales. Nevertheless, their younger rivals show better profitability. No doubt, a typical company from the latter group has a higher m-cap than its old economy cousins.

This more or less reflects the stock market's perception of the old order vis-à-vis the new one. New models brandish a high growth potential due to the completely new opportunities that they try to address. But by the same virtue, they also tend to carry a high risk of failure. What better proof than the dotcom era of the late '90s? But better executed strategies can yield enormous returns for investors.

However, it needs to be noted that business models mature over a period of time. For instance, the growth in the IT sector is gradually tapering off from the phenomenal 50-60% seen a few years ago. And the leading IT companies, which were Indian mascots of a new emerging India and darlings of the stock market, are now just another group of companies growing at double digits. This is simply because, as they get bigger, they run into newer challenges.

Today, Indian IT companies are facing stiff competition from global peers. Further, the rupee's appreciation has dented the profitability of these export-oriented businesses. The differentiation in the old and new economy is largely based on the ability of players in a sector to launch new channels to deliver old products and services.

For instance, sectors like retail and realty are not new to mankind. The only difference is that retail in India is slowly moving from 'mom & pop' shops to organised big retail chains, while realty has gone beyond constructing residential and office spaces to creating lifestyle homes and workplaces. In a sense, what is happening in India is exactly what happened in the more developed nations 2-3 decades ago.

However, the future may not be so easy and to survive the ever-changing times, India Inc will need to go beyond just inventing new delivery channels. The real challenge is to see if Indian companies can invent a new experience for the global customer or create a truly new economy - something what the iPod, Google or Microsoft have achieved.

At the end of the day, perhaps, this is a timely reminder of that adage 'Change is the only constant'. Today, it is about telecom, retail and realty. Tomorrow, it may very well be an alternate energy source like solar cells or wind energy. This may force even old economy business models like automobiles to incorporate technologies which run vehicles on these alternate fuel sources. The concept of old or new economy, then, naturally becomes as dynamic as that of the overall milieu in which it operates.

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