Notes on the economic characteristics of South Asia


South Asia region comprises of four least developed countries (Bangladesh, Bhutan, Maldives and Nepal) and three developing countries (India, Pakistan and Sri Lanka).

No country (of the region) has yet achieved the status of developed economy. The entire region is poverty-ridden where one- third poor of the world are living. India is the largest country in the region: population-wise, land area-wise and economy-wise.

The region has a large number of rural population and most of them survive on subsistence agriculture. The merchandise trade (export and import) of the region is minuscule in the total world trade: the combined share of the exports (of the region) in world exports in 1990s was below one per cent. Similarly, its combined share in total inflows of world foreign direct investment was hardly 2% in 1990s.


With little over $2 billion Foreign Direct Investment, India hosts the largest FDI in region. However, given the large size of its economy, the FDI inflows are small and below its potential. Countries in the neighbouring-East and Southeast Asia host much higher levels of FDI. For instance, China attracts about US S40 billion FDI annually, Singapore US $6 billion. Currently the region is passing through many problems, particularly persistent poverty for a long period, which is central to the overall economic backwardness.

The poverty related social problems such as terrorism; ethnic conflicts, etc. are abundantly present. The hard-earned economic resources are diverted to tackle the menace of terrorism and providing security to the civilians. The military expenditure is increasing while social expenditure is decreasing and the four big economies of the region, Bangladesh, India, Pakistan and Sri Lanka.

This is because statistics and economic information about these economies is adequately available. Secondly, these economies have embarked upon liberalisation and SAPs for quite some time. Their evaluation could throw light on the merits and demerits of these programmes. Thirdly, the left out three countries, i.e. Bhutan, Maldives and Nepal are dependent economies.

India supports them financially in many respects. India provides considerable external aid to these countries. For instance, India helped to finance Bhutan the entire development plans in the initial years. Currently, nearly third of Bhutan’s Five Year Plans are financed by India.

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