Monetary, exchange rate, and fiscal policies will foster stable and sustainable growth in China and India – ADB
April 13, 2010

Two days before the BRIC countries meet in the Brazilian capital of Brasilia to discuss issues from food to financial security, the Asian Development Bank has released its Asian Development Outlook 2010, a look at the economic performance, prospects, developmental challenges and opportunities the region provides.

For India and China the ADO 2010, is both optimistic and cautious. It expects China’s  GDP to grow 9.6 percent in 2010 and 9.1 percent in 2011. For India it expects a GDP growth of 8.2  percent in 2010 and 8.7 percent in 2011.

However the ADO warns that as the global economic recovery proceeds, nations will need to be more cautious in removing stimulus measures, maintaining fiscal and monetary policy prudence  and curtailing inflation, asset price bubbles and  sharp increases in international commodity prices admist the persistence of global imbalances.

Looking ahead, the ADO suggests unlocking the potential in China’s services industry. The report says – services have great potential to generate growth and employment. They accounted only for about 42 percent of GDP and 35 percent of employment in 2008, much less than in other countries with similar per capita incomes.

China will also unveil its 12th five-year plan (2011–2015), in March 2011. The plan will provide an opportunity to add momentum to China’s
restructuring efforts by establishing new targets, including one for the
share of private consumption in GDP, coupled with policy adjustments to achieve such a target.

According to the ADO, India’s future too looks bright, however as one of Asia’s stellar countries, the country is currently facing both short and medium-term policy challenges – gradually phasing out stimulus measures will be critical for the health of the economy. The ADO also raises concerns over India’s inflation and infrastructure bottlenecks which it says should be ironed out to see sustained acceleration in growth.

To read the whole report click here.

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