United Nations Conference on Trade and Development on Thursday projected a 5.4 per cent GDP growth for India in 2003, substantially higher than the Asian average of 4.4 per cent.

The UN body's projection on India is in sharp contrast to 6.0 per cent growth estimated by the Asian Development Bank, but higher than 5.1 per cent estimated by the International Monetary Fund.

In its Trade and Development Report for 2003, Unctad has placed India's growth next to China and Iran in the Asian region with China estimated to grow by 7.1 per cent, while Iran is poised for 5.7 per cent growth in 2003.

However, it found a distinction in India's growth momentum, which was rather robust as compared to other Asian giants because of weak links with the American economy, which dipped by one per cent in the first quarter of 2003.

Though Asian economy had been most directly affected by the end of IT boom in the US, it said, "India, with much looser links to the US economy, increased its growth to well over 5.0 per cent in 2001 and maintained 4.5 per cent in 2002."

Most of the Asian economies were already reeling under falling external demand in the first quarter of 2003, ahead of the impact of Severe Acute Respiratory Syndrome outbreak on economic activity, it said.

Noting that the weakness in global demand over the past couple of years had only a limited impact on Asian economies since their strong external position allowed greater leeway for counter-cyclical economic policy, it said, "both India and China have increased government deficit financing."

Unctad said net private capital flows to both China and India stood at $59 billion, accounting for over four-fifths of the total inflows into the region.

The total current account surplus in Asia exceeded $100 billion with India and China together accounting for about $28 billion.

"Since net official inflows to the region were negative on account of payments to the International Monetary Fund, net private capital inflows were, in effect, used, together with current account surplus, to pay off official creditors and to add to international reserves at an unprecedented amount of $167 billion," Unctad said.

It said India and China had accumulated reserves mainly from net capital inflows.

On capital formation, Unctad said during 1995-2000, it was 23.5 per cent of GDP, much lower than Asian average of 29.5 per cent. However, it was 35.4 per cent in China.

It said the rate of capital accumulation in India was above the 20 per cent threshold from the late 1980s, and moved towards the 25 per cent mark in 1990s.

On the ratio of gross domestic investment to GDP, it said China and "to a lesser extent, India", had seen considerable improvements in their investment and growth performance in the last two decades.

India's labour productivity rises

Indian labour productivity has made rapid strides in manufacturing, even as per capita labour costs rose in certain sectors like textiles and transport equipment, in 2000.