South Asia: The Fastest Growing Region in The World

South Asia is the southern sub-region of Asia and consists of the eight countries of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. Geographically, the Indian Ocean is on one side of South Asia, and the Western, Central, East, South, and Southeast Asian regions are on the other. South Asia is The Fastest Growing Region in The World. The South Asian Association for Regional Cooperation (SAARC) is an economic cooperation organization established in the region in 1985. South Asia covers about 5.2 million square kilometers, 11.71% of the Asian continent, or 3.5% of the world’s land surface area. The population of South Asia is about 1.9 billion, about one-fourth of the world’s population.

Considering the countries within South Asia, India is the largest and most important economy in the region (US$3.535 trillion) and makes up almost 70% of the South Asian economy. No doubt, South Asia is driven up economically mainly because of India. As for purchasing power-adjusted exchange rates, it is the 5th largest in the world in nominal terms and the 3rd largest in purchasing power terms. In comparison with the United Kingdom in size, India is on the rise. It is the fastest-growing major economy and one of the world’s fastest, registering a growth rate of 7.3% in FY 2014–15. Mumbai is India’s financial hub, with a GDP of almost $400 billion. India’s economy will be the third-largest in the world by 2030. India’s economy is in the 5th and 7th ranks in the world.

With Asia’s fastest GDP growth rate, Bangladesh is the following country after India. It has a remarkable growth record economically and will rank 11th in the world in the coming years. It has the world’s 33rd-largest GDP in nominal terms and is the 27th-largest by purchasing power-adjusted exchange rates. Compared with Pakistan, Bangladesh’s economy initially stood almost 40% lower in GDP per person, but now it is above 40% of GDP per person. Bangladesh has developed from the least developed South Asian country to a developing or middle-income country, a giant leap in development.

Followed by Bangladesh is Pakistan, which has an economy of about $314 billion and ranks 5th in GDP per capita in the region but is facing economic crises now because recent data suggests that the economy has weakened in Pakistan in FY 2023. Following that is Sri Lanka, the region’s second-highest GDP per capita and the fourth-biggest economy. Initially, Sri Lanka experienced annual growth of 6.4% from 2003 to 2012. Still, it was unsustainable and not equally distributed throughout the area, so Sri Lanka has been reclassified as a lower middle-income nation from an upper middle-income country.

According to a 2015 World Bank study, South Asia has had the world’s highest growth rate thanks to robust economic growth in India and low oil costs.

This article highlights the new perspectives on how South Asia explored economic’ miracles and became the fastest-growing region in the world.

What Broke Down the Economic Backbone of South Asia Before 1900?

South Asia has been an economically significant region since ancient times. British and Americans were attracted to this region because this land is blessed with natural resources. Europeans started dealing directly with the Indian subcontinent by the 1500s., which is today’s Afghanistan, Bhutan, India, Pakistan, Sri Lanka, Nepal, and the Maldives. Textiles and spices were the region’s primary agricultural products and the most expensive commodities. Queen Elizabeth approved establishing the East India Company on the subcontinent in 1600. She allowed a few hundred merchants into the company. Still, after that, in the quest for profit, the company hired a giant private army approximately double the size of the British army, took hold over significant parts of the Indian subcontinent, and started to rule the 200 million inhabitants of the subcontinent. The British restricted the East India Company after years of corruption. Despite the restrictions by the British, the company had built the infrastructure on the subcontinent.

Due to a rebellion against the company, the British started to colonize the area in 1857. The British government was imposed on the local populations of the subcontinent. In 1857, native soldiers of the subcontinent accused the company of selling and exporting rifles coated with beef and pork fat. Hindus and Muslims in the subcontinent considered it a religious insult and started to take steps against the company. Finally, after a period of continuous rebellions for 18 months, the British Raj was established in the subcontinent in 1857. It took the lives of thousands of Indians and British. The East India Company was resolved, but the British maintained the company’s policies. Russia was also interested in building an empire on the subcontinent but signed a mutual agreement with the British in 1907.

By 1900, the British had started ruling half of the region directly and indirectly. Banks and stock exchanges were their main strategies. The British began industrialization in the subcontinent with the establishment of cotton mills. They used the land for their benefit while compromising the inhabitants. Large-scale railroad construction was initiated to expand the markets for British products. New urban centers, such as Bombay and Madras, expanded at the expense of older urban centers, such as Surat. Instead of exporting food crops, they used the land for farming and exporting cash crops such as tea and cotton, resulting in famines in the region. Millions of Indians died during the famines. Both kinds of conflicts, either against the state or among people, resulted in death, misery, social trauma, and destruction of infrastructure and had huge spillover effects, all of which caused South Asia to lag behind the world during that time.

The rivalry for Raj in the subcontinent made the inhabitants think about independent countries, and by the 20th century, Independence had become a complete solution. Activists like Muhammad Ali Jinnah and Mahatma Gandhi protested for freedom. The British used their sources in the two world wars, creating non-sustainability in their colony, and thus they left the subcontinent. In 1947, India and Pakistan became Independent countries, but during the movement for Independence, millions of Hindus and Muslims died or became refugees.

Then, in 1971, Bangladesh emerged from Pakistan as a separate and Independent country. There has been a period of continuous conflicts and wars across South Asia, due to which his economy was staggering and was lagging behind the world after the Independence. Due to foreign trade policies, South Asia faced an economic crisis, and state sustainability was at stake.

There were two oil crises in the history of South Asia, in 1973 and 1979, respectively. But later, oil saved South Asia from coming back from an economic crisis. South Asians started to fight for their individual and national rights and focused on building their respective countries’ economies.

The Economical Comeback Moves for South Asia!

South Asia emerged from the political forms of the British Empire after independence. The South Asian economic miracle began in the late 1970s. The region started to export millions of wage workers. The remittances that followed made the politicians in South Asia willing to relax controls on foreign trade and allow the import of technologies. The global offer of exporting more articles for earnings and importing technologies from those earnings attracted both China and South Asia in the 1980s, as both regions had a typical zeal for state development.

South Asia found economic reforms essential in the 1980s and early 1990s, focusing mainly on monetary, fiscal, and exchange rate management. South Asia also began to decline government control to increase income from the private sector. All the countries in South Asia grew by over 5 percent per year on average. Poverty declined with the rapid economic growth after the end of shift-restricting factors. Then South Asia realized that carrying on this impressive performance beyond the next few years would require reforms and investments.

The performances of Bangladesh and India have mainly driven strong economic growth in South Asia. India started global outsourcing. The famine in 1943 made the Indians believe that food production was necessary. They invested in the creation of public enterprises for industrial development. Jawaharlal Nehru, India’s first Prime Minister, remarked that importing from outside is equivalent to becoming a slave to other nations. India’s IT achievements have been remarkable. India has grown tremendously by focusing on urbanization, industrialization, domestic business, handicrafts, technology, and software production. Software production in India for the international market increased from US$1.1 billion to US$23 billion in a few years.Domestic demand for consumption and investment has been robust. India then introduced the goods and services tax to help the private sector grow.

Further, the “Green Revolution” of the late 1960s made India self-sufficient in food grains. The economy of India grew with a surge of an average of 6.3% annually. The poverty line in India declined from 50% to 34% in 15 years. The country’s share in world trade increased from 0.4% to 1.5% in 2006. India, therefore, is the primary driver of growth in South Asia. India has the world’s fastest-growing economy.

The incorporation of AMUL is a milestone for one of the world’s most significant milk and milk product producers.

Bangladesh has focused on developing domestic industries such as textile manufacturing to achieve today’s growth but needs more infrastructure.

Sri Lanka, like Pakistan, has large account deficits and entered an International Monetary Fund program in June 2016. After independence, the economy of Pakistan was revitalized under Ayub Khan. The government of Pakistan built a number of dams, the country’s first cement and car industries, and heavily invested in agriculture. Pakistan has emerged as a semi-industrialized region focusing on textiles, agriculture, and food production. Numerous industrial restrictions were eliminated under Muhammad Zia-ul-Haq, the balance of payment deficit was kept under control, and Pakistan became self-sufficient in all necessities. The GDP of Pakistan has been on the rise since 2012. However, Pakistan has been unable to cover the gap between itself and the rich industrial nations because of poor governance. In 2013, Pakistan faced hyperinflation, high debt, and mild economic growth. Pakistan is still under massive obligations from the IMF and struggling to escape the financial crisis.

Afghanistan, the poorest country in the region and Asia, has been facing security and political uncertainties for years. Its economy depends on foreign aid and defense spending. Overall, South Asia’s impressive economic growth of around 7% will continue over the next few years.

According to the World Bank’s report (2011), South Asia has fallen below the international poverty line. In 2015, it was reported that South Asia was the fastest-growing region in the world.

What is the future of South Asia, considering it has the fastest and most steady economic growth? 

Considering the fastest growth rate in the economy of South Asia, we can say that soon it will become an economic superpower. As of now, the political situation is stable throughout the majority of South Asia, except Afghanistan. For the region that grew so brightly despite the political instability, it is a much more convenient time for development with peaceful political transitions. The South Asian government is already on the development agenda and has made policies to achieve the goals. Bhutan has approved a new plan for the next five years. Bangladesh’s government has also promised to reach certain milestones in economic development. The global environment is also favorable for South Asia. It is a significant oil importer, and lower oil prices are helping the current accounts improve in the region.

Infrastructure building has seemed tremendous over the past few years, and if it continues at the same rate for the next decade, it may create competition for other countries. Domestic demand is expected to remain strong.

To sustain continuous growth, the countries of South Asia need to continue to implement new reforms for their betterment. They must participate in global production networks. They need to continue to invest in infrastructure.

If South Asian countries continue their struggles, today’s annual growth of 7 percent is expected to double in the next ten years.

Read: Money Through Time

Edited by Jamil Khan