South Asian Region comprises of eight nations-Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. The combined population of these countries is over one billion of which, one-third lives below the poverty line. This means that there is deep-rooted poverty with high inequality. So efforts are placed to achieve respective goals of improving the living standard of the poor. Despite poverty, some of these nations have achieved robust economic growth since the past decade. But, the distribution of growth is skewed. A combined average ratio of richest to poorest 10 percent shows that the richest 10 percent of region’s population have enjoyed income share of 10.7 times greater than that of the poorest 10 percent in 2007.

Poverty is rampant in the SAARC region with 34.9 percent combined population proportion below poverty line (US $1.25 a day) in 2007. However, there is a significant variation in the population proportion below poverty line across and between the SAARC countries. That population proportion was 55.1 percent in Nepal followed by Bangladesh and India at 49.6% and 41.6% and by Bhutan, Pakistan and Sri Lanka at 26.2%, 22.6% and 14.0% respectively. Clearly, Nepal is at its worst with 4 times, 2.4 times, 2.1 times, 1.3 times and 1.1 times more population proportion below income poverty line than in Sri Lanka, Pakistan, Bhutan, India and Bangladesh respectively.

The overall combined average growth rate of per capita real GDP and annual average rate of inflation in SAARC region, excluding Afghanistan, was 3.6% and 7.0% respectively during 1990-2007 with large variations across and between the countries under consideration. Bhutan is ahead with 5.2% of its annual growth rate of per capita real GDP and inflation rate of 6.6% followed by Maldives and India at 5.1% and 4.5% respectively. The annual inflation rate in India was 6.8%. Sri Lanka and Bangladesh have achieved similar growth of 3.9% and 3.1% with inflation rate 9.6% and 5.4% respectively. Nepal is one step ahead than Pakistan with 1.9% per capita real GDP growth rate and inflation rate of 6.5% while Pakistan stands at the bottom with 1.6% annual per capita real GDP growth rate and inflation rate of 7.3%.

Generally, Gini coefficient (GC) is used to measure the inequality in the distribution of income whose value lies between 0 and 1 in which 1 indicates extreme inequality. The combined value of GC of SAARC countries, excluding Afghanistan and Maldives, was 0.39 in 2007. However, there is a large variation in the value of GC between and across countries with highly skewed distribution of income. Another measure of inequality is dispersion ratio that shows the extent and degree of differences in income distribution between the poor and rich. The income of poorest 10% in Bhutan was 16.3 times lesser than the richest 10% in 2007 followed by Nepal with 15 times and Sri Lanka with 11.5 times. The same for India, Pakistan and Bangladesh was 8.6 times, 6.8 times and 6.2 times respectively. While Bhutan led in dispersion ratio, Nepal had the highest GC at 0.47 in 2007 indicating an extreme inequality in the distribution of income followed by Bhutan and Sri Lanka with 0.46 and 0.41 respectively. The same for India, Pakistan and Bangladesh was 0.37, 0.31 and 0.31 respectively.

The SA countries are characterized by poverty, inequality but low profile of human development. The combined average Human Development Index (HDI) excluding Afghanistan is 0.600. But there is a large discrepancy in HDI within and across the SAARC countries. Maldives represents HDI of 0.771 in 2007 highest followed by Sri Lanka, Bhutan and India with respective HDI of 0.759, 0.619 and 0.612. The fifth and sixth are Pakistan and Nepal with HDI value 0.572 and 0.553 respectively, Bangladesh being the last at 0.535.

Nepal is among the poor performers as it is lowest in terms of per capita GDP growth, income poverty and inequality. The country is failing to achieve higher GDP growth rate while in recent years India has made miraculous economic progress with annual economic growth rate approaching double digits. The economic growth rate is encouraging in the rest of the member countries of the SAARC region. It is a matter of great concern as to why Nepal has a low profile. There are twofold reasons responsible for this state of affairs. The first is the low per capita income. The real per capita GDP growth for Nepal was 1.9% during 1990-2007, which of course has direct impact on low HDI ranking. The second is the highly skewed distribution of this growth. The implication is that the rich will get richer pushing the majority of people into abject poverty. To correct these imbalances, among others, Nepal has to place efforts on a war-footing to achieve the requisite economic growth rate as much as the combined average growth rate of SAARC region and to reduce the gap of inequality between the poor and the rich by improving the current patterns of income distribution.

Dr Dhungel is Associate Professor, Central Department of Economics, TU