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Does South Asia Run the Risk of Rising Inflation?

Eliana Cardoso's picture

I am old enough to remember the days when Latin America was the land of inflation. Hyperinflation in Bolivia, Brazil and Argentina made the news in the 1980s and early 1990s. At that time, Asia was seen as immune to the Latin disease. Since then, much water has gone under the bridge. Inflation came under control in the majority of Latin American countries. Today the median inflation rate in South Asia is more than twice the size of the median inflation rate in Latin America and the Caribbean. (See chart below)

Should South Asia’s policymakers look at this information and wonder whether they are doing something wrong?

In general, the recipe for hyperinflation is the monetization of budget deficits in countries afflicted by political instability or conflict. Even if the threat of mega inflation is far removed from the South Asia scenarios, the combination of big budget deficits and loose monetary policy seems to be present in some countries of the region.

Incentives and Values in Conflict-Prone Countries

Eliana Cardoso's picture

One of the most extraordinary examples of the use of economic principles comes from the beginning of the 19th century, when England used to send a huge number of prisoners to Australia. The government originally paid the ship captain a pre-determined amount for each prisoner that boarded the ship, but half of them would die during the journey. In 1862, Edwin Chadwik, knowing that people respond to incentives, told the U.K. government to pay captains according to the number of prisoners that actually disembarked in Australia. With this adjustment, the survival rate increased from 50% to 98.5%.

This example illustrates how incentives can do wonders in some circumstances. Yet, human actions are not always guided by the same calculations made by a profit maximizing ship captain. Behavioral economists have emphasized that we respond to a deep ingrained sense of fairness. Culture and values are crucial in understanding human behavior and promoting healthy and stable societies.

How Should We Best Accelerate Growth and Job Creation in South Asia?

Ejaz Ghani's picture

“South Asia continues to grow rapidly and its largest economy, India, is close to becoming a Tiger.”

Sadiq Ahmed and I were inspired to author Accelerating Growth and Job Creation in South Asia when we were asked by the South Asia Chamber of Commerce, SAARC Business Conclave, FICCI, and a number of policy makers, local research institutes, and CEOs to come up with a strategy on what can be done by South Asian countries to accelerate growth and job creation. So we invited the world’s leading scholars to apply their talents to understanding the economies of South Asia. This gave birth to the book.

It is organized along three themes—an overview of South Asia’s growth opportunities and challenges; sources of growth and policies for the future; and the significance of regional cooperation in promoting growth. The essays combine quantitative data with analytical rigor to provide innovative suggestions in terms of policies and institutions that can propel South Asia towards higher growth, while promoting inclusiveness.

South Asia Advances on Visual Tool Comparing Development over Time

Joe Qian's picture

The World Bank released its Data Visualizer tool last week, which compares 209 countries through the lens of 49 development indicators utilizing data ranging from 1960 to 2007. Using three dimensional bubbles whose sizes are proportional to populations and are color coded to the different regions (purple represents South Asia), they move horizontally or vertically based on their achievements on a number of indicators that range from GDP per capita to the percentage of children that are inoculated against measles.

Users will find similarities with the groundbreaking Gapminder World tool that Swedish Health Professor Hans Rosling first presented to the TED Conference in 2006. He concluded that the world is converging and that old notions of contrasting developed country (generally small families and long lives) with developing country (large families and short lives) to be grossly out of date.

Renewable biogas provides clean, affordable energy for rural households in Nepal

Environmental Specialist Javaid Afzal demonstrates supervision practices of Bank staff as he inspects the internal workings of a biogas plant currently under construction.

Trecking through the remote and rugged mountainous areas of Nepal, it was evident to me that the abundance of natural beauty starkly contrasted with the scarcity of access to affordable and environmentally sustainable energy sources.

In Nepal, Most households still rely on traditional energy sources for cooking and heating, such as firewood or agriculture residue with few having access to electricity.

The high demand for firewood has created a number of environmental problems such as deforestation, soil degradation, and flooding. Firewood also requires considerable time for families to collect and its use results in indoor air pollution which particularly impacts women and children.

A solution has been the introduction of biogas as a way to bring cleaner, safer, and more affordable energy to rural households. It is created when animal and human waste are converted into clean sources of cooking fuel, replacing the need for wood, dried dung, and fossil fuel based sources of energy. Its byproduct can also be used as a natural fertilizer to increase agricultural yield.

Doing Business Report 2010: South Asia

Joe Qian's picture

The World Bank released its annual Doing Business report (pdf) last week which tracks regulatory reforms for conducting business and ranks countries based on their ease of doing business.

Countries are evaluated and ranked by indicators such as starting a business, employing workers, getting credit, paying taxes, etc.

In South Asia, seven out of eight (75%) of the countries instituted reforms that were conducive to business, higher than any previous year of the study.

Pakistan was the highest ranked country in the region at number 85 while Afghanistan and Bangladesh were the most dynamic reformers with three reforms each. Afghanistan’s rank in the study also increased the most in the region, climbing eight spots.

Watch Your Wallets, Protectionism is Back!

Zahid Hussain's picture

Protectionism is BackProtectionism is on the rise all over the world, thanks or should we say “no thanks” to the global economic crisis.  Last November, G-20 leaders pledged to fight protectionism. Yet, according to the World Trade Organization (WTO), 18 out of these 20 economies have since taken measures to restrict trade. With the global economy struggling to recover, political pressures demanding protection from import competition to sustain domestic employment are intensifying. It is likely to prove right the old adage that the only thing we learn from history is that we never learn from history.  One lesson from the experience of the 1930s that is currently most relevant is that raising trade barriers deepens and prolongs recession.

Development Marketplace: My Tryst With Nutrition

Sundararajan Gopalan's picture

For more information on the Nutrition Development Marketplace, please see the accompanying Feature Story and Press Release

The year was 1975. I was a final year medical student in Pondicherry, South India. I was going for my practical test on Preventive and Social Medicine (PSM). PSM was (and probably still is) one of the least favorite subjects in the medical curriculum for most students. “Why should we prevent diseases? If we prevent all diseases what will we all do with our medical degrees? Isn’t that professional suicide?” asked one of my class-mates! But I digress. Coming back to the test, I was unusually nervous because I had not studied everything well. For some reason, one chapter that I did study the night before was nutrition. I had also volunteered for two months in a Nutrition Rehabilitation Center (NRC) which meant that it was one chapter that I was more confident about. As my luck would have it, every single question that the examiner asked me that day was on nutrition! I blasted my way through the test, and thanked my stars for that exceptional bit of good fortune. From that day, nutrition has always been close to my heart.

The NRC is a somewhat outdated concept nowadays. The idea was to have a malnourished child and mother live for a month in the NRC and learn good household behaviors that could result in better nutritional outcomes.

Nepal announces a diaspora bond

Dilip Ratha's picture

Excerpt from the budget speech (July 13, 2009, para 139) by the Nepal finance minister for the new fiscal year beginning this month:

"An arrangement has been made to issue "Infrastructure Development Bond" of an amount of Rs. 7 billion by Nepal Rastra Bank fixing pegged exchange rates targeting the Nepalese working abroad through Nepalese Embassies in South Korea, Malaysia, United Arab Emirates, Saudi Arabia and Qatar, as a part of domestic borrowing for the coming fiscal year. Such Bonds can be purchased only from workers working abroad. From this arrangement, the remittance can be used for infrastructure development and the remittance itself remains free of additional charges while transmitting to Nepal. In addition to it, I am confident that such workers employed abroad will receive interest from the day of bond purchase and be benefitted."


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