South Asia has experienced nearly a decade of robust economic growth, averaging 6 percent a year since 2000. This strong growth has translated into declining poverty and impressive progress on human development. The region’s growth prospects are weakening, however, in the face of the deteriorating global economy.
South Asian countries have taken various monetary and fiscal policy measures in response to the crisis. Additional actions will be needed, however, to reduce the impact and pave the way for a resumption of rapid growth. The World Bank is advocating for policies that provide fiscal stimulus, invest in sound public infrastructure projects, create a favorable investment climate, and scale up existing safety net programs to protect the poor.
World Bank Assistance
The Bank approved nearly $4.3 billion for South Asia in fiscal 2008, $1.5 billion in loans from IBRD and $2.8 billion in IDA credits and grants. Complementing the strong lending portfolio is the Bank’s analytic and advisory work. Much of this work is being refocused to provide rapid-response policy advice to improve the macroeconomic environment and the investment climate to reverse the slowdown in investment.
The Bank’s ongoing strategy for South Asia comprises three pillars: accelerating and sustaining growth, making development inclusive, and strengthening human development. Promoting public accountability and good governance is a common foundation for these three pillars. The Bank also recognizes that the region is now no longer uniformly low income, but represents large and growing contrasts in terms areas that are middle-income, a large segment that is still low-income, and growing areas of conflict. These growing contrasts require tailored solutions in the Bank’s support across all three pillars.
Responding to Global Crises
South Asian countries were severely impacted by the increase in world food prices in 2007 and 2008. In Bangladesh, the food price shock pushed some 4 million people into poverty in 2008. In response, the Bank committed $130 million as part of the Global Food Crisis Response Program (GFRP) to help ease the pressure on the country’s budget, under which the government was struggling to fund the expansion of food-related spending, including social protection programs. Under GFRP, Afghanistan received $8 million for the rehabilitation of about 500 small, traditional irrigation schemes.
The Bank is also focused on helping South Asian countries cope with the impact of the global economic crisis. In Pakistan, the Bank approved $500 million to support the government’s program to regain and maintain economic stability and steer the economy back onto a higher growth path. In India, the Bank approved a $400 million loan to improve access to fi nance for the country’s small and medium enterprises, which face serious challenges in accessing adequate and timely fi nancing on competitive terms, particularly long-term loans.
Investing in Infrastructure
The Bank is working to address South Asia’s vast urban and rural infrastructure defi cits, which often are cited as the greatest constraint to sustained, rapid growth. More than 40 percent of India’s population, for example, is without electricity, and the high cost of erratic and insufficient power supply hurts industry as well as households. The new country strategy for India plans to fast-track much-needed infrastructure development. In fiscal 2009, the Bank approved a $400 million loan to the Power Grid Corporation of India, financing designed to increase reliable power exchange between regions and states.
Bangladesh faces similar energy sector problems. Manufacturers surveyed in the Bank’s most recent Investment Climate Assessment estimate that power shortages reduce sales by about 12 percent a year. To help address the problem, the Bank approved $350 million in fi scal 2009 for the Siddhirganj Peaking Power Project, designed to increase reliable power during periods of peak demand. The project builds on the Bank Group’s long history of involvement in Bangladesh’s energy sector, including support to the successful Rural Electrifi cation and Renewable Energy Development Program, which has helped bring power to hundreds of thousands of consumers through grid connections and solar home systems. And in Nepal, the Bank committed $89.2 million in response to the country’s unprecedented energy crisis, in which grid-based consumers were supplied with electricity for only eight hours per day.
Inadequate road infrastructure is also a critical constraint for sustainable and inclusive growth in South Asia. In Sri Lanka, national roads carry more than 70 percent of all traffic. But uncontrolled roadside development, years of neglect, and poor road maintenance have resulted in low travel speeds and poor levels of service. To help improve the country’s roads, the Bank approved $98 million in additional fi nancing for the ongoing Road Sector Assistance Project, which has so far improved and completed 420 kilometers of national roads across the island.
Strengthening Infrastructure
The Bank is working to address South Asia's vast urban and rural infrastructure deficits, often cited as the greatest constraint to foreign investment.
Half of the region's population still lacks access to electricity. To help address the problem, 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 overstretched northern electricity grid. It also extended a $600 million loan to the Power Grid Corporation of India, backed by a guarantee from the government of India, designed to increase reliable power exchange between regions and states.
Investing in People
South Asia suff ers from some of the worst human deprivation in the world. It has the largest number of undernourished children in the world, and an estimated 26 million children remain out of school. But the region has also made impressive gains. Bangladesh, for example, has achieved gender parity in secondary schools. Building on this achievement, the Bank approved a $130.7 million credit to improve quality and increase access to and equity of secondary education in the country in fi scal 2009.
Similar progress has not been realized in higher education in Bangladesh: at 6 percent, the country’s tertiary enrollment rate is one of the lowest in the world. In fi scal 2009, the Bank provided $81 million to improve the quality and relevance of teaching and research in higher education institutions in Bangladesh.
The Bank continues to be heaviliy engaged in South Asia’s health sector. In a major new attack on malaria, kala azar, and polio, the Bank provided $521 million to boost prevention, diagnosis, and treatment services in India. It also continued its support to improve the health sector in Afghanistan with a $30 million grant. The project builds on the health sector’s signifi cant achievements since 2001, including a doubling of the number of functioning health care facilities and a 22 percent decline in the infant mortality rate, which is now saving the lives of 80,000 children a year. In Sri Lanka, the Bank committed $24 million to the country’s ongoing health service delivery program, with 50 percent going to the confl ict-aff ected Northern and Eastern Provinces to provide basic health services to the more than a quarter of a million internally displaced persons.
Protecting Vulnerable Prople
The Bank’s strategy for South Asia aims to make growth more inclusive by removing obstacles to growth in lagging regions, sectors, and communities.
In Orissa, India, where half of the state’s 38 million people live under the poverty line, the Bank provided a $444 million assistance package to improve the state’s road network, enhance its agricultural tank systems, and increase livelihood opportunities for rural poor. The Orissa Rural Livelihoods Project seeks to empower poor rural people, especially women and disadvantaged groups, through their inclusion in self-help groups.
Similarly, the Bank approved $250 million for the Pakistan Poverty Alleviation Fund (PPAF), now active in 119 out of Pakistan’s 134 districts. Since 2000, the program has facilitated the formation of 80,000 community organizations and provided 1.9 million microcredit loans, 16,000 community infrastructure schemes, and training support for 232,000 people in enterprise development skills.
In Bangladesh, the Bank approved $50 million in additional fi nancing for the Social Investment Program Project to help restore the assets and livelihoods of families affected by Cyclone Sidr. The project has already benefi ted more than 1,000 villages across Bangladesh. The Bank also provided $75 million to Afghanistan’s National Solidarity Program (NSP), a rural development initiative that has reached over 22,000 villages—about 68 percent of the rural population. Since its beginning in 2003, NSP has disbursed over $564 million in block grants to communities to fund more than 44,200 small projects to developing irrigation, power, water supply, and roads.
Updated: October 2009
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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