26 March 2009
Press Release No. G/13/2009-IN
India’s Economic Growth to Ease but Strong Enough to Anchor Asia and the PacificESCAP’s annual survey analyses region’s challenges, proposes solutions
Bangkok (UN/ESCAP Information Services) – The real economies of South Asia are set to weather the effects of the global economic slowdown better than some other, more open, economies of the Asia-Pacific region – thanks to the Indian economy.
India’s economy is estimated to have grown by 7.1 per cent in 2008, thus providing an anchor of economic stability in the region, according to the Economic and Social Survey of Asia and the Pacific 2009.
The flagship publication of the United Nations’ regional arm – the Economic and Social Commission for Asia and the Pacific (ESCAP) – this year’s issue is titled "Addressing Triple Threats to Development.” It analyzes the three global crises which have converged to threaten development in the Asia-Pacific region: the financial crisis, fuel and food prices, and climate change. The Survey provides a regional perspective as well as country-specific analyses, outlining ways in which economies in the region can move forward in unison towards a more inclusive and sustainable development path.
The Survey notes how the Indian Government took measures to improve the liquidity of the financial sector and relaxed monetary policy. It also introduced fiscal stimulus packages which should soften the economic downturn, and further strengthen domestic demand. Supported by these measures, the economy is expected to grow at around 6.0 per cent in 2009.
India’s economy performed relatively well during 2005 to 2007 by maintaining its growth momentum along with moderate inflation, resilient capital markets, a manageable current account deficit and favourable foreign exchange reserves. From 2005 to 2007, India achieved an average growth rate of 9.4 per cent, aided by strong performances by industry and services. An investment boom, growth in consumer demand, rising incomes, ample bank credit and robust exports sustained the vibrancy in industry and services. The economy also benefited from significant inflows of foreign investment and the government’s efforts to contain the fiscal deficit while at the same time stepping up public expenditure for employment generation programmes.
Inflation has been driven up in all the countries of South Asia, partly by unrelenting pressures from higher international commodity prices, particularly the prices of oil, basic metals and selected food items. In India, the consumer price index for industrial workers rose from 6.2 per cent in 2007 to nine per cent in 2008. Price increases in food and fuel groups were higher than those of other groups. As a result, life became more challenging for large segments of the population. To contain inflation, the Indian Government reduced customs and excise duties on raw materials and products, and monetary policy was kept tight for part of 2008. With the drop in oil and other commodity prices in international markets, inflation is expected to fall in 2009.
In India, after several years of fiscal consolidation facilitated by strong economic growth, the budget in 2008 remained under pressure. The deficit of the central government was brought down to 2.7 per cent of GDP in 2007, and a target of 2.5 per cent was set for 2008. However, due to stimulus packages to contain deceleration in economic growth, significant increases in government salaries and subsidies for food, fertilizer and certain fuel products, the budget deficit is estimated to rise to six per cent of gross domestic product (GDP) in 2008.
Among long-term challenges, poverty remains a major problem for most countries in South Asia. Also, economic and social inequalities remain widespread. The main challenge for countries in the subregion, the Survey notes, is not only to improve growth rates on a sustained basis but also to make them more inclusive for a rapid reduction in poverty and inequality.
****The Economic and Social Survey of Asia and the Pacific 2009 is available online from 0500 GMT/1200 Bangkok on 26 March at:http://www.unescap.org/survey2009/index.asp
For more information, please contact:
Mr. Shuvojit Banerjee
Economic Affairs Officer
Macroeconomic Policy and Development Division, ESCAP
Tel.: (66) 2 288 1623
E-mail: mpdd dot unescap(at)un dot org
Mr. Bentley Jenson