Cutting Poverty in South Asia

South Asia can cut poverty by 2/3 over the next ten years…if growth accelerates to 10%, according to a new report on poverty in South Asia released by the World Bank.

Despite obstacles such as conflict, corruption and high fiscal deficits in some countries, South Asia has achieved impressive economic growth and poverty reduction in the past decade, thanks mainly to economic reforms in the 1990s. If this growth accelerates to 10 percent a year, the region could see single-digit poverty rates by 2015. A closer look at the evidence suggests that much remains to be done to achieve these accelerated growth rates. First, economic growth in the past decade has resulted in growing income inequality which may act as a constraint to higher growth. Second, while conflict, corruption and high fiscal deficits may not have constrained growth in the past, their persistence may become binding in the future. Third, a comparison with East Asia–a region that has sustained 7-10 percent growth rates–shows that South Asia’s export-orientation, inflows of foreign direct investment, workers’ skill levels, infrastructure and ease of doing business are also substantially less advanced than East Asia’s.

Read the full report here.  On the report’s webpage, there is also a nice set of video clips – interview with the author of the report.    

BBC News is running a story on economic growth in India.  In regards to trends in South Asia, it notes that

Inequality in South Asia is large but not as large as in much of the rest of the world.  Let us consider the ratio of income earned by a country’s richest 10% and the poorest 10%. The ratio for India is 7.3. That is, the richest 10% of the population is a little over seven times as rich as the poorest 10%. All South Asian nations have similar ratios.

This is a lot of inequality but not as much as in China which has a ratio of 18.4 or the United States 15.7.  The problem with South Asia is that, being poor, even this smaller inequality means much greater hardship for the poor and this is what is feeding various kinds of rebellious movements in the region.  This will be one of the most formidable challenges confronting India over the next decade if it is to live up to its promise.