Solving the riddle in South Asian development

Alamgir Khan
Saturday, March 12th, 2016


South Asia was a region of moderate growth before 1980. But in the past three decades, with GDP increase at an annual rate of 5.9% it has become the second fastest growing region in the world, after East Asia and the Pacific. India has led this growth momentum followed by Bangladesh and Sri Lanka and with volatile growth in Pakistan and Nepal. Despite this amazing rate of economic development and significant improvement in some social sectors, this region is home to half a billion poor people which is 44 per cent of the total poor in the world and 62 per cent people without any access to sanitation facilities. Life expectancy rates, maternal mortality ratios and childhood health have improved and yet, compared globally, these are worst in the world except in Sub-Saharan Africa. This reflects a scenario in which human development is much slower than economic development. How is it that economic development of a country does not create expected level of improvement in people’s lives?


The answers to this question and other related ones are sought by researchers of the Human Development in South Asia 2015 report, prepared and published by the Lahore-based Mahbub ul Haq Human Development Centre. They find that there is a “two-way relationship between economic growth and expansion of human capabilities. While economic growth generates resources to expand education, health, and other indicators in social sector, the expansion of human capabilities contributes to faster economic growth.” This two-way relationship between economic growth and human development worked for the miraculous development in Japan, South Korea, Taiwan, Thailand and in China. But policy makers of South Asia did not maintain this two-way relationship and so the economic development did not produce the expected level of improvement in the lives of people.


So the most important task at present is to translate the economic growth into human development. Even with increased social investment, exclusion of some certain types of population of society occurs. The report says, “There has been considerable progress in improving access to primary enrolment, specifically for females; however, slow progression through school, grade repetition and failure to complete the primary cycle remain major concerns. …  What is worse is that the percentage of out-of-school children in each country interacts with other factors such as wealth, geographical location, ethnicity and caste to exacerbate the inequality in access to education for children from disadvantaged backgrounds. … achievement in urban areas is typically higher than in rural areas.”


Moreover, “Despite the increase in access to education, what South Asian students actually learn at school remains questionable.” It is now important to solve this problem of exclusion. Therefore, the state policies should be re-oriented towards the marginalized and the excluded. The faults were, according to the report, “South Asian governments were unable to re-orient the structure of public spending in favour of social services, as defence and interest payments dominated, as compared to education and health.” This requires “an active and honest state—a state that is able to collect a much larger share of incomes of the rich in order to improve the human capital of the poor.” And “South Asia needs to make sustained efforts in four broad policy areas. These are: (a) accelerating human development, particularly education; (b) reducing poverty; (c) advancing gender equality; and (d) improving governance.”


Though it is clear from this report that South Asia moves ahead like a single body journeying through similar roads of economy and history and sharing similar experiences, the region is far from a close relationship. The report says,  “South Asia is one of the least integrated regions of the world: intra-regional trade accounts for less than 5 per cent of South Asia’s total trade, as compared to 32 per cent in East Asia. Similarly, intra-regional FDI is only 1 per cent of South Asia’s total FDI and is not comparable to the 35 per cent levels of investment in East Asia. South Asia needs to integrate economically by promoting deeper trade and … common trade infrastructure.”


This report of human development in South Asia has been very good at pointing to the causes of the delink between economic growth and human development and suggesting the way forward. But its unrestrained praise for the IMF, World Bank and western prescription of market liberalisation, globalisation, privatization, withdrawal of subsidy from agriculture, etc, which it says drove the engine of the economic development in this region should be put under question. Today’s problems of income inequality, corruption, misgovernance, etc. are actually the consequences of those western policies implemented in this region against its will. However, policy makers in South Asian countries will do better if they pay heed to what this report says for solving the riddle of the inconsistency between economic growth and human development.

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