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South Asia Economic Growth Rate Maybe Unsustainable, says World Bank - 2004-04-25

World Bank estimates that economic growth in South Asia in 2004 will surpass seven percent - nearly double that of many developed nations. Despite the stronger growth, the region will continue to house the largest number of poor people in the world.

The World Bank says the transfer of technology jobs from Western countries, India's growing information technology exports, new regional trade deals, and peace between India and Pakistan are contributing to a healthier economy in South Asia.

The regional economy grew at 6.5 percent in 2003. The World Bank says that is expected to increase to 7.2 percent this year. This puts South Asia among the world's high-growth regions, just behind East Asia and the Pacific.

Economists say growth of nearly eight percent in India, the region's biggest economy, is driving the robust expansion in South Asia. But all other countries in the area, barring Nepal, are growing at over five percent.

T.K. Bhaumik, a South Asia specialist at India's Confederation of Indian Industry, says predictions of a normal monsoon this year have fueled hopes that the region will continue to expand. Monsoon rains will determine farm output, which plays a critical role in the South Asian economy.

"We are going to expect good agriculture, plus there is recovery in the industrial sector. And services sector is having a normal rate of growth, so there is now a momentum generated within this region for high growth," he said.

The World Bank says remittances by migrants working in rich countries and growing foreign investment are also helping South Asian economies stay buoyant.

But the World Bank cites some concerns. Infrastructure in the region is inadequate and needs massive investment. Most regional governments also need to rein in high fiscal deficits.

Some economists are also expressing concern that higher growth in South Asia is not reducing poverty significantly because it is has failed to generate more employment.

But Mr. Bhaumik says the number of poor people living in these countries has been steadily shrinking in recent years.

"Percolation effect of growth is at work, it just needs to be accelerated," he said.

South Asia is crowded, housing about one-quarter of the world's population. More than half a billion people in the region live on less than one dollar a day, according to U.N. estimates.