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World Bank Sees Higher Growth Rates for South Asia - 2003-09-07

New technology and peace overtures are helping boost the economies of South Asia. A new World Bank report forecasts a higher rate of growth for the South Asian region this year, led by India.

The World Bank says South Asia's rate of growth in 2003 will be higher than the average for most developing countries. Growth in the region is expected to accelerate to five-point-four-percent, up from a little over four-percent the previous year.

The World Bank's senior economist, Dominique van der Mensbrugghe, attributes this "robust growth" to several factors. "There's been significant reforms over the last decade that are producing this growth, there is macroeconomic stability overall, some conflicts have been resolved," he said on a recent visit to New Delhi.

The bank says business and investor confidence in the region has returned due to improved relations between India and Pakistan, as well as efforts to resolve a civil conflict in Sri Lanka.

In Pakistan, increased government spending has also driven the higher growth.

In India, a return to normal agricultural production after last year's drought is contributing to a stronger economy.

But the country's economic buoyancy is mainly due to its booming information technology sector, especially the outsourcing of services by Western companies to India such as computer help desks, and back office processing tasks. Mr. Mensbrugghe sees this as a growth industry.

"The services, of course, has been one of the underpinnings of growth in India," he explained. "Exports of services have been averaging 18 percent growth per annum over the last decade, which is just tremendous amount of growth and there is no reason why that should not continue into the future."

However, the World Bank cautions governments in the region - particularly India - to reduce their large fiscal deficits, which can slow growth.

Mr. Mensbrugghe also warned that it will be difficult to put Afghanistan's economy in order if stability does not return to the country quickly.

"It will continue to muddle through, and it will not be able to start growing. We know the problems there are significant and they are ongoing. So they need to be resolved," he said.

The World Bank forecasts that South Asia will continue to see sustained economic growth over the next two years.