India to fuel higher growth in South Asia

Wednesday, 03 September 2003, 19:30 IST
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NEW DELHI: Economic growth in South Asia is expected to accelerate in 2003, fueled by the projection of a higher growth in India, forecasts the World Bank in its annual report released here Wednesday. Though for the third year in a row, the global economy is growing well below its potential at an expected rate of 2.0 percent in 2003, growth in South Asia is expected to accelerate to 5.4 percent, according to the World Bank report 'Global Economic Prospects 2004: Realising the Development Promise of the Doha Agenda'. "A projection of higher growth in India underpins this forecast, predicted on the continued growth of the service sector in the country. Pakistan, Bangladesh and Sri Lanka are expected to benefit from the continued macroeconomic stability and implementation of structural reforms," the report said. "Nepal is also expected to experience strengthened growth, assuming continued implementation of reforms and improvement in the security situation, along with a recovery in tourism receipt and domestic demand." The report pointed out that despite inequities in world trading system, including trade barriers and a higher tariff that drag down export growth of developing countries, India had helped to drive the export growth in South Asia. "Driven largely by a recovery in India's exports, trade volume growth accelerated for the region on average, despite sluggish external demand. Current account balances in both India and Pakistan posted surpluses, and in Bangladesh, the current account balance improved significantly," the report noted. During 2002-03, India's export witnessed a high 19.18 percent growth to notch a record $52.2 billion. This year too India was hopeful of recording 12 percent growth in exports with the global demand picking up. The World Bank report noted that remittances played a major role in the economic growth of the region as a number of countries, including India, Bangladesh, Pakistan and Sri Lanka, recorded a significant increase in inflows. Higher remittances saw India's foreign exchange reserves rise to a record $85.56 billion. "Throughout the region, inflation remained stable and some progress was made in the consolidation of fiscal deficits," the report said. Assuming a return to normal agriculture production, as in the case of India helped by a good monsoon, and a recovery in external demand and continued improvements in political stability and regional security, the World Bank expects South Asia region to record 5.4 percent growth this year, up from 4.2 percent in 2002. Adding a cautionary note, the World Bank report stated that the forthcoming phase out of the agreement on textiles and clothing from January 2005 could result in increased competition for Bangladesh and Sri Lanka in particular as garment exports accounted for bulk of merchandise trade from these countries. Should these risks prevail along with other geopolitical, weather and other global economic conditions, the growth prospects could be adversely affected. On the plus side, the multilateral body has stressed that progress in the WTO negotiations in eliminating or reducing trade barriers for developing countries would be a sure recipe to spur global trade and eventually raise incomes across the world.
Source: IANS