As a term, South Asia needs to be defined. An obvious definition is based on SAARC (South Asian Association for Regional Cooperation) – Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, India, Pakistan and Sri Lanka. Though this is the obvious and a natural definition, there is great diversity within the region and this, at times, is forgotten. The population sizes of Bhutan or Maldives can hardly be compared with those of Bangladesh or India, and India’s GDP can hardly be compared with that of any of the other countries. Meanwhile the priorities of Bhutan and Maldives cannot be compared with that of other countries and in some ways, Afghanistan is in a different category altogether. Ipso facto, though the title says South Asia, we primarily have in mind Bangladesh, Nepal, India, Pakistan and Sri Lanka. For these, whether we drag the timeline back to 1980 or whether we focus on the last few years, the growth trajectory hasn’t been that bad, though it is relatively better for India and relatively worse for Nepal. However, there is an enormous backlog of poverty and deprivation within the region. This means that average real growth rates of 5.5% aren’t good enough. It needs to be jacked up to 8% and more.
The reference to 2030 is obviously a reference to the sustainable development goals (SDGs) and related targets. Most such goals, targets and indicators (when developed) tend to be correlated with one another; for instance, reducing poverty isn’t quite different from reducing hunger and providing sanitation. The template for any government is exceedingly simple:
- First, create an enabling environment for growth and entrepreneurship development, reducing the visible hand of unnecessary government intervention and allowing the invisible hand of the market to function, with appropriate regulation.
- Second, recognize that at such low levels of development, it is unrealistic and impossible for governments to try to do too many different things; governments will lack administrative and fiscal capacity. Therefore, focus on law and order, dispute resolution, roads, water, electricity, primary health and education. Ensuring these is the best way to ensure inclusion and equity. These are public goods one needs to focus on. In the process, excessively centralized governance structures must be decentralized and a distinction must be drawn between governments financing an activity and governments actually providing it. The former can co-exist with choice and competition, while the latter engenders inefficient monopolies.
- Third, in the interim, provide subsidies for those who truly deserve them and not indulge in across-the-board subsidization.
In all of these, South Asia doesn’t perform remarkably well and that is because these principles have been imperfectly grasped.
With regards to trade, it is a bit of a red herring. True, intra-SAARC trade is below its potential, which has been highlighted across several studies. However, inter-country trade is a function of cross-border movements of capital and labor. Therefore, unless there is a greater willingness to accept cross-border movements of capital and labor, trade cannot pick up. That apart, ostensible tariff reduction can always be circumvented through rules of origin, testing requirements and other forms of non-tariff barriers, even if one excludes the problem of negative lists in which certain entities are outside the purview of tariff reductions.
Since trade liberalization within SAARC has moved very slowly, there have been some sub-regional and bilateral agreements. Thankfully, these have now moved beyond goods and extended to services and transportation agreements. One of the most important initiatives has been the connectivity push through road, rail and water networks. These are early days, but we have the prospect of the Asian Highway and the Trans-Asian Railway, integrating South Asia with South-East Asia. But, within South Asia, these networks will have to be constructed by individual countries and resources found for them. Stated differently, trade or transportation agreements are at best an exogenous trigger. While the exogenous is a convenient red herring, the constraints are actually endogenous to countries and as mentioned earlier, involve redefining government and governance.
Despite commendable reductions in poverty since 1990, South Asia still has a poverty head count ratio of almost 15% (with a Purchasing Power Parity of USD 1.90 poverty line). Multi-dimensional measures of poverty show much higher levels of deprivation. Despite declines, there are very high levels of hunger and malnutrition. Similarly, growth also has a distributional angle, especially of the spatial variety as certain geographical areas are relatively difficult to access and deliver public goods to; these areas have been marginalized and bypassed. Progressing across these fronts is South Asia’s agenda for 2030.