Economy faces uphill task
The country’s economy is facing unusual challenges due to slowdown in the industrial sector, decline in production and mounting security concerns.
All this is clearly indicated in the dismal figures of economic growth—the growth of Gross Domestic Product (GDP) declined to less than 6 per cent from the recorded 6.4 per cent last year.
According to the results of Economic and Social Survey made public on Monday, tourist arrival declined by almost 21 per cent in 2001 and manufacturing sector was severely affected due to decline in production of readymade garments, textiles, woolen carpets and construction materials.
The report has predicted that the GDP will further lower to 5 per cent in 2002 and then recover to 6 per cent in 2003.
The countries need to accelerate the process of fiscal re-balancing, privatisation and reform in corporate and financial sectors in order to push the economy. The report has emphasised the need of “prudent policies”, adding that “the prospects are positive provided that some challenges are met with effective policies.”
The outlook for the region for 2002, the report says, is “uncertain”. The weakening of global growth would constrain economic activities in the South Asian economies to some extent and the countries will continue to have a relatively low trade-GDP ratio. “Slow progress in fiscal consolidation has led to accumulation of a large burden of domestic debt, which is acting as a major drag on medium-term GDP by pre-empting large revenues for debt servicing,” said the report.
The recovery of the economy will largely depend on domestic as well as external factors including the overall economic environment of the United States but greater is the need for stronger policy initiatives from each government to enhance growth and mitigate effects of economic downturn.
“Economic recovery is essentially predicted upon a significant improvement in the external environment, supported by appropriate domestic policy measures,” said the report. “The varying characteristic of each country suggest that policy approaches need to be conceived in a more nuanced way in order to reflect the particular needs.”
According to the report, the global slowdown in 2001, combined with continuing domestic constraints, had some negative impact on the economies of South and South West Asia, with the notable exception of India, and to a lesser extent, Bangladesh, which saw an increase in the GDP growth rate between 2000 and 2001. “India’s economy benefited from a strong performance in agriculture and stable prices while industrial production tended to remain flat,” it said.