TOPICS: Challenges for South Asian economy

Low per capita income and low rate of economic growth characterise the economies of most South Asian countries. In the past, the average annual growth rates in the region were only marginally higher and in some cases even lower than the population growth rates. Of late, economic liberalisation has brought about increased involvement of the World Bank (WB) and International Monetary Fund (IMF) in South Asian economies. Economic liberalisation has become almost synonymous with structural adjustment policies introduced by WB and IMF. These structural adjustment schemes demand privatisation of public institutions, including those providing public services.

Another prong of IMF structural adjustment programmes pursued in South Asia is exchange rate devaluation. This has augmented inflation to the extent that domestic goods heavily rely on imported inputs resulting in higher cost of the products. South Asia is a resource-deficient hence undeveloped region where the primary sector dominates the economy. This is testified by the fact that about 60 per cent of regional output consists of primary products, which suffer from low demand and relative price fall.

There is great diversity among South Asian countries in terms of levels of development, size and associated economic power. But despite modest past achievements, South Asia continues to be home to the majority of the world’s poorest as development in the region seems to have favoured the upper classes. Economic analysis has made it clear that for improvement in the welfare of South Asian region, the present economic growth rate of six per cent is inadequate and no less than a sustained GDP growth rate of eight per cent can facilitate the much-needed structural transformation.

Today, the world is striving towards a freer trading environment with the elimination of tariff and non-tariff barriers in trade in the framework of World Trade Organisation. Therefore, challenges of bridging the gap between the rich and the poor and of realising a fairer distribution of benefits have become more complicated than before. In this context, South Asia has to exploit fully all the potential opportunities of realising high economic growth and improving the competitive strength of economic activities through well-designed programmes of action.

Capital is scarce in most South Asian countries and require careful rationing. In this context, non-productive schemes should be cancelled and funds should be diverted to productive schemes. Without such flexibility and resilience, it is virtually impossible to improve the region’s economy. More so when there is no linkage between priorities and policies. Not that the priorities were not clear in the past, but the instruments chosen to achieve them failed to deliver. The pattern of development and structure of social and economic relations should be so planned that they result not only in appreciable increase in national revenue and employment but also in equitable distribution of income and wealth.