Wednesday, May 25 2005 16:42 Hrs (IST) - World Time -

Tokyo: India today (May 25, 2005) advocated a trading block for Asia on the lines of the European Union, saying such a move had become imperative for the prosperity and development of the region.

"The concept of Asian economic integration is a logical development, as a means of promoting the common prosperity and well-being of the people of Asia," Planning Commission Deputy Chairman Montek Singh Ahluwalia said, addressing a conference, 'The Future of Asia: Charting a Course for Asian Economic Integration' in Tokyo.

"Regional integration is taking place in Europe and in North America in parallel to steps to achieve multi-lateral liberalisation," he said.

Asian countries have opened their economies to foreign trade and investment and have aggressively integrated with the global economy. "They have generally done well in this process and Asia has the best record of economic development and poverty reduction compared with any other region. This has given us confidence to think of deeper economic integration among ourselves," he added.

Ahluwalia said Asian countries were diverse politically, "However, commonality of economic interests is also a powerful driver and there are strong economic forces which justify greater integration. In the case of Asia, unlike Europe, it is possible that economics will lead in the integration process and politics will follow".

Referring to India's economic growth, Ahluwalia said, "The economy has grown at an average rate of 6.5 per cent in the last three years and we expect to average 7.5 per cent in the next two years. We are aiming at taking the economy to an 8 per cent growth path thereafter."

On India's reforms process he said, "They (reforms) have been implemented at a more gradual pace than in many other countries. This gradualism should not be mistaken for lack of conviction. It is, rather, the inevitable consequence of India's democratic polity."

He said, "There is a great deal more we ourselves need to do to realise our potential. The process of economic reforms must be carried forward and the Government is committed to doing so. We will continue the process of reducing the import tariffs to bring them in line with those in other countries in East Asia."

Highlighting the Government's commitment for economic growth, he said, "We will actively encourage foreign investment from Asia and other parts of the world. We will work to creating an investor friendly economic environment."

On FDI, he said, "This region is an important source of FDI into India. Japan's investments in India are growing.

South Korea has become an important investor in recent years. Singapore and the other South-East Asian countries have also begun investing."

"At present, the inflow of FDI into India is about four billion dollar per year, if we exclude portfolio investment in Indian equities by Foreign Institutional Investors. This is a big increase from less than $ 100 million in 1990 when the reforms began, but it is far below our potential."