India, China to keep leading Asian economic growth

Two Asian giants, India and China, would continue to lead the economic growth story of this continent as this past year.

Growth is expected to remain strong. It is also expected to settle at a more sustainable rate of about 7% for Asia as a whole, slightly down from 8% in 2010. China and India continuing to lead Asia's growth.

Despite this positive outlook, there are still downside risks, but these mainly come from the external environment: the risk that global growth could be weaker than we anticipate.

Also financial spill-overs from advanced countries, especially in Europe, could be another source of concern, and constitute another downside risk. However he warned that the strength of Asia's growth could lead to the threat of inflation.

Asia had to contend with the risks posed by possibly weaker global economic growth and financial spill-overs from advanced economies, he suggested, but predicted that the region's economic importance would continue to increase.

Certainly the region has a certain dependence that needs to be rebalanced so that the momentum comes from a broader set of policies. It is true that across Asia the region has been more dependent on exports than other emerging markets in the world.

And, therefore, in order to maintain these high growth rates, we do believe the region should reduce its reliance on export growth and we have emphasised the importance of rebalancing. That is, to raise domestic demand in Asia. This is also a major topic in our discussions with countries in Asia.

In 2011, Asia will face two set of challenges. The first will involve managing the timing and exit from policy stimulus that many countries in Asia have used. This is because output is growing above potential in most economies. In fact, output gaps are closing and inflation pressures are emerging. So, view is that although many countries have taken steps to remove monetary stimulus, there still is further room to remove policy stimulus.

Source: www.moneylife.in

Thank you,

Minita Aiya

Client Service Associate

DENIP Consultants Pvt. Ltd.