South Asia Economic Focus Fall 2019: Making (De)centralization Work

South Asia Economic Focus Fall 2019: Making (De)centralization Work
  • The World Bank has released the report “South Asia Economic Focus Fall 2019: Making (De)centralization Work” on October 13, 2019, where the growth in South Asia is estimated to slow to 5.9 per cent which is 1.1 percentage points down from the earlier estimates of April 2019.

Report on India’s economic growth :

  • The report also lowered India’s growth forecast to 6% for the second consecutive year. There has already been a pervasive deceleration in the initial quarters of the current fiscal year. The report, which has been released ahead of the annual meeting of the World Bank with the International Monetary fund(IMF), has underscored that India’s economic growth declined for a second successive year. In 2018-19, it stood at 6.8 per cent, decelerating from 7.2 per cent in the 2017-18 fiscal year. In the first quarter of 2019-20, the Indian economy experienced a substantial and broad-based growth slowdown along with a steep decline in private consumption on the demand end.
  • On one hand, the industrial output growth appreciated to 6.9 per cent due to growth in manufacturing and construction activities, on the other hand, the growth in agriculture and the services sector moderated to 2.9 and 7.5 per cent, respectively. The report also pointed out that the current account deficit has widened to 2.1 per cent of the GDP in 2018-19 from 1.8 per cent a year prior to that, indicating a deteriorating trade balance.
  • The latest edition of the report noted that the robust domestic demand, which had fuelled high economic growth in the past, has slowed down leading to an overall slowdown across the South Asian region. In India, the domestic demand has dropped to 3.1 per cent in the earlier quarter from 7.3 per cent a year ago, on the other hand, manufacturing growth nosedived to below 1 per cent in the second quarter of 2019 compared to over 10 per cent in the second quarter of 2018. 

Report on the economic growth of other South-Asian nations :

  • As per the report, Bangladesh has become the second-fastest growing economy in the South Asian region, after Bhutan. Bangladesh’s growth is expected to increase from 7.9 per cent to 8.1 per cent in 2019 which is the cumulative result of strong public investments and a persistent macro-economic framework. The economy is in all probability will maintain a growth rate above 7 per cent.
  • In Pakistan and Sri Lanka growth is projected to be 2.4 per cent and 2.7 per cent respectively, this financial year. Pakistan’s slow economic growth is mainly due to the stringent monetary policy that is adopted. Sri Lanka, whose growth remained slow due to security challenges and political uncertainty, is expected to reach 3.3 per cent in 2020 supported by moderate investment and exports.

Road ahead, as suggested by the report:

  • The report also suggested that a slight rebound in investment and private consumption could revive South Asia’s growth up to 6.3 per cent in 2020, a little above the Pacific and East Asia, and 6.7 per cent in the year 2021.
  • The report highlights how, as their economies become more advanced, South Asian countries have made decentralization a priority to improve the delivery of public services.
  • With various initiatives currently ongoing, across the region to shift more political and fiscal responsibilities to local governments, the report indicates, that decentralization efforts in South Asia have so far reaped mixed results.

Answer the following questions as per the article above:

Q: 1. What is the World bank’s growth forecast for India?
A) 3.2%
B) 6%
C) 5%
D) 4.3%
E) None of these
Answer: B

Explanation:
Option B is the correct answer. As per the second paragraph, we can clearly deduce the correct choice.

Q: 2. Why is Pakistan’s growth projected to be slow?
A) Due to the fact, Pakistan has been put into the grey list by FATF.
B) Pakistan has been funding terror organization under the garb of political funding
C) Pakistan is following a strict monetary policy.
D) Pakistan’s government is not interested in funding infrastructure projects.
E) None of these
Answer: C

Explanation:
Option C is the correct answer. Pakistan’s slow economic growth is mainly due to the stringent monetary policy that is adopted.

Q: 3. Which of the following is the second-fastest-growing nation in the South Asian region?
A) Bangladesh
B) Nepal
C) Bhutan
D) India
E) None of these
Answer: A

Explanation:
Option A is the correct answer. Bangladesh has become the second-fastest growing economy in the South Asian region, after Bhutan. Bangladesh’s growth is expected to increase from 7.9 per cent to 8.1 per cent in 2019 which is the cumulative result of strong public investments and a persistent macro-economic framework.
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