The World Bank has projected average per capita income growth for South Asia for 2006-15 at 4.1 percent with the hope that reforms initiated by the regional countries would quicken and begin to pay productivity dividends to the people in due course of time. In its report on 'Regional trade pacts must create - not divert - trade to reduce poverty', the Bank has forecast long-term growth of 5.5 percent for the region as, in its opinion, the contribution to growth from the private sector of each member country was accelerating at an encouraging pace.
The bank also attaches significant importance to the South Asian Free Trade Agreement (Safta) and believes that the new arrangement among member countries would spur intra-regional trade, provided that most products are included in the tradable items list and the regional strategy is embedded in the larger trade strategy of gradually opening to international markets.
The report gives a clear picture of South Asian countries' economic growth in the coming years and their limitations. It indicates that South Asia's trade, as a share of GDP, remained smaller than any other developing region in the past.
According to the report, gradual expansion of trade ties between India and Pakistan, as a consequence of steps towards implementation of the proposed Safta agreement, may anchor the recent rapprochement. It maintains that expanded trade creates new constituencies favouring reduced tension. However, it adds that a lesson of the study is that regional trade agreements (RTAs) can only play their due role if they are well designed and create trade rather than divert it.
Its global economic prospects 2005 also predict highest growth in 30 years for developing countries and South Asia to grow 6 percent.
Safta was proposed in January this year and its member countries are actively engaged in finalising modalities to make this arrangement a reality in short span of time.
The report says that South Asian exports, as a share of world trade, remained low up to 2000 as the region maintained world's largest level of average applied tariff but now things are changing. It maintains that Nepal launched trade liberlisation in the early 1990s and Sri Lanka and Pakistan have begun reducing border barriers and increasing external trade. It also says that India began to reduce border protection in the early 1990s and in early 2004 it announced up to one-third tariff cuts.
Regarding Bangladesh economy it notes that Dhaka's border protections remained among the world's highest in the past but now it has announced reduction in protections to get fit in the changing world scenario.
The report says that GDP in South Asia is estimated to have slowed down in 2004. If it goes down to 6 percent from 7.5 percent in 2003 it would give New Delhi an edge over other regional countries. It notes that India's services sector made strong advances, supported by productivity gains and greater market presentation besides high growth of its manufacturing sector.