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World Bank’s South Asia Development Report Highlights Strong Growth Led by India

The latest South Asia Development Report by the World Bank underscores that output growth in South Asia has exceeded expectations and remains stronger compared to other emerging market and developing economies (EMDEs). This robust growth is largely attributed to the impressive economic expansion of India.

Led by India’s vibrant economic breakthrough, South Asia has been outperforming in various macroeconomic fundamentals. Notably, inflation and balance of payment pressures have eased significantly. Supply chains have demonstrated resilience to logistic challenges posed by the Red Sea conflict and the Panama Canal drought.

Several South Asian governments have actively streamlined their macroeconomic policies and capital controls, alongside implementing economic adjustment and reform initiatives in collaboration with the International Monetary Fund (IMF).

The output growth in South Asia is projected to range from 6.0–6.1 percent for 2024–25, primarily driven by India’s sustained growth. India’s GDP is expected to reach 7.5 percent in FY 2023-24, supported by rapid increases in investments and government consumption. Inflation has remained within the central banks’ target range of 2–6 percent and is anticipated to subside in the upcoming quarters.

India’s composite Purchasing Managers Index (PMI) stands at 60.6, exceeding the global average of 52.1, indicating robust growth in the manufacturing and services sectors. Financial conditions in India have remained accommodative, with domestic credit issuance to the commercial sector experiencing the fastest pace since 2013.

Furthermore, while global trends lean towards protectionism, India is increasingly supportive of free trade. Recent free trade agreements with the European Union Free Trade Association, Australia, and the UAE illustrate this stance. Moreover, export credit and merchandise exports in India have shown promising growth.

In addition to India, Bhutan has also supported the growth trajectory in the South Asian region, driven by strong exports of hydroelectricity. Meanwhile, Sri Lanka’s economy is experiencing revival, propelled by the resurgence of tourism.

However, challenges persist in Bangladesh, Nepal, Afghanistan, Pakistan, and the Maldives, ranging from economic deceleration to food insecurity and unemployment.

To sustain and propel the growth trajectory, South Asian countries must address policy challenges such as revenue generation, climate resilience, job creation, and financial system reforms.

In conclusion, South Asia, led by India’s robust economic expansion, maintains its position as a growth leader amidst global economic challenges. Addressing policy challenges will be crucial for sustaining and accelerating growth, allowing South Asia to unleash its full economic potential and emerge as a formidable force in the global economic arena.

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