The Economic and Social Survey of Asia and the Pacific has projected a growth in gross domestic product (GDP) of 6.9 per cent and an average inflation rate of 6 per cent for India in 2000.
The ESCAP 2000 maintains that key areas which require urgent attention, include trade policy reforms, control over public sector deficit, strengthening of the financial sector and improvements in conditions for private sector so that they can play a more significant role.
The survey also comments that the `agenda' for the second generation reforms need to be defined. This should include properly conceived programmes of privatisation of public enterprises, elimination of entry barriers to small and medium enterprises in certain sectors and an exit policy for bankrupt firms.
According to the survey, it is projected that the developing economies of the region will reach an average growth of slightly over 6 per cent in 2000. The elements which have spurred such optimistic projections are progress in financial structuring, the potential of further easing of the monetary policy and falling interest rates and the expectation of maintaining strong export performance which will be facilitated by the prevailing excess capacity, easing of the credit crunch and higher global demand.
The survey projects that the price of non-fuel primary commodities will grow by 3.4 per cent as against a decline of 1.2 per cent in 1996, 3.3 per cent in 1997, 14.8 per cent in 1998 and 7.2 per cent in 1999.
"Other commodity prices, especially those of food and non- food agricultural commodities also experienced a renewed upswing" says the survey. This fact augers well for the developing countries dependent on export of primary commodities. The sharp spurt in oil prices is expected to be moderate in the current year and the overall rise is projected at 3.4 per cent as against a 27.7 per cent rise in 1999.
The survey predicts that the corporate debt restructuring area will see a further progress. Exchange rate stability along with a strong export performance will, according to the survey, ease the debt servicing burden and also encourage domestic investors. Corporate entities will find it easier to raise investment finance from domestic capital markets with continuing improvements in stock market indices. It is also expected that there will be a return of private capital inflows into the region following the current recovery and the accompanying policy changes.
Listing the `downside risks' the survey points out that one of the risk factors is the short-term negative effects of the structural reforms. Most of the countries in this region are restructuring their corporate entities which have triggered off uncertainties regarding employment prospects which in turn will dampen pickup in domestic demand. The challenge therefore is the retention and acceleration of efficiency enhancing restructuring measures without adverse effects.
