South Asia

South Asia has always provided highly contrasting economic images. It is a land of fabulous wealth and of extreme poverty. The subcontinent has a small elite of very wealthy people and a large and growing middle class. South Asia has almost one half of the world’s poor even though it has only 20% of the world’s population. In 1997 the Pakistan-based Human Development Center called the subcontinent the poorest, the most illiterate, the most malnourished, and the least gender-sensitive--indeed the most deprived--region of the world.

Poverty is a problem in South Asia due to the population strain on limited land and other resources, and weak economic development caused by faulty government policies and corruption.

Population Strain
All of the countries of South Asia have rapidly growing populations, which have put tremendous strain on available land and other resources. Bangladesh’s situation appears to be the most desperate. Bangladesh is the second most densely populated country in the world (Singapore is first). Bangladesh has an average of 950 persons per square kilometer. More than 60% of its people are farmers. The most important industries are textiles and the processing of agricultural products.

India, on the other hand, has an average of 328 persons per square kilometer, while Pakistan has 168. As in Bangladesh, more than 60% of the people in India and Pakistan are farmers. By contrast, the United States has less than 30 persons per square kilometer, and less than 10% of Americans are employed in agriculture.

Economic Development
When South Asians gained their independence from Great Britain in 1947 (see History), the gaps between rich and poor and the reputation of being a land of fabulous wealth and of terrible destitution were already well-established.

Nevertheless, most South Asians were eager to bring about the rapid economic development of their respective countries. Contrasted below are India’s economic experiences against those of Pakistan and Bangladesh.

In India, Jawharlal Nehru, the first prime minister, had a dream of creating a prosperous, socialistic nation by importing the best of Western technology and methods. To ensure that the gap in wealth between rich and poor would diminish rather than grow, he wanted the government to have control over the most important sectors of the economy. The Indian government imposed numerous regulations on both native and foreign businesses, an act that led to the creation of large, state-owned monopolistic companies.

Of course, some progress has taken place. Life expectancy has risen from 45 years at birth in 1965 to 63 years today. A growing middle class has developed, which has created a huge internal market that has spurred industrial production. But, over time the economy has become

overregulated,
increasingly inefficient,
hostile to foreign trade and investment, and
riddled with corruption.

India followed Nehru’s policies for almost forty years in spite of the slow rate of growth and the resulting economic problems. However, in the late 1980s, India moved away from Nehru’s vision and made changes toward a capitalistic market economy. Facing a major financial crisis in 1991, the Indian government sped up the shift to a capitalistic market economy. Since then, the economy has begun to grow at a more rapid rate, but the transition is being resisted by those who favor the old socialistic-oriented system. Moreover, many Indians are ill-equipped for world competition. For example, 65.5% of men and only 38% of women are literate.

Pakistan, on the other hand, has followed more capitalistic, market-oriented economic policies than India. From 1947 until the 1970s, Pakistan’s economy saw an average annual growth rate of about 4.5% a year, which is quite respectable. However, economic growth has slowed significantly since the late 1980s.

Pakistan’s government attempted to control economic development through a series of five-year plans. However, the country frequently was unable to achieve its goals because of governmental instability, changing priorities, and high military spending. Life expectancy has risen from 45 years at birth in 1965 to 59 years today. In contrast, literacy rates are still low. Only 50% of men and 25% of women can read and write.

Pakistan’s current government faces serious economic problems:

foreign debt of more than $17 billion,
foreign reserves ($1 billion) that are too low to purchase needed imports,
imports that are twice as much as its exports, and
difficulty in collecting taxes.

Some have argued that Pakistan’s current aggressive stance on Kashmir (see section on Kashmir) has been engineered by its prime minister, Nawaz Sharif, to distract his people from Pakistan’s current economic crisis.

Like Pakistan, Bangladesh (East Pakistan till 1971) has also followed more capitalistic, market-oriented economic policies than India.

Less developed and poorer than Pakistan, Bangladesh has economic problems:

frequent natural disasters such as typhoons hit this low-lying country and bring devastating floods;
high population growth in an already densely populated country;
government instability, inefficiency, and corruption; and
heavy reliance on foreign aid, which distorts markets and causes corruption.

Bangladesh has attempted to reform its economic institutions and policies in the 1990s. The government has begun to encourage foreign trade and investment, and the economy has achieved annual growth rates of around 5% for the past decade. Life expectancy rose from 44 years at birth in 1965 to 56.6 years today. As in Pakistan, literacy rates in Bangladesh are very low. Only 49% of men and 26% of women can read and write.

Bangladesh’s challenges are great, and this country is likely to remain one of the world’s poorest in the foreseeable future.