Directed by India, South Asia moving towards becoming a center of global growth: IMF

WASHINGTON: Directed by India, South Asia it is moving to become the center of global growth and could contribute approximately one third of global growth by 2040, according to more recent research by the International Monetary Fund .

Notably, under the IMF's geographical division of the world, South Asia does not include Afghanistan & Pakistan . For IMF, South Asia includes India, Bangladesh Nepal Sri Lanka , Bhutan , & Maldives.

Under a substantial liberalisation scenario, supported by stepped-up efforts to improve infrastructure & successfully harness South Asia 's young & large workforce, the region could contribute about one-third of global growth by 2040, argues the IMF paper 'Is South Asia Ready for take Off? A sustainable & inclusive growth agenda,' to be released in New Delhi on Monday.

"Looking at it both from the growth trajectory that we see & the development elsewhere in Asia, we see South Asia as moving towards being much more of center of global growth," Anne-Marie Gulde-Wolf, Deputy Director, Asia & Pacific Department, IMF told PTI ahead of the release of the report.

In anticipating some key aspects of the IMF investigation, Gulde-Wolf said that, according to demographic trends, more than 150 million people in the region are expected to enter the labor market by 2030.

We have a region with enormous potential for the demographic dividend. (This is), a region that has been seen in the last period of significant growth, he said.

This young & large workforce can be South Asia 's strength, if supported by a successful high-quality & job-rich growth strategy, leveraging all sectors of the economy in a balanced way. The IMF paper says.

Although policy recommendations remain country-specific, for many South Asia n economies these should include: further progress in revenue mobilisation & fiscal consolidation; greater trade & foreign direct investment (FDI) liberalisation; & investment in people, the paper notes.

What can India do to harness the potential demographic dividend & to avoid pitfalls of rapid growth that we have seen in other areas, she asked. The IMF is looking at sustainable growth, avoiding massive ecological problems that could be associated with this kind of imbalanced prose.

That is why the IMF believes that India needs a multiple approach that takes advantage of the advantages the country already has, he said.

The country already has an excellent tertiary education system, based on high added value services. So, by no means, any strategy should devalue that aspect, he said.

Pero debe complementarse con áreas como el sector manufacturero, donde India está por debajo de lo que cabría esperar de un país con ese nivel de desarrollo, dijo & agregó que el problema es cómo involucrar al sector privado para aumentar la base de fabricación.

India, she noted, needs to create a better environment for private sector growth which looks at a product market, labour markets, land is a particular issue & obviously some of the impetus has to come from foreign direct investment , the top IMF official said.

"It has to be supported by creating a basis of labour force that is able to use the opportunities that would be created here. While maintaining the quality of the tertiary education, more needs to be done to broaden the quality of primary & secondary education," she said.

Together with this, there is need to reduce red tape obstacles & maybe more generally the footprint of the state, including in the financial sector, Gulde-Wolf said.

Bangladesh, which has had a very impressive development history in the recent past, mainly based on the garment industry, needs to diversify its economy, she said.

Noting that Bangladesh has a very low revenues to GDP ratio, low debt, but also very low investment in infrastructure, she said it is critical for this country to increase the infrastructure that would be needed for expansion of the private sector.

Among other countries Nepal, Maldives & Bhutan each one has their own issues, but the common issue that really binds them together is the need to unleash more private sector groups.

Sri Lanka , she noted, is in many senses, slightly different because it's benefiting less from the, demographic dividend because it's already reached its maximum. The island nation does not have the same growth history as the other South Asia n nations.

Responding to a question, Gulde-Wolf said subject to implementation of the IMF recommended reforms, India's income level on PPP basis would be reaching about 45 per cent of the US income level & it would one third of the global growth.

Observing that it is always difficult to make a long-term forecast, she said it is important to show what the potential is & what the payoff over time off reforms can be.

India tiene un potencial significativo, pero se necesita una reforma significativa, dijo, & agregó que estas reformas deben implementarse para establecer la trayectoria. “Si pierde tiempo al retrasar esta reforma, tomará más tiempo ponerse al día donde se encuentra. & la ventana de tiempo no es muy grande ”, dijo el funcionario del FMI.

It is necessary to implement reforms. We still see that the slowdown at this stage is mainly cyclical, but the most recent figures that have arrived are lower than we expected, said Gulde-Wolf.