By IANS
Bangkok : India, along with its Asia-Pacific neighbours, will lead regional growth in 2008 despite uncertainties over the US dollar and soaring oil prices, a UN agency report said.
India is expected to sustain its robust growth rate this year, driven by investments in the booming manufacturing and service sectors and also largely for being insulated from the weakness in the global economy, the UN Economic and Social Commission for Asia and the Pacific (ESCAP) said in a report.
“Asia Pacific economies are well prepared to manage continued uncertainty in the external environment over the coming months,” said Ravi Ratnayake, chief economist of ESCAP.
“The region’s main strength lies in healthy macroeconomic fundamentals – countries have the room to adopt supportive fiscal and monetary policies if faced with significantly declining export growth, financial market volatility or inflationary pressures,” he added.
The predictions are in line with leading industry body Confederation of Indian Industry’s (CII) survey, which highlighted the business confidence back home.
The CII survey said that 87 percent of the respondents in India said they would like to undertake additional investments in October-March 2007-08 while 75 percent believed the quantum of new orders would increase over the same period.
The survey also found the outlook positive for exports, saying 53 percent of the respondents revealed that volume of exports had increased and that the trend was likely to continue.
ESCAP said that developing economies in the region registered an impressive 8.2 percent growth in 2007 despite the financial market volatility, which muted external demand and appreciated currencies.
But while that growth may see a slight slowdown this year, it is still expected to grow at rate of 7.8 percent.
The UN agency said Japan could grow at a slower rate given its proximity to the US while China may experience a moderate decrease in its GDP (gross domestic product) growth as Beijing tries to cool the economy.
However, it said investment would continue to be the main demand component in China that may bode well for Indians doing business with its giant neighbour.
It, however, warned that inflationary pressures would remain due to an overheating economy, while underlying the fact that domestic consumption would play an increasingly important role.
But despite the positive outlook, there was a need to tread carefully, given the signs of financial market volatility over the year ahead, the report warned.
It also highlighted the dramatic rise to global prominence of Asian companies as they executed huge deals in 2007 to buy up leading foreign enterprises, citing India as an example, whose share of global outward investment had trebled in the last four years.
That trend was likely to continue, it said.
Robust growth in domestic markets has provided these firms with strong balance sheets and ample access to finance, enabling them to expand overseas, the report pointed out.
ESCAP said the growing popularity of state investment funds, also called sovereign wealth funds, was playing a larger role in global capital markets. These funds are looking to diversify foreign exchange assets and earn higher returns by investing in a broad range of asset classes, the report said.