Growth in India may recover to 6% this year and 6.5% in 2014 from 5.0% in 2012, but South Asia's largest economy needs to pursue structural reforms to create a more favorable investment environment and spur growth, the Asian Development Bank said on Tuesday in its latest regional outlook report for 2013.
China is expected to accelerate to 8.2% from 7.8% last year, driven by strong consumption and investment, said the Manila-based development lender.
Meanwhile, growth in developing Asia is seen gaining momentum this year, powered by rising domestic consumption and intra-regional trade, but authorities need to ward off risks of inflation and asset bubbles arising from strong capital inflows, the ADB said.
Developing Asia - comprising 45 countries in Central, East, South, and Southeast Asia and the Pacific - is forecast to grow 6.6% this year and 6.7% in 2014.
The growth estimate for this year was unchanged from a December update of its 2012 regional outlook and is faster than last year's 6.1% growth.
Southeast Asia - the only sub-region to post faster growth last year - is expected to extend its resilience this year and into 2014 before a 2015 regional economic integration forecast to enlarge trade volumes and diversify export markets.
Tensions over long-standing border disputes in Asia, deepening austerity fatigue in the euro zone and political risks linked to wrangling over the US debt ceiling are the main threats to the region's near-term outlook.
The region needs to put up safeguards against the buildup of asset bubbles and possible withdrawal of huge liquidity that has spilled over to the region following monetary policy stimulus in developed economies.
"Advanced economies will likely continue their accommodative monetary stance, and authorities in developing Asia must safeguard the soundness of the finance sector to avoid the emergence of disruptive asset bubbles," the report said.