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Unctad projects 8.5 percent growth for India
Thursday, 06 September 2007, 19:30 IST
New Delhi: Indian economy will expand by 8.5 percent in fiscal 2007-08, and together with China, it will propel Asia as the fastest growing region in the world, says a United Nations report.
"It will be again China and India setting the pace for growth in the developing world," said the Trade and Development Report of the UN Conference on Trade and Development (Unctad) released here Wednesday.
The main risk, the report warns, is that a major recession in the US could sharply curtail India and China's exports.
The Indian economy had expanded by 9.4 percent last fiscal, as per the official statistics released by the Indian government and the story continued during the first quarter of the current fiscal with a 9.3 percent growth.
Accordingly, economists agreed that the Unctad's forecast could prove to be an underestimation. "These are just preliminary figures," Nagesh Kumar, director-general of Research and Information System for Developing Countries.
"I am really glad economists have been proved wrong in the past," Kumar said as he released the Unctad report at the UN India headquarters here, referring to the large gap between the performance this year and the estimates.
The report said in the findings for 2007 that the global economy will grow at around 3.4 percent for the fifth year in a row, with 6 percent expansion in Africa and a slightly lower growth of 5 percent in Latin America.
With the current turmoil in the global sub-prime markets taking a toll on even countries like India, the report recommended a new code of conduct for managing the growing speculative capital flows moving around the world.
It said these distorted the exchange rates and perpetuated huge current account imbalances and accordingly proposed management of exchange rates in a larger, multilateral framework similar to the one for tariffs and subsidies.
Unctad said the high investment ratios in China and India of over 40 percent and 30 percent of gross domestic product, respectively, could only be sustained only if large external shocks can be avoided.
It warns that the regional and bilateral trade pacts will prove to be costly for developing countries even though these are in vogue because of the slow progress at the World Trade Organization (WTO).
"Such agreements may offer transitory gains in terms of market access and higher foreign direct investment but may also limit government action that can play an important role for the medium and long term growth of competitive industries.
"Officials of developing countries should therefore think very carefully before entering into such agreements," the report says.
It also says that despite rising globalisation, regional integration will be beneficial for long-term development. "It can help countries develop their economic capabilities and leave them fit to compete on the global stage."
But to achieve this, countries should not rely on trade liberalization alone and include regional cooperation and joint action in policy areas of macroeconomics, finance, infrastructure, industry and trade, the report says.
Source: IANS
Source: IANS