South Asia is expected to log an economic growth of 6.9 per cent in 2003-04, which would further go up to 7.2 per cent in the next fiscal, making the region the second-fastest growing in the world after China, economic think-tank RIS said on Tuesday.
Presenting a rosy picture of the region, the 'South Asia development and cooperation Report 2004' of RIS, released by Planning Commission Deputy Chairman K C Pant, said: "The service sector has emerged as the key driver of growth in the region contributing nearly half of its income and more than half of the growth."
The report takes note of another interesting development -- the broad based nature of growth with all the economies displaying growth dynamism.
"In particular, the least developed economies in the region like Bangladesh showed markedly superior industrial dynamism in terms of development of manufacturing industries and improved competitive industrial performance," it said.
These are indicative of a convergence of economic structures in the region, it said, adding the growth performance of the region has been hit by both difficult external environment and internal problems.
"Helped by robust recovery of the United States economy and strong growth in China and India, among other Asian economies, the world economy is likely to grow at 3.2 per cent in 2003 and at 4.1 per cent in 2004," the report said.
The long-term growth outlook also looked robust, RIS said, adding "India and China are likely to emerge among the world's three largest economies by 2050 enabling Asia to regain her place in the world economy that it had until the beginning of the 19th century."
In the light of global trends, the report said: "An immediate challenge for South Asia is to expedite the move towards free trade agreement and further vision of deeper economic integration."
Lauding the region for carrying forward trade reforms, RIS said, "South Asian economies are now much more open and deeply integrated with the world economy than in the 1990s."
The region's exports are likely to grow at 12 per cent in 2003-04 and 2004-05, it said.
While this has given South Asia the opportunity to take advantage of the global trends, RIS warned, "It has also made the region's economies more vulnerable to external shocks as is clear from the growing synchronisation of business cycle."