Growth in Chinese exports to the US dipped from 20.4 per cent in the first quarter 2007 to 12 per cent in the third while that to India and other developing nations grew 20 per cent.

With the American market slowing down and exports to the US being curtailed, many Asian markets have started looking inward. Engouraged by more self- sustaining domestic sources of growth, Asia’s emerging economies are gradually shifting away from dependence on exports. Hubert Neiss, the IMF’s top official for the region during the 1997-98 financial crisis, said, “There’s been a long tradition of fiscal frugality in most Asian countries, however, at a time when global demand and exports are slowing down, it’s important to boost domestic demand, consumption and investment. Asia can afford it.”

The region’s economies, almost twice as reliant on overseas sales as the rest of the world, are being dragged down by weakness in the U.S., Japan and Europe, the markets for 60 percent of Asian shipments, according to Bloomberg. The slowdown has been accompanied by accelerating inflation that limits the ability of Asian central banks to support growth with lower interest rates.

As a result, in India, where tax collections have more than doubled since Prime Minister Manmohan Singh’s government came to power in 2004, the government proposes sharing the wealth by waiving 600 billion rupees ($15 billion) in agricultural loans for as many as 40 million farmers. Finance Minister Palaniappan Chidambaram also raised the income-tax exemption limit and cut excise duties on goods including drugs and small cars.

In China, whoes tax revenue climbed 31 percent in 2007, and growth reached a 13-year high in 2007, said that the government will raise welfare payments to provide a shield from soaring food costs. China also plans to spend 31 percent more on agriculture in 2008, boosting rural incomes that are a third of those in the cities.

Other Asian countries too are following suit, The Philippino government has accelerated investment in public works and social services. Thailand’s government is spending 1.5 trillion baht ($47 billion) to expand mass transportation and improve health care. Hong Kong is cutting taxes, and Singapore is handing out cash to its citizens.

However, Not all Asian nations can afford to boost their economies using tax and spending tools. Countries such as Sri Lanka and Malaysia “have fiscal vulnerabilities right now,” says Ping Chew, a managing director at Standard & Poor’s in Singapore. “Asia has to be careful that the measures it’s taking reflect the temporary phenomenon of slowing growth it’s experiencing and that the fiscal stimulus doesn’t become entrenched,” Chew added.