Much better harvests, in 1980/81, helped India to make a full recovery from the economic set-back of the previous year, when its real GDP fell by more than 4 per cent. They also gave considerable relief to Bangladesh and helped Nepal to recover from its previous crop failures. Pakistan and Sri Lanka, however, had somewhat slower growth of real GDP, although their rates were still comparatively high. Recovery did not mean progress, as improvement of real incomes per capita is still disappointingly slow in south Asian countries; and five of them - Afghanistan, Bangladesh, Bhutan, the Maldives and Nepal - have been classed as “least developed” countries, needing far more economic aid to break out of low-level economic stagnation. Current difficulties are perhaps most acute with regard to balances of payments. Dear oil and domestic inflations have pushed up import bills, and world recession has impeded export growth. India, late in 1981, obtained a record credit of $ 5.8 billion from IMF, nearly half of which is to be used for its 1980/81 deficit. Pakistan has had to seek debt relief, and Bangladesh, like India and Pakistan, has had to raise expensive loans on international capital markets. Inflation has not been much worse than in the rest of the world, and has shown signs of abating, but is a further problem because of its effects on external trade, production, and the distribution of incomes. Abundant liquidity has been generated by large demands made on the banking systems by Governments or official entities, and by excessive credits to the private sector in nearly all these countries. Steps, however, are being taken to tighten credit conditions, to rationalize interest rates, and to reduce fiscal deficits, at least in the larger countries.

Related Subject(s): Economic and Social Development
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