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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

India and the Asian Corridor

India and the Asian Corridor

PARK Bun-SoonAmita BatraToh Mun Heng

Jan. 31, 2007

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India's economy has grown at a blistering pace achieving an average annual growth rate of 8.1% since 2003. The nation's overall saving rate rose to 29.1% in 2004-05 from 23.5% in 2000-01, while its overall investment rate rose to 30.1% from 24.2% over the same time period. Multinational corporations engaged in IT services, such as IBM and GE, are also showing keen interest in making investments in India.

India will be able to maintain the current growth pace of 7-8% per year until 2015, on the condition it can successfully manage the current account balance, while developing the manufacturing sector. Amid increased worries over deteriorating current account balances, India is moving to upgrade its economic structure to bolster manufacturing capacity and attract more foreign direct investment. India's 11th five-year plan (2007-2012) targets a 9-11% growth rate.

Thanks to India's robust economic growth and Southeast Asian economies' Free Trade Agreement (FTA) negotiations, an "Asian corridor" is slowly emerging. On the back of growth in India and China, India's economic cooperation with East Asian countries increased.

As India is integrated into East Asia's emerging division-of-labor structure, an Asian corridor was created leading to a consumption and production zone that links Northeast Asia, Southeast Asia and India. The Asian corridor accounts for 48.7% of the world's population, 21.5% in GNI (based on market exchange rate), 23.1% in exports and 20.1% in imports.

This study is aimed at analyzing how the growth of India and the East Asian FTA trend affected the economies of the Asian corridor.

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