Jumpstarting South Asia

Abstract

As is well-known, the seminal work of the late Angus Maddison has established that 2,000 years ago the Indian subcontinent (modern day, South Asia) and China were by far the richest regions of the world. Since the Industrial Revolution of the nineteenth century, the share of world GDP of the Indian subcontinent had started to decline. This trend reversed somewhat after the economic reforms of the 1980s and 1990s. More recently, however, economic growth in South Asia has softened yet once again for several reasons. This book focuses on the slowing pace of economic reforms and outlines a two-pronged strategy to jumpstart South Asian economies. First, South Asian countries should complete the economic reform process that they had begun in the 1980s and 1990s and implement the more microeconomic reforms, namely, the sectoral, and governance and institutional reforms to enhance competition and improve the operation of markets. Second, they should implement the second round of ‘Look East’ policies or LEP2 to (i) link themselves to production networks in East Asia, their fastest-growing markets, and (ii) develop production networks in manufacturing and services within their region. The book argues that the proposed strategy will lead to a win-win situation for all countries in South Asia and East Asia and reinvigorate economic integration within South Asia, one of the least integrated regions of the world. The book also identifies the unfinished policy reform agenda for each South Asian country and the components of the LEP2 that they should implement.