Growth in South Asia has been accelerating since the early 1990s, and its economic performance during the last decade and a half has been impressive. Despite of deadly floods and Covid-19, economic growth has contributed to significant reduction in poverty in the region.
The nations making up this region include India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, and the Maldives. More than a billion people live here and possess a richly woven tapestry of cultures, languages, and traditions.
This region has experienced high growth, regardless of the presence of multiple factors that include demographic advantages, economic reforms, and globalization. Despite these opportunities, South Asia faces numerous challenges that will prevent it from continuing on its path of growth. Demographic advantages are among the most significant opportunities to achieve further economic growth in South Asia.
The ‘World Economic Situation and Prospects September 2024 Update’, released by the United Nations Department of Economic and Social Affairs (DESA), notes that risks to the region’s prospects are tilted to the downside, however, further escalation of geopolitical conflicts and adverse weather conditions could disrupt supply chains and induce commodity price volatility.
Innovation, increased productivity, and a dynamic consumer market are ingredients for economic success emanating from an ever-young workforce. For instance, India’s large pool of skilled professionals in the fields of IT and engineering has made it a global software services hub and capital to outsource to.
Bangladesh has also emerged as the biggest producer in the South Asian region concerning the textile and garment industry, primarily due to low labor costs and an increasing and young workforce. While Maldives, Bhutan and Nepal are struggling with their changed policies to emerge as the growing economy. Economic reforms have become vital in the economic growth of South Asia.
The country in the region has adopted liberalization policies at large thus enhancing trade and inflow of foreign direct investment in the region and entrepreneurship development. Ever since the economic liberalization of India in the early 1990s, that country had experienced rapid growth in various sectors, from technology to manufacturing and services.
Similarly, FDI went up in Bangladesh, especially in the garment sector, which is now considered a mainstay of the Bangladesh economy. These reforms have boosted growth and integrated South Asian economies into the global market, with associated access to new technologies, capital, and markets. Greater opportunities are ahead for regional cooperation and integration in South Asia.
South Asia seeks to strengthen economic collaboration through initiatives like the SAARC. Country-specific benefits would also be incorporated through increased intra-regional trade by the facilitation of trade agreements and reduction of tariffs.
The region still remains very low in terms of intra-regional trade compared with other regions. Further infrastructural development through roads, railways, and ports would enhance trade and investment opportunities. For example, the China-Pakistan Economic Corridor aims at improving infrastructure and connectivity between China and Pakistan potentially benefiting the whole region. Despite all these opportunities, however, South Asia suffers from numerous challenges that could dampen its economic rise.
Poverty and inequality top the list. No doubt that India and Bangladesh have witnessed tremendous success in reducing the poverty numbers, but millions yet live below the poverty line. Income inequality remains a critical issue; while wealth is concentrated in urban areas, rural populations struggle to access basic services.
Addressing these disparities is critical to ensuring sustainable economic growth and social stability. Political instability and governance also presents another major challenge. Most South Asian countries fight with political unrest, corruption, and poor governance that may discourage investment opportunities and stunt economic growth.
The politico-economic turmoil which Pakistan has faced in the past few decades has influenced its economic policies and stability. It needs to build robust institutions, enhance transparency, and hold people accountable to bring about a stable economic environment.
Climate change and natural calamities also expose South Asia to great vulnerability, flooding large tracts of the region, particularly areas vulnerable to droughts, along with extreme happenings. This does have economic implications and worsens poverty.
Agriculture still absorbs a great deal of employment in most South Asian countries, making climate-related shocks much more relevant. This makes investment in climate-resilient infrastructure and sustainable agriculture practices very important for mitigating such risks and ensuring food security.
Then, there are geopolitical tensions that will be pressing issues to economic cooperation and stability in the region. Conflicts, such as those between India and Pakistan, can be barriers to trading and investment opportunities. Building trust and dialogue within nations is an important step toward creating a peace-loving environment for economic development.
Conclusion:
The South Asian economic boom is a mix of opportunity and challenge.
Demographic advantages, economic reforms and scope for regional co-operation all add up to make it a strong foundation for growth. Challenges that should be addressed include poverty, political instability, climatic vulnerability, and geopolitical tensions.
These are the hurdles that should be taken to hold onto what can be gained and build on momentum. With its strengths honed, it can create for itself an economic future that is bright and inclusive, benefiting the people it churns out with it and contributes to the economy of the world.
This would be only possible through cooperation between governments, businesses, and the civil society to further exploit all the potentials of the region and make sure benefits from economic growth flow to all equitably.
This Article is written by Ms. Ayesha Iqra who is studying International Relations at the National University of Modern Languages, Islamabad.
