India must boost manufacturing: ADB

Singapore: India needs to build up its manufacturing sector and participate in the global value chain network to attract FDI, a senior executive of the Asian Development Bank (ADB) said here today.

"India need Foreign Direct Investment (FDI) and it needs to participate in the global value chain," said ADB's deputy chief economist Juzhong Zhuang, referring to the push of building up manufacturing in the country.

He noted the Indian government-initiated business reforms, make India a more attractive FDI destination.

"So far India has a well-developed service sector, (but) it has a large potential in the manufacturing sector," stressed Zhuang after launching ADB's Asian Economic Integration Report 2016 here today.

India should focus on manufacturing, imports parts, assemble products and supply to the domestic market as well as export, said Zhuang. The ADB report examines current trends in trade, finance, migration, remittances, and other regional cooperation and integration issues.

"Trade and FDI have been key drivers of growth and prosperity in Asia and the Pacific," he said.

But he called on the region to "guard against the threat of rising protectionism and make concerted efforts to push for freer trade and better investment policies to preserve the region's growth momentum."

The report noted that the anemic global economic recovery continues to weigh on the region's trade growth, which continues to decelerate. Last year, trade growth in Asia slowed to 2.3 per cent, below the global average of 2.7 per cent.

But it highlighted that greater trade openness and FDI can strengthen the region's resilience to slow global growth. Countries in the region need to improve their institutional quality, business environment, and policy effectiveness to encourage FDI, said the report.