Some countries in the region are continuing a trend of strong growth, while others are recovering from a period of turmoil. While high inflation and interest rates have bogged down many emerging markets, South Asia seems to be forging ahead.
However, a second look reveals a more nuanced picture.Per capita incomes average only about US$2,000—one-fifth of the level achieved by the neighboring East Asia and Pacific region or the upper-middle income average, and one-twentieth the level of high-income countries. Moreover, not all countries in the region are growing fast, and three—Afghanistan, Pakistan and Sri Lanka—are in acute crisis.
South Asia's growth rates may be higher than elsewhere, but they are still not sufficient for countries to reach high-income status within a generation
All still have a long way to go. And the path will get more difficult ahead.
The World Bank's latest South Asia Development Update, Toward Faster, Cleaner Growth, provides a roadmap that policy makers can use to hasten their way towards their goal. There are four ingredients that are particularly important:
Boost private investment. Strong private investment is critical for accelerating the pace of catch-up with high-income countries and enabling the energy transition. In all but one country in South Asia, private investment growth has slowed compared to the pre-pandemic period.
Restore fiscal sustainability. Many countries in the region are carrying extra weight that makes this journey more difficult.Lightening this burden will require some combination of increased revenues, improved spending efficiency, and stronger fiscal rules to anchor better policies over time.
Modernizing the economy and increasing energy efficiency will help South Asia keep pace in the global energy transition
Speed the energy transition.Modernizing the economy and increasing energy efficiency will help the region keep pace in the global energy transition.
Maintain a healthy labor market.A robust labor market with strong social safety nets also make the path to new work easier for displaced workers.
With the right policies and investments, South Asia can avoid this fate and reach the summit to create sustainable livelihoods on a livable planet for its people.
This blog is part of a series on the World Bank's latest South Asia Development Update, Toward Faster, Cleaner Growth.