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Since 1980, South Asia region has grown at an annual average rate of 5.5 percent, making it the second fastest growing region in the world, after East Asia. This translates into per capita GDP growth of 3.4 percent per year. During the same time, average annual growth in developing countries has been 2.4 percent.

In recent years, per capita growth accelerated further, reaching 4.5 percent during 2000-2005. Under the current policy stance and the external environment, the region is expected to maintain a per capita growth rate of 4-5 percent over the medium term.

The cross-country difference in per capita income expansion in South Asia is less striking than in other regions because most of its countries have participated in this expansion. However, growth among countries and over time has differed:

  • Sri Lanka grew the fastest over the entire period, although it was overtaken by India in the 1990s.
  • Pakistan and Bangladesh grew slower than the regional average, although Bangladesh gained momentum in the 1990s while Pakistan’s growth slowed down. However, since 2003 growth has picked up in Pakistan. 
  • Nepal grew significantly slower than other countries and the divergence between its per capita income and other countries’ widened. While growth seemed to pick up in the mid-1990s for a short-time, but it has been slackening since 2003.

At the national level growth remains high, but there is a widening disparity in the growth rate within countries themselves, especially among the larger countries in the region. Generating growth in these lagging regions is one of the biggest challenges facing policymakers in South Asia today.

World Bank Assistance and Growth in South Asia

The World Bank has been working with South Asian countries to accelerate private-sector led growth and reduce poverty through these three key instruments:

  • Investment projects, which augment the physical and social capital of the country to increase its productive capacity 
  • Policy-based lending, which support policy and institutional reforms that facilitate investment and increases their efficacy 
  • Economic reports, which combine global World Bank knowledge with local context to formulate country-specific growth and development strategies

In India and Pakistan, the World Bank has been particularly active at the sub-national level, preparing a number of analytical reports examining the growth and development challenges facing the sub-national entities. It has also undertaken a number of policy-based sub-national development loans/credits to improve their growth prospects and to strengthen their public service delivery.

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