South Asia's Conundrum: Turning Potential into Sustained Progress

Sanjay Kathuria

Asian Economic Policy Review, 2025, vol. 20, issue 1, 27-51

Abstract: South Asia has long been a region of untapped potential, lagging behind East Asia in economic progress, despite some remarkable successes. “China plus one” presents another opportunity for the region to capitalize on its demographic dividend. Focusing on Bangladesh, India, Pakistan, and Sri Lanka, this article highlights major hurdles to their sustained progress, including protectionist trade policies, inadequate human capital, and a small labor force relative to population. For Sri Lanka and Pakistan, there are the additional challenges of coping with ongoing economic crises. The analysis suggests options to regaining/sustaining macroeconomic stability, while factoring in the fiscal dimension of climate change; acting urgently to deepen global and regional trade, to seize the moment; addressing the near crisis in human capital in many countries; accelerating digital solutions to improve governance and service delivery; and using regional cooperation to help build climate resilience. The role of business elites in influencing economic policies is also discussed.

Date: 2025
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