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South Asia Posts Strong Growth in 2006

South Asia posted strong growth in 2006 despite political turbulence in some of the countries in the region. But, as Anjana Pasricha reports from New Delhi, poor infrastructure and widespread poverty continue to bedevil many South Asian economies.

The World Bank estimates that South Asian economies expanded at a rate of 8.2 percent in 2006, among the fastest in the world.

India led the way, racing ahead at nearly 8.7 percent as both the service and manufacturing sectors boomed.

Other countries in the region also showed strong growth, despite political tensions and civil conflicts.

In Sri Lanka, for example, growth picked up to a healthy seven percent despite a renewed civil conflict with Tamil Tiger separatists. Economists attribute the strong growth to a good harvest and to reconstruction activity, which began after the 2004 tsunami devastated vast areas of the country. Since then, Sri Lanka has received millions of dollars in aid to rebuild roads, homes and livelihoods.

Bangladesh's economy grew at 6.7 percent, although there are fears that a campaign of strikes and blockades spearheaded by a prominent political alliance ahead of next year's general elections may slow down growth.

Pakistan also fared well, with growth estimated at 6.6 percent.

D.H. Pai Panandiker, head of an economic research institute, the RPG Foundation in New Delhi, is optimistic about the region's prospects.

"I think this will be the region of the future apart from China," Panandiker says. "For countries like India, eight to 10 percent growth is a feasible proposition, similarly for Pakistan - Pakistan can also grow at seven percent or so. Bangladesh is already improving."

However, economists warn that South Asia continues to grapple with problems that could impact future growth. Panandiker says infrastructure is not keeping pace with the needs of expanding businesses.

"Almost every country is short of power; every country is short of roads; every country is short of ports; all the infrastructure facilities are inadequate in the South Asian region and much greater investment has to be made," Panandiker says. "And for that probably if this sector is opened to foreign investment, development would be faster."

Poverty in the region remains another key concern. South Asia is home to nearly 40 percent of the world's poor. Nearly one-third of the region's one point four billion people live on less than one dollar a day.

The rising economies are denting poverty - but not fast enough. In fact, the World Bank says economic growth has intensified inequalities in many countries, and is calling for policies that will lead to more inclusive growth.

Economists say most countries in South Asia need to expand their services and manufacturing sectors to create jobs for the millions of unemployed or underemployed people in the region.