Inflation, Growth, and Distribution Nexus in Post-Transition and Emerging Economies of South Asia

Abstract

This study investigates the impact of inflation on poverty and income distribution in five major economies in South Asia in the period 1986-2014. Inflation reduces the poverty rate and the poverty gap as the agricultural poor largely benefit from higher agricultural prices whereas the poorest quintile of the population who are landless farmers remain in a disadvantageous position. This raises the overall level of inequality in the economy despite poverty reduction. Trade openness is still not the engine of growth in South Asia - rather it has widened the poverty gap and aggravated inequality because the poor are not well integrated to the global market as compared to the well-off groups. As a result, there has been growing inequality across the region.