With revival in India's industrial growth and growing private consumption demand, the United Nation's Economic and Social Commission for Asia and Pacific (ESCAP) has projected a higher overall economic growth of 8.3 per cent for the current fiscal as compared to the estimated 7.2 per cent in 2009-10.
In its report titled ‘The economic and social survey of Asia and the Pacific 2010' released here on Thursday, ESCAP noted that although food inflation, high deficit and large portfolio capital inflows were matters of concern, governments in the Asia-Pacific region should increase social spending to turn the fragile economic rebound into sustainable recovery.
“Governments must embrace this opportunity to secure the gains of the economic rebound by investing in social programmes that directly benefit those hit hardest by still lingering global crisis,” the report said.
On India's economic prospects, the report said: “With a revival in investment and private consumption, growth in exports and a strong expansion in industrial production in the recent months, GDP growth is projected to accelerate to 8.3 per cent in 2010.”
As for the Asia-Pacific region, the report projected the developing economies to grow by 7 per cent in 2010-11, with China and India taking the lead by growing at 9.5 per cent and 8.3 per cent, respectively.
Even while pointing out that surging food prices was a cause of concern for India, the report estimated that retail price inflation would fall to 7.5 per cent in 2010 from 12 per cent in the previous year. Consumer prices in India, particularly of food, have “remained stubbornly high”, it said while pointing to the Consumer Price Index (for industrial workers) which rose to nearly 9 per cent in 2008 and further to 12 per cent in 2009. “A faster increase in food prices has become a cause of concern,” it said.
Turning to the South Asian economies, ESCAP expressed concern over the high deficits in some countries owing to the expansionary policies to counter the impact of the global financial crisis. “It is important that governments in the sub-region prepare a clear road map for fiscal consolidation to be implemented at the earliest to contain growing public debt…Yet another challenge is to manage portfolio capital inflows, mainly by FIIs that are leading to build-up of bubbles in capital markets and putting upward pressure on the exchange rates,” the report said.