South Asia Emerges Stronger

South Asia is emerging as the most promising and energetic region in the
global economy. Expansion of domestic economies, growing depth of
financial markets, rising opportunities for incomes and investments, greater
pursuit of peace and stability are the major factors that drive the current pace
of growth in South Asia.

Stronger Economic Growth
The economic growth rate in South Asia, which was lagging behind the
average for developing Asia two years ago, reversed the trend with the
former now showing sizeably higher growth. Seven out of eight countries
(Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Srilanka, Afghanistan and
India) constituting the South Asia region have growth rates over six percent a
year, making it one of the dynamic regions in the world. According to Global
Economic Prospects of the World Bank, real GDP growth in South Asia that
was at 5.7 percent in 2009 is poised to reach 6.9 percent in 2010 and 7.4
percent in 2011. South Asia’s economic growth in 2011 is expected to be
five percentage points higher than that of the world average and nearly two
percentage points more than developing countries.

South Asia also came out strongly in terms of pursuing aspects of domestic
macroeconomic stability and external strength. It has displayed better Gross
Domestic Product Growth than the developing Asia region as shown below.

Growing Financial Sector

The financial systems in various countries of the South Asia region are
progressing at a rapid pace. Except Afghanistan, which is recouping from the
long years of strife and instability, the size of the financial system in other
countries is equal to the size of the domestic economy or even more, like in
India where it is several times higher. All the countries of the region have
experienced significant surge in market capitalization as also value of share
trading in stock markets. Rapid developments have taken place or are taking
place in regard to development of other exchange-traded asset markets such
as currencies, commodities and bonds.

An important aspect of the financial sector growth in South Asia has been its
positive and strong contribution to the economic output. According to World
Bank estimates, 78.5 percent of the change in the growth rate of potential
output during 2003-10 as compared to 1995-2003 was contributed by
deepening of the financial markets.

Future Prospects

In the last two decades, the exchange industry in South Asia experienced
rapid growth and diversity, emerging as one of the strong and significant
and reaching to the top league in terms of business carried out in equities
derivatives, commodities futures, and currency derivatives. South Asia also
is home for a large number of intermediaries and financial institutions.
South Asian Federation of Exchanges (SAFE) has a large role to play in terms
of harnessing cross-border cooperation to further the regional business
interests.

Growth is expected to pick up in most of South Asian economies in 2010 with
India leading the group with a good economic performance. Sri Lanka is
expected to see an uptick of 6.0%,boosted by stronger investor confidence.
Improved domestic economic fundamentals would allow Pakistan to attain
higher growth of 3.0%.Bangladesh and Nepal are also projected to turn out
a better performance.