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India driving South Asia story
By agencies
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Thursday, 01 June 2006, 19:30 IST
MUMBAI: India seems to be driving the South Asia growth story, says the latest World Bank study. Private capital flows to South Asia reached a record $23.6 billion in 05, up from $9.7 billion in 00, the Economic Times said.
This growth was largely driven by India, which received the majority of capital flows to the region. Foreign direct investment (FDI) in South Asia also rose to $8.4 billion in 05, an increase of $1.2 billion from 04, the paper said quoting the World Banks annual 06 Global Development Finance report.
In India, investments rose in industries such as cement, sugar, plastics and rubber, and hotels. The services sector in India is expected to continue expanding rapidly as a result of strong FDI inflows and outsourcing, it says. According to the report, net private capital flows to developing countries reached a record high of $491 billion in 05, driven by privatizations, mergers and acquisitions, external debt refinancing, as well as strong investor interest in local currency bond markets in Asia and Latin America.
The report indicates that this may not be the case in the coming days. The economic activity in the region is expected to slowdown in 06 through to 08 due to a tightening of monetary and fiscal policies. The report forecasts South Asia to grow at 6.8 percent in 06 and 6.5 percent in 07, the paper said.