Has South Asia Benefited from the Growth of Asian Emerging Economies?

Abstract

India and China are two Asian emerging economies with the unprecedented growth. In the context of slowdown in North since 2008, many have argued that the emerging economies can be drivers of growth of South. However, not much empirical evidence is available to support this argument. This article estimates the growth linkages between the South Asia and its economies, and the two Asian emerging economies in terms of cointegration and causation in their growth rates. Both short-term and long-term relationships are tested for the period 1970–2009. The tests for structural breaks are also undertaken. The results show that there is a long-term relationship as well as short-term relationship between China’s growth and growth South Asia (excluding India). In the post-structural break period, that is, post-1985, the relationship is found to be two way, with China also benefitting from growth of South Asia. India, on the other hand, seems to have limited integration with the region. The only relationship that is found between India’s growth and that of other countries’ growth in the region is with Bangladesh and Bhutan.