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Last Updated: Friday, 12 August 2005, 15:43 GMT 16:43 UK
South Asian economies gather pace
Floods in Mumbai (Bombay)
The rains have caused havoc in Mumbai, India's movie capital
South Asia's two biggest economies have both picked up speed, new figures suggest.

Pakistan registered annual growth of 8.4%, just as foreign investment hit record levels amid an accelerating privatisation programme.

And in India, demand for consumer goods has helped expand industrial production by 11.7% in the year to June - the biggest increase for a decade.

The news pushed estimates of Indian growth to as high as 8% for 2005-6.

Sell-offs in the pipeline

According to Prime Minister Shaukat Aziz, Pakistan's performance in attracting foreign direct investment (FDI) was the result of both a shift in perceptions and a change in government policy.

There was still a "risk premium" attached to investing in Pakistan, he told reporters during a visit to Hong Kong.

But the attractions of doing business in the country's expanding market was too good to miss.

The economy is definitely on the upswing
DH Panandikar, RPG think tank

"Every major company operating in Pakistan - local or foreign - is in expansion mode," he said, adding that the $1.5bn (0.83bn) FDI figure for the year to June 2005 could be doubled in the year ahead.

"It is do-able, and privatisation will help," he said.

The successful sale of a 26% stake in Pakistan Telecommunications to Emirates Telecom for $2.6bn in June is to be followed by the sell-off of two state oil companies.

There are 11 potential bidders in the running, although the government has yet to set a firm timetable for the privatisation.

Monsoon recovery

In India, the expansion in industrial production was accompanied by news of consumer inflation dropping to an annual rate of 3.84%, a two-year low thanks to lower food prices.

The record may not last, since so far state energy firms have not passed on soaring oil costs to their customers.

Even so, a combination of the return of the monsoon rains (the relative absence of which hit agricultural output in 2004) and continuing consumer demand should keep growth strong, analysts said.

"The economy is definitely on the upswing," said DH Panandikar, head of New Delhi's RPG economic think tank.

"I expect growth (in the year to March 2006) to be in the 7.5%-8% range."

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