Rapid economic growth and progress in human development have raised the possibility that the region with the greatest number of poor people could end mass poverty within a generation. Following domestic reforms and external assistance, GDP in South Asia has grown nearly 6 percent a year for the past decade. Growth in the two largest countries, India and Pakistan, reached 7 percent in the past two years. In 2006, GDP in South Asia is estimated to have expanded at a very rapid pace of 8.2 percent.
With growth has come an impressive reduction in poverty. During the 1990s poverty rates fell 7 percentage points in India, 9 percentage points in Bangladesh, and 11 percentage points in Nepal. Pakistan’s poverty rate declined 5 percentage points in the first half of this decade. But in order to end poverty in a generation, South Asian economies must sustain economic growth at 8–10 percent a year.
South Asia still has some of the worst human deprivation in the world. Levels of child malnutrition in India are nearly twice those in Africa. In Pakistan 1 in 10 children dies before the age of five, and only 1 in 3 completes primary school. About one person in five in South Asia lacks access to water services, and some two-thirds lack access to sanitation.
Looming over these challenges is perhaps South Asia’s most fundamental challenge: improving governance. Several South Asian countries suffer from endemic corruption, with Bangladesh scoring near the bottom of Transparency International’s list for the past six years. Weak governance and corruption—reflected, for example, in high levels of teacher absenteeism or rampant procurement problems at power plants—are key bottlenecks to human development and growth. Confrontational and often personality-based politics plague Bangladesh, Sri Lanka, and some Indian states, sometimes to the point of political violence. In parts of Afghanistan, Pakistan, and Nepal, conflict between state and nonstate actors plays out regularly.
Arguably, few regions in the world are more at risk from climate change in terms of adverse impact on the poor than South Asia. The rapid melting of glaciers is initially expected to contribute to excessive water flow and flooding in the region. Eventually, the full loss of glaciers, if it happens, would have a severe affect on the availability of fresh water in the three mighty rivers: Indus, Ganges, and Brahmaputra. These rivers are the life-line for an estimated 500 million people in India, Pakistan, and Bangladesh. Much of this population is very poor.
These challenges seem daunting. But the region’s ability to grow and reduce poverty suggests that they can be met. The combination of promising economic performance and a colossal development challenge represents a unique opportunity for the World Bank—one it is well placed to take on.
World Bank Assistance
The World Bank Group extended loans, credits, grants, equity investments, and guarantees totaling nearly US$6.9 billion to South Asia in fiscal year 2007. This is an increase of US$2.3 billion over the previous year, demonstrating the institution’s continuing role in fighting poverty as South Asian countries look for ways to tackle their social challenges even while most of their economies grew aggressively. As of March 24 in fiscal year 2008, IBRD/IDA lending to South Asia totaled more than US$2, 4 billion.
The Bank’s strategy has shifted in recent years to focus on lagging regions. The India program now supports lagging states that contain the majority of the country’s poor people. For instance, in fiscal 2008, the Bank approved an US$225 million loan/credit to Bihar to support implementation of critical structural reforms to attain sustainable and inclusive development, while improving the delivery of key public services.
Climate change poses a serious risk to poverty reduction in South Asia, and is becoming central issue in the Bank’s work in the region. In fiscal 2008, the Bank responded to help Bangladesh recover from the dual shocks of the August flooding and November cyclone. The Bank has so far approved US$297 million for flood and cyclone response, of which US$175 million was quick disbursing. Total World Bank assistance is expected to exceed US$500 million.
New interim Country Assistance Strategies for Afghanistan and Nepal were discussed by the Board in fiscal 2007. The Afghanistan strategy seeks to assist the poor during a period of conflict by focusing on developing the rural economy and improving rural livelihoods. It also aims to build the capacity of the state and increase its accountability to citizens, to ensure the provision of services that are affordable, accessible, and of adequate quality. So far in fiscal 2008, the Bank has supported Afghanistan’s development with US$202 million to improve access to basic services, increase equitable access to quality basic education, expand microfinance services, and help curb the Spread of HIV/AIDS.
The Nepal strategy emphasizes flexibility in helping Nepalis respond to historic opportunities in the transition to peace. On December 6, 2007, the Bank extended its largest ever support package to Nepal with US$253 million in IDA grants. The aim is to improve living conditions through better education, roads, and irrigation, and empowerment among the rural poor.
Besides lending, a strong component of the Bank’s strategy is its analytic and advisory work. A recent report on gender issues in Bangladesh documented the significant victories in women’s status and gender equality, while pointing to the need for greater participation of women in the labor force, and increased voice. A report on education in Punjab, Pakistan concluded that the dramatic increase of private schools in Pakistan requires a rethink of education policies The Bank also undertook a study on labor issues in India, a report proposing economic incentives and development initiatives to reduce opium production in Afghanistan, and an environmental assessment in Pakistan.
Building the Climate for Investment
The 2008 edition of Doing Business in South Asia reported that the region had become the second-fastest regulatory reformer in the world. India led the way, rising 12 places in global rankings. Bhutan and Sri Lanka were other top reformers in the annual report from the World Bank Group.
The Bank is working to address deficiencies in the region’s investment climate, such as weak infrastructure, red tape, and corruption. In India, the Bank provided a $400 million loan for the Rampur Hydropower Project in the state of Himachal Pradesh that will provide renewable, low carbon energy to India’s over-stretched Northern Electricity Grid. It also extended a US$600 million loan to the Power Grid Corporation of India, backed by a Government of India guarantee, designed to strengthen the country’s electricity transmission system in order to increase reliable power exchange between regions and states.
South Asia has the largest rural population in the world. About 1 billion people live in rural areas and as a result the region’s economy depends on agriculture, and hence on irrigation, more than any other region in the world. About 20 percent of South Asian population lacks access to water services. The World Bank provides assistance to South Asian governments in many aspects of water resources management including watershed management, groundwater management, international waters, and river basin management. In fiscal 2008, the Bank approved US$25 million credit to boost agriculture production and improve the use of water in irrigation in Balochistan province in Pakistan. In Bangladesh, the Bank supported a US$62.60 million project to improve agricultural productivity and farm income by revitalizing the national agricultural technology system.
The Promise of Regional Integration
South Asia is sitting on a rich potential source of growth: regional integration. Increasing integration within the least-integrated region in the world could yield huge benefits for its people. Annual trade between India and Pakistan, currently estimated at $1 billion, could potentially reach $9 billion. Unfortunately, progress on trade integration within South Asia has been slow. While continuing to make the case for more open trade in goods and services within the subcontinent, especially with private sector entities such as national federations of chambers of commerce and industries, the Bank is focusing on regional cooperation in energy and water, where the win-win benefits are likely to be even higher.
Fostering Participation in Development
The Bank’s approach to participation in South Asia is to empower community groups to make development decisions, direct resources, and play a role in projects that affect them. The emphasis is on equity and the inclusion of poorer regions, communities, and households in development projects.
Under the Pakistan Poverty Alleviation Fund, some 10,000 community infrastructure projects have been completed, touching the lives of more than 2.5 million people in about 5,000 villages. More than half of these projects provide safe drinking water or access to safe sanitation. In fiscal 2008 the fund received additional financing of $75 million to support a new social mobilization component and aims to mobilize five million people in 25 of the country’s poorest districts into community organizations and local support organizations.
In India, the Bank is supporting livelihood programs that provide microfinance and self-employment opportunities to millions of poor women. In Andhra Pradesh, India, Bank-funded projects have helped some 8 million women build incomes, improve living standards, and even gain political influence by banding together in some 630,000 self-help groups. In fiscal 2008, the Bank supported this program with additional financing of US$65 million to finance critical investments in institution and capacity building which will allow community institutions of poor women become sustainable and self-reliant.
Updated: March 2008 Media Contact: Erik Nora (202) 458-4735, E-mail: enora@worldbank.org
Additional Resources
- South Asia: Development Data A wide range of social and economic measures on South Asia, including links to the World Bank's most important online development databases. (Read More »)
- South Asia: Analysis and Research Compilation of all the World Bank's publications on South Asia, with 'search' options and links to analysis and research on other South Asian countries. (Read More »)
- World Bank Program in South Asia Launching pad to all information on World Bank activities in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.(Read More »)
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