India Powers South Asia's Growth Engine

20 January 2024, Mumbai

WHY India

A bird's-eye view

Despite a global economic slowdown, South Asia has emerged as the world's fastest-growing region, with India spearheading the charge. 

The World Bank's Global Economic Prospects report predicts India's GDP to reach 6.3% in 2023–24 and 6.4% in 2024–25, solidifying its position as the regional leader.

But Uneven Progress Across Region

However, the region's economic landscape is more nuanced than just India's success. While some countries bask in opportunities, others struggle with challenges.

Multiple data-points

Bangladesh, once a regional growth champion, experienced a dip to 5.6% in 2023 due to import restrictions and rising costs. Though a slight rebound is expected in 2024, the World Bank warns of persistent inflation and currency problems.

Pakistan's economy, plagued by high inflation and currency devaluation, took a hit in 2023 and faces limited prospects. Growth in 2024 is expected to hover around 4%, constrained by restrictive fiscal and monetary policies.

Sri Lanka's economic fate hangs in the balance, hinged on the outcome of crucial debt negotiations.

On the bright side, the Maldives and Bhutan stand out for their impressive growth: the Maldives' tourism-driven economy is projected to flourish with 4.5% growth in 2024, while Bhutan's new hydroelectric plant will propel its GDP to a remarkable 7.2% in the same year.

Cautious optimism

Despite its remarkable performance, South Asia is not immune to global headwinds. The World Bank warns of rising energy and food prices, tighter financial conditions, and geopolitical tensions as potential risks. 

Domestic uncertainties, like upcoming elections in some countries, add another layer of complexity.

Demographic dividend

However, the region also boasts significant opportunities for sustained growth: a young and growing population, rising consumption, and a focus on infrastructure development. By embracing growth-friendly policies, South Asia can navigate the challenges and capitalize on its immense potential.

5 Key Insights on South Asia's Economic Landscape:

1. Regional Surge: South Asia leads global growth, despite worldwide slowdown. India shines as regional leader, projected at 6.3% & 6.4% GDP growth in 2023-24 and 2024-25.

2. Uneven Progress: While India soars, other countries face challenges. Bangladesh dipped to 5.6% growth in 2023 due to import restrictions and rising costs.

3. Divergent Paths: Pakistan & Sri Lanka struggle with high inflation, currency issues, and limited prospects. Maldives & Bhutan thrive, with Maldives' tourism boosting growth to 4.5% and Bhutan's new hydro plant driving it to 7.2%.

4. Global Risks & Domestic Uncertainties: Rising energy & food prices, tighter financial conditions, geopolitical tensions, and upcoming elections pose challenges.

5. Young & Growing: Despite challenges, South Asia boasts a young population, rising consumption, and focus on infrastructure. Growth-friendly policies can unlock its immense potential.

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