All values, unless otherwise stated, are in US dollars.
Development of GDP per capita of economies in South Asia
The economy of South Asia comprises 2 billion people (25% of the world population) living in eight countries (though Afghanistan is sometimes excluded).[5][6] The Indian subcontinent was historically one of the richest regions in the world, comprising 25% of world GDP as recently as 1700,[7][8] but experienced significant de-industrialisation and a doubling of extreme poverty during the colonial era of the late 18th to mid-20th century.[9] In the post-colonial era, South Asia has grown significantly, with India advancing because of economic liberalisation from the 1980s onwards,[10] and extreme poverty now below 15% in the region.[11] South Asia has been the fastest-growing region of the world since 2014.[12]
Despite projected growth rates of about 6.0-6.1 percent for 2024-2025, South Asia continues to face significant economic challenges. A notable slowdown in private investment, especially in key sectors such as manufacturing and services, poses a major concern. Additionally, persistent employment issues, particularly low female workforce participation, highlight broader socio-economic disparities. The region is also critically vulnerable to climate-related impacts, including flooding and heatwaves, which significantly affect the agricultural sector—a fundamental component of local economies. This environmental susceptibility strains the already limited capacity of the public sector to adapt, increasing dependence on resilience initiatives from local businesses, farmers, and vulnerable communities.[13]: xv
Around 500 BC, the Mahajanapadas minted punch-marked silver coins.[citation needed] The period was marked by intensive trade activity and urban development.[citation needed] By 300 BC, the Maurya Empire had united most of the Indian subcontinent except Tamilakam, which was ruled by the Three Crowned Kings.[14]The resulting political unity and military security allowed for a common economic system and enhanced trade and commerce, with increased agricultural productivity.[citation needed]
By the 18th century, the Mysoreans had embarked on an ambitious economic development program that established the Kingdom of Mysore as a major economic power.[citation needed] Sivramkrishna analyzing agricultural surveys conducted in Mysore by Francis Buchanan in 1800–1801, arrived at estimates, using "subsistence basket", that aggregated millet income could be almost five times subsistence level.[22] The Maratha Empire also managed an effective administration and tax collection policy throughout the core areas under its control and extracted chauth from vassal states.[23]
The role and scale of British imperial policy during the British Raj (1858 to 1947) on India's relative decline in global GDP remains a topic of debate among economists, historians, and politicians. Some commentators argue that the effect of British rule was negative, and that Britain engaged in a policy of deindustrialisation in India for the benefit of British exporters, which left Indians relatively poorer than before British rule. Others argue that Britain's impact on India was either broadly neutral or positive, and that India's declining share of global GDP was due to other factors, such as new mass production technologies or internal ethnic conflict.
Contemporary era
Post-colonial era
A 1959 map showing how most of Asia was communist (in red), with Pakistan (blue) being more aligned with capitalist powers than India.[24] The resulting Cold War dynamics impacted South Asian geoeconomics in the late 20th century.[25]
In the aftermath of in the late 1940s and the Indian subcontinent's independence from British rule, Pakistan chose to have a more capitalistic economy and aligned itself more closely with the United States, while India went with a more closed economy dubbed as the "License Raj" and eventually aligned more closely with the Soviet Union. Rising economic inequality and misrule by West Pakistan towards East Pakistan contributed to the 1971 independence of Bangladesh, however. Both India and Pakistan then went through a period of economic liberalisation in the 1980s and '90s, which resulted in India going from having around half of Pakistan's GDP per capita in 1990 to surpassing Pakistan by the 2010s.[26] Bangladesh, which had started off substantially poorer than both India and Pakistan at the time of its independence, has grown substantially, and has also surpassed Pakistan's GDP per capita.[27]
Recent decades
India is the largest economy in the region (US$4.11 trillion) and makes up almost 80% of the South Asian economy; it is the world's 5th largest economy in nominal terms and the world's 3rd largest economy by purchasing power adjusted exchange rates (US$14.26 trillion).[28] India is the member of G-20 major economies and BRICS from the region. It is the fastest-growing major economy in the world and one of the world's fastest registering a growth of 7.2% in FY 2022-23.[29]
India is followed by Bangladesh, which has a GDP of ($446 billion).
a. It is one of the emerging and growth-leading economies of the world, and is also listed among the Next Eleven countries. It is also one of the fastest-growing middle-income countries. It has the world's 33rd largest GDP in nominal terms and is the 27th largest by purchasing power adjusted exchange rates (476015 trillion). Bangladesh's economic growth was 6.4% in 2022.[30] Pakistan has an economy of ($40 billion nominal GDP.[31] Next is Sri Lanka, which has the 2nd highest GDP per capita and the 4th largest economy in the region.
Certain parts of South Asia are significantly wealthier than others; the four Indian states of Maharashtra, Tamil Nadu, Gujarat and Karnataka are projected to account for almost 50% of India's GDP by 2030, while the five South Indian states comprising 20% of India's population are expected to contribute 35% of India's GDP by 2030.[32]
Maharashtra is a "State-only", not a "State-cum-Country", Tamil Nadu is also a "State-only", not a "State-cum-Country", West Bengal is also a "State-only", not a "State-cum-Country".
Poverty rates vary greatly throughout the region, with a majority of Afghanistan relying on humanitarian aid,[47] and 40% of Sri Lankans slipping into poverty due to the economic crisis that started in 2019.[48]
In 2021–22, the foreign direct investment (FDI) in India was $82 billion. The leading sectors for FDI inflows were the Finance, Banking, Insurance and R&D.[109] India has free trade agreements with several nations and blocs, including ASEAN, SAFTA, Mercosur, South Korea, Japan, Australia, UAE, and several others which are in effect or under negotiating stage.[110][111] In recent years, independent economists and financial institutions have accused the government of manipulating various economic data, especially GDP growth rate.[112][113][114][115][116][117][118]
Industrialisation in Bangladesh received a strong impetus after the partition of India due to labour reforms and new industries.[134] Between 1947 and 1971, East Bengal generated between 70% and 50% of Pakistan's exports.[135][136] Modern Bangladesh embarked on economic reforms in the late 1970s which promoted free markets and foreign direct investment. By the 1990s, the country had a booming ready-made garments industry. As of 16 March 2024, Bangladesh has the highest number of green garment factories in the world with Leadership in Energy and Environmental Design (LEED) certification from the United States Green Building Council (USGBC), where 80 are platinum-rated, 119 are gold-rated, 10 are silver, and four are without any rating.[137] As of 6 March 2024, Bangladesh is home to 54 of the top 100 LEED Green Garment Factories globally, including 9 out of the top 10, and 18 out of the top 20.[138] As of 27 April 2024, Bangladesh has a growing pharmaceutical industry with 12 percent average annual growth rate. Bangladesh is the only nation among the 48 least-developed countries that is almost self-sufficient when it comes to medicine production as local companies meet 98 percent of the domestic demand for pharmaceuticals.[139] Remittances from the large Bangladeshi diaspora became a vital source of foreign exchange reserves.[140] Agriculture in Bangladesh is supported by government subsidies and ensures self-sufficiency in food production.[141][142] Bangladesh has pursued export-oriented industrialisation.[143][144]
Bangladesh experienced robust growth after the pandemic with macroeconomic stability, improvements in infrastructure, a growing digital economy, and growing trade flows.[145] Tax collection remains very low, with tax revenues accounting for only 7.7% of GDP.[146] Bangladesh's banking sector has a large amount of non-performing loans or loan defaults, which have caused a lot of concern.[146][147] The private sector makes up 80% of GDP.[148][149] The Dhaka Stock Exchange and Chittagong Stock Exchange are the two stock markets of the country.[150] Most Bangladeshi businesses are privately owned small and medium-sized enterprises (SME) which make up 90% of all businesses.[151]
In its early years, Pakistan's economy relied heavily on private industries. The nationalization of a significant portion of the sector, including financial services, manufacturing, and transportation, began in the early 1970s under Zulfikar Ali Bhutto. During Zia-ul Haq's regime in the 1980s, an "Islamic" economy was adopted, outlawing economic practices forbidden in Sharīʿah and mandating traditional religious practices. The economy started privatizing again in the 1990s.
The economic growth centers in Pakistan are located along the Indus River; these include the diversified economies of Karachi and major urban centers in Punjab (such as Faisalabad, Lahore, Sialkot, Rawalpindi, and Gujranwala), alongside less developed areas in other parts of the country. Pakistan was classified as a semi-industrial economy for the first time in the late 1990s, albeit an underdeveloped country with a heavy dependence on agriculture, particularly the textile industry relying on cotton production. Primary export commodities include textiles, leather goods, sports equipment, chemicals, and carpets/rugs.
Pakistan is presently undergoing economic liberalization, including the privatization of all government corporations, aimed at attracting foreign investment and reducing budget deficits. However, the country continues to grapple with challenges such as a rapidly growing population, high illiteracy, political instability, a hostile neighborhood, and heavy foreign debt.
The Afghan economy continues to improve due to the influx of expats, establishment of more trade routes with neighboring and regional countries, and expansion of the nation's agriculture, energy and mining sectors. The billions of dollars in assistance that came from expats and the international community saw this increase when there was more political reliability after NATO became involved in Afghanistan.
Despite holding over one trillion dollars in proven untapped mineral deposits, Afghanistan remains one of the least developed countries in the world. Its unemployment rate is over 23% and about half of its population lives below the poverty line. The main factor behind this has been the continuous war in the country, which deterred business investors and left much of the population fighting among each other instead of catching up with the rest of the world. Afghanistan has long sought foreign investment in order to improve its economy. The population of Afghanistan increased by more than 50% between 2001 and 2014, while its GDP grew eightfold. After the U.S. withdrawal from Afghanistan and the Taliban's return to power in 2021, the Biden administration decided to confiscate or withhold $9.5 billion worth of assets from the Afghanistan Central Bank to stop the Taliban from accessing it.
Bhutan's economy is closely aligned with India's through strong trade and monetary links and dependence on India's financial assistance. Most production in the industrial sector is of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labour. Model education, social, and environment programs are underway with support from multilateral development organisations.
Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. For example, the government, in its cautious expansion of the tourist sector, encourages visits by upscale, environmentally conscientious tourists. Detailed controls and uncertain policies in areas such as industrial licensing, trade, labour, and finance continue to hamper foreign investment. Hydropower exports to India have boosted Bhutan's overall growth, even though GDP fell in 2008 as a result of a slowdown in India, its predominant export market.
Since 1961, the government of Bhutan has guided the economy through five-year plans in order to promote economic development.[152]
On 8 December 2023, Bhutan graduated from the UN's list of least developed countries (LDCs), making it only the 7th country to do so and the first in 3 years.[153][154]
In ancient times, Maldives were renowned for cowries, coir rope, dried tuna fish (Maldive fish), ambergris (maavaharu) and coco de mer (tavakkaashi). Local and foreign trading ships used to load these products in the Maldives and bring them abroad.
Nowadays, the mixed economy of Maldives is based on the principal activities of tourism, fishing and shipping. This results from the Maldives' strategic geographic positioning near crucial sea routes essential for China's energy provisions. Consequently, China has persistently utilized its economic resources to enhance its sway over the Maldivian government.
Tourism is the largest industry in the Maldives, accounting for 28% of GDP and more than 60% of the Maldives' foreign exchange receipts. It powered the current GDP per capita to expand 265% in the 1980s and a further 115% in the 1990s. Over 90% of government tax revenue flows in from import duties and tourism-related taxes.
Fishing is the second leading sector in the Maldives. The economic reform program by the government in 1989 lifted import quotas and opened some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment.
Agriculture and manufacturing play a minor role in the economy, constrained by the limited availability of cultivable land and shortage of domestic labour. Most staple foods are imported.
Industry in the Maldives consists mainly of garment production, boat building, and handicrafts. It accounts for around 18% of GDP. Maldivian authorities are concerned about the impact of erosion and possible global warming in the low-lying country.
Among the 1,190 islands in the Maldives, only 198 are inhabited. The population is scattered throughout the country, and the greatest concentration is on the capital island, Malé. Limitations on potable water and arable land, plus the added difficulty of congestion are some of the problems faced by households in Malé.
Development of the infrastructure in the Maldives is mainly dependent on the tourism industry and its complementary tertiary sectors, transport, distribution, real estate, construction, and government. Taxes on the tourist industry have been plowed into infrastructure and it is used to improve technology in the agricultural sector.
The economy of Nepal is a developing category and is largely dependent on agriculture and remittances. Until the mid-20th century Nepal was an isolated pre-industrial society, which entered the modern era in 1951 without schools, hospitals, roads, telecommunications, electric power, industry, or civil service. The country has, however, made progress toward sustainable economic growth since the 1950s. The country was opened to economic liberalization, leading to economic growth and improvement in living standards when compared to the past. The biggest challenges faced by the country in achieving higher economic development are the frequent changes in political leadership, as well as corruption. Nepal has consistently been ranked as one of the poorest countries in the world.
Nepal has used a series of five-year plans in an attempt to make progress in economic development. It completed its ninth economic development plan in 2002; its currency has been made convertible, and 17 state enterprises have been privatised. Foreign aid to Nepal accounts for more than half of the development budget. Government priorities over the years have been result in the development of transportation and communication facilities, agriculture, and industry. Since 1975, improved government administration and rural development efforts have been emphasised.
Agriculture remains Nepal's principal economic activity, employing about 65% of the population and providing 31.7% of GDP. Only about 20% of the total area is cultivable; another 40.7% is forested (i.e., covered by shrubs, pastureland and forest); most of the rest is mountainous. Fruits and vegetables (apples, pears, tomatoes, various salad greens, peach, nectarine, potatoes), as well as rice and wheat are the main food crops. The lowland Terai region produces an agricultural surplus, part of which supplies the food-deficient hill areas.
GDP is heavily dependent on remittances (9.1%) of foreign workers. Subsequently, economic development in social services and infrastructure in Nepal has not made dramatic progress. A countrywide primary education system is under development, and Tribhuvan University has several campuses. Although eradication efforts continue, malaria had been controlled in the fertile but previously uninhabitable Terai region in the south. Kathmandu is linked to India and nearby hill regions by road and an expanding highway network. The capital was almost out of fuel and supplies, due to a crippling general strike in southern Nepal on 17 February 2008.
Major towns are connected to the capital by telephone and domestic air services. The export-oriented carpet and garment industries have grown rapidly in recent years. Together, they account for approximately 70% of the country's merchandise exports. The Cost of Living Index in Nepal is comparatively lower than many countries but not the least. The quality of life has declined to a much less desirous value in recent years. In the 2021 Global Hunger Index, Nepal ranks 76th out of the 116 countries with sufficient data to calculate 2021 GHI scores. With a score of 19.1, Nepal has a level of hunger that is moderate. Nepal has the worst road infrastructure in Asia.
The mixed economy of Sri Lanka was worth $84 billion by nominal gross domestic product (GDP) in 2019[155] and $296.959 billion by purchasing power parity (PPP).[156] The country had experienced an annual growth of 6.4 percent from 2003 to 2012, well above its regional peers. This growth was driven by the growth of non-tradable sectors, which the World Bank warned to be both unsustainable and unequitable. Growth has slowed since then. In 2019 with an income per capita of 13,620 PPP Dollars[157] or 3,852 (2019) nominal US dollars,[158][159] Sri Lanka was re-classified as a lower middle income nation with the population around 22 million (2021)[160] by the World Bank from a previous upper middle income status.[161]
Sri Lanka has met the Millennium Development Goal (MDG) target of halving extreme poverty and is on track to meet most of the other MDGs, outperforming other South Asian countries. Sri Lanka's poverty headcount index was 4.1% by 2016. Since the end of the three-decade-long Sri Lankan Civil War, Sri Lanka has begun focusing on long-term strategic and structural development challenges, and has financed several infrastructure projects.
High foreign debt, economic mismanagement under the governments of Gotabhaya and Mahinda Rajapaksa,[162] and lower tourism revenue led to the country defaulting on its sovereign debt in April 2022.[163] The economy contracted 7.8% in 2022, and the percentage of the population earning less than $3.65 a day doubled to around 25% of the population. On March 20, 2023, the IMF has loaned US$3 billion to the country as part of a 48-month debt relief program.[164]
International Economic Reports on South Asia
In the South Asia Development Update for April 2024, the World Bank reports that South Asia is projected to sustain its position as a leading growth region among emerging markets, largely propelled by India's robust economic performance. Nonetheless, the region's dependency on the public sector for economic progress, combined with a lag in private investment and the presence of macroeconomic challenges such as high levels of debt and fiscal deficits, poses risks to its stability and growth. These factors may impede the region's capacity to effectively address climate-related issues and to make the most of the demographic dividend offered by its young population. The World Bank emphasizes the critical need for policy reforms aimed at stimulating job creation, particularly for women and in non-agricultural sectors, and for fostering private sector development to ensure continued economic growth and to leverage the demographic dividend. The update highlights that strategic responses to climate change and a focus on creating a resilient job market are indispensable for maintaining the momentum of South Asia's development trajectory.[165][166]
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^Last update for Afghanistan from the World Economic Outlook is for 2020. Later years are unavailable.
^Individual country percentages may not add up to 100% due to rounding. Afghanistan not included in 2022 totals due to year mismatch. World Economic Outlook also does not count Afghanistan in the South Asia subtotals.
^"UNGEGN List of Country Names"(PDF). United Nations Group of Experts on Geographical Names. 2007. Archived(PDF) from the original on 28 July 2011. Retrieved 28 July 2011.
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^Nicholas Vasilakos, Alkis Theonas Pitelis, Nick Horsewood & Christos Pitelis. (2023) Place-based public investment in regional infrastructure, the locational choice of firms and regional performance: the case of India. Regional Studies 57:6, pages 1055-1068. doi:10.1080/13547860.2013.827462
^Kannan, K. P., and G. Raveendran. “Growth Sans Employment: A Quarter Century of Jobless Growth in India’s Organised Manufacturing.” Economic and Political Weekly 44, no. 10 (2009): 80–91. JSTOR40278784.
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^Roy Choudhury, P., Chatterjee, B. Analyzing “jobless growth” in post-liberalisation India: a decomposition approach. Ind. J. Labour Econ. 58, 577–608 (2015). doi:10.1007/s41027-016-0037-0
^Marwha, Amita, Jobless Growth in India's Service Sector: A Descriptive Study (February 21, 2016). Available at SSRN2735644 or doi:10.2139/ssrn.2735644
^Das, R. C. (2021). Sectoral Compositions of Output and Employment in India: Are We Moving Towards Jobless, Job-loss or Job-enabled Growth? Review of Market Integration, 13(2-3), 98-123. doi:10.1177/09749292221084016
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