Despite the recent global economic slowdown, India remains among the fastest-growing large economies, and South Asia’s contribution to global growth is set to rise and it is poised to play a key role in the global economy, while those of more mature economies around the world decelerate, the International Monetary Fund (IMF) said in a recent policy paper.IMF’s geographical division of South Asia does not include Afghanistan and Pakistan.With a population that has a median age under 27, South Asia is the youngest region in Asia. Based on demographic trends, more than 150 million people in the region are expected to enter the labour market by 2030.
While policy recommendations remain country-specific, the new IMF paper recommends they focus on further progress in increasing revenues and reducing fiscal deficits; greater trade and foreign direct investment liberalisation; and investment in people.
Under a scenario that includes more ambitious liberalisation of trade and foreign direct investment, stepped-up efforts to improve infrastructure and the successful harnessing of South Asia’s workforce, the region could account for about one-third of global growth by 2040. This is 5 percentage points higher than the expected contribution under a baseline scenario based on current, ongoing policies and demographic trends.Under the scenario where more ambitious reforms move ahead, real gross domestic product (GDP) growth in South Asia would surpass 6.5 per cent on an average over the long-term compared to about 6 per cent under the baseline scenario. In a downside scenario, where job-rich growth fails to be delivered to the growing workforce, real GDP growth would be just 5 per cent, the paper says.
The reform efforts, most importantly, would bring substantial improvement in per capita income and living standards in South Asia. For India alone, real GDP could be boosted by 20 per cent and per capita income to about 50 per cent of that in the United States by 2040, with important spillovers to the region through trade linkages and productivity gains from technology transfers.
