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FEATURE STORY

South Asia Regional Brief

March 24, 2014

Children on their first day of school in Sri Lanka. 

STORY HIGHLIGHTS
  • The percentage of people living on less than $1.25 a day fell in South Asia from 61% to 31% between 1981 and 2010. Still, 42% of the world’s poor live in South Asia —more than any other region in the world.
  • Growth in South Asia rose to an estimated 4.6 percent in 2013 from 4.2 percent in 2012 on a market price-calendar year basis. Growth was, however, well below its pre-crisis pace.
  • The World Bank Group (WBG) is a significant development partner in South Asia, with a portfolio of 190 IDA/IBRD projects, total-ing approximately $37.1 billion in net commitments.

March 2014: South Asia has experienced a long period of robust economic growth, averaging 6% a year over the past 20 years. This strong growth has translated into declining poverty and impressive improvements in human development. The percentage of people living on less than $1.25 a day fell in South Asia from 61% to 31% between 1981 and 2010. The proportion of poor is lower now in South Asia than any time since 1981. Still, 42% of the world’s poor live in South Asia —more than any other region in the world.  The region is home to half a billion poor and its development is key to meeting global poverty and prosperity goals.

As referenced in the January 2014 Global Economic Prospects, growth in South Asia rose to an estimated 4.6 percent in 2013 from 4.2 percent in 2012 on a market price-calendar year basis. Growth was, however, well below its pre-crisis pace, reflecting a combination of domestic imbalances, weakening investment rates, and a challenging external environment. A cyclical recovery in the second half of 2013 was led by a rapid expansion of regional exports, reflecting a gradual recovery in global demand and currency depreciation in India. Regional GDP is projected to improve to 5.7 percent in 2014 in market price terms, and to rise to 6.3 percent in 2015 and 6.7 percent in 2016. A gradual improvement in regional growth over the forecast period will be led mainly by a recovery in global demand and domestic investment, although the latter remains subject to significant downside risks. A projected strengthening of demand in the Euro Area and United States (the two largest trade partners of South Asia) and robust growth in developing-country markets will support regional exports.

Despite slowing of US monetary stimulus, a recovery in regional investment is expected to buoy medium-term growth. The projected increase in investment rates and GDP growth, however, will depend critically on ensuring macroeconomic stability (including reducing fiscal deficits and inflation), making sustained progress on policy reforms, and reducing structural and regulatory constraints on production (particularly in the provision of energy and infrastructure).

South Asia will play an important role in the global development story. It has the world’s largest working-age population, a quarter of the world’s middle-class consumers, growing labor force and cities, the largest number of poor and undernourished in the world, and several fragile states of global geopolitical importance. With inclusive growth, South Asia has the potential to change global poverty.

World Bank Assistance

The World Bank Group (WBG) is a significant development partner in South Asia, with a portfolio of 190 IDA/IBRD projects, totaling approximately $37.1 billion in net commitments. In fiscal year 14, WBG will provide over $2 billion in IBRD assistance (a five-time increase compared to fiscal year 13) and $7.3 billion in IDA assistance (nearly 80% increase against fiscal year 13). The leading sectors are transport, energy, public transportation and water.

Work in the region supports the Bank’s overarching goals to reduce poverty and boost shared prosperity by:

·         Increasing employment and accelerating growth;

·         Enhancing human development and social inclusion;

·         Strengthening governance and accountability;

·         Addressing disaster and climate risk; and

·         Enhancing regional integration and cooperation.

Increasing Employment and Accelerating Growth

The key asset of South Asia is its people. South Asia has a young population and the lowest female participation rate in the labor force. The “demographic dividend” will result in more workers entering the labor force in the future and the region will need to add between 1 and 1.2 million additional jobs every month for the next 20 years. Creating jobs for them will contribute to growth, equity and peace in the region. To strengthen policies that are conducive to inclusive growth, the Bank is working on a report in which inequality in income and consumption will be studied alongside inequality of access to and opportunities for jobs and job success.

The Bank’s new Country Partnership Strategy for India (2013-17) aims to help India achieve its long-term vision of faster, more inclusive growth. As the first country strategy to set specific goals for reducing poverty and increasing prosperity for the poorest people, it significantly shifts support toward low-income and special-category states, where many of India’s poor and disadvantaged live.

Enhancing Human Development and Social Inclusion

Building human capital by ensuring that the people of South Asia have access to education, health care, and social safety nets is key for development in the region. A large share of the portfolio is results focused, linking financial support directly to the achievement of core milestones that improves service delivery.  Education projects focus on raising school enrollment rates and ensuring the quality and equity of the training and education system. Health projects seek to increase the use of skilled birth attendants and ensure that pregnant, adolescent girls, and under age 5 receive basic nutrition services. Given the alarming levels of infant and child malnutrition, the Bank emphasizes policy dialogue, diagnostic studies, and start-up financing support in this area.

Addressing the root causes of discrimination, inequality and other forms of exclusion is also a priority. The Bank is empowering women through rural livelihood and poverty alleviation programs and addressing gender based violence across the region.

Strengthening Governance and Accountability

The Bank is working in South Asia to improve governance at all levels for a more productive growth, by building capacity of legislative bodies and supreme audit institutions in their budget oversight roles. It is also helping to implement e-procurement systems, better delivery of public services, and craft right-to-information regulations.

Addressing Disaster and Climate Risk

The human and economic impacts of disasters climate change can be reduced through mitigation, adaptation, risk reduction and risk transfer and the Bank collaborates with its clients. The Bank  is working to increase the region’s resilience to extreme weather events, natural disasters, and climate change by providing tools (through investments, analytical work and technical assistance) to its clients.

Enhancing Regional Cooperation

Regional cooperation and integration are key strategic priorities for South Asia, as limited intraregional trade, poor air, road and rail connectivity, and scant trade in energy impede growth in the region. The strategy for regional cooperation:

·         Builds on the emerging view in the region that regional cooperation is key to being part of the Asian Century;

·         Supports regional networks to promote cooperation by sharing information and build institutional capacity through analysis and dialogue, and capacity building;

·         Focuses on trade in goods, services, and electricity, people-to-people contact, and cooperation in water resources management among Bangladesh, Bhutan, India, Pakistan, and Nepal;

·         Strengthen regional cooperation in wildlife protection, water resource management, food security, and disaster risk management; and

·         Leverages partnerships including DFID, AusAid, South Asia Water Initiative, South Asia Food and Nutrition Security Initiative, and Central Asia Water & Energy Development Program. 

Achieving Results in South Asia

World Bank support has helped South Asia achieve the following results, among others:

·         Afghanistan: Child mortality dropped from 257 to 97 per 1,000 live births between 2002 and 2010

·         Bangladesh: Secondary school graduation rate increased from 30% to 39% from 2008 to 2011

·         India: HIV prevalence rate reduced and at least 3 million new infections averted through reaching at-risk populations

·         Nepal: 1 million people supported through Food Crisis Response program

·         Pakistan: 3.6 million families received income support of $12 per month

·         Sri Lanka: 200,000 households in 1,000 post-conflict villages benefited from infrastructure/productive investment

Media Contact: Gabriela Aguilar, (202) 473-6768 or gaguilar2@worldbank.org