Economy of South Asia

The subregion of South Asia, within the Asian continent, maintains a diversified developing economy consisting of eight countries. With a population of 2 billion people, the region is home to 25% of the world population. The Indian subcontinent was historically one of the richest regions in the world, accounting for 25% of world GDP as recently as 1700, but experienced significant de-industrialisation and a doubling of extreme poverty during the colonial era of the late 18th to mid-20th century. In the post-colonial era, South Asia has grown significantly, with India advancing because of economic liberalisation from the 1980s onwards, and extreme poverty now below 15% in the region. South Asia has been the fastest-growing region of the world since 2014.

With projected growth rates of about 6.0% from 2025, South Asia continues to face significant economic challenges. A notable slowdown in private investment, especially in key sectors such as manufacturing and services, poses a major concern. Additionally, persistent employment issues, particularly low female workforce participation, highlight broader socio-economic disparities. The region is also critically vulnerable to climate-related impacts, including flooding and heatwaves, which significantly affect the agricultural sector—a fundamental component of local economies. This environmental susceptibility strains the already limited capacity of the public sector to adapt, increasing dependence on resilience initiatives from local businesses, farmers, and vulnerable communities.

History

Ancient and medieval era

Colonial era

Contemporary era

Post-colonial era

In the aftermath of in the late 1940s and the Indian subcontinent's independence from British rule, Pakistan chose to have a more capitalistic economy and aligned itself more closely with the United States, while India went with a more closed economy dubbed as the "License Raj" and eventually aligned more closely with the Soviet Union. Rising economic inequality and misrule by West Pakistan towards East Pakistan contributed to the 1971 independence of Bangladesh, however. Both India and Pakistan then went through a period of economic liberalisation in the 1980s and '90s, which resulted in India going from having around half of Pakistan's GDP per capita in 1990 to surpassing Pakistan by the 2010s. Bangladesh, which had started off substantially poorer than both India and Pakistan at the time of its independence, has grown substantially, and has also surpassed Pakistan's GDP per capita.

Recent decades India is the largest economy in the region (US$4.11 trillion) and makes up almost 80% of the South Asian economy; it is the world's 5th largest economy in nominal terms and the world's 3rd largest economy by purchasing power adjusted exchange rates (US$14.26 trillion). Outlook Database, October 2018 India is the member of G-20 major economies and BRICS from the region. It is the fastest-growing major economy in the world and one of the world's fastest registering a growth of 7.2% in FY 2022–23. In 2026, global economic trends are expected to continue shaping South Asia's growth outlook, with shifting trade dynamics and financial conditions influencing regional prospects.

India is followed by Bangladesh, which has a GDP of ($446 billion).

a. It is one of the emerging and growth-leading economies of the world, and is also listed among the Next Eleven countries. It is also one of the fastest-growing middle-income countries. It has the world's 33rd largest GDP in nominal terms and is the 27th largest by purchasing power adjusted exchange rates (476015 trillion). Bangladesh's economic growth was 6.4% in 2022. Pakistan has an economy of ($379 billion nominal GDP. Next is Sri Lanka, which has the 2nd highest GDP per capita and the 4th largest economy in the region.

While in East Asia, regional trade accounts for 50% of total trade, it accounts for only a little more than 5% in South Asia. Certain parts of South Asia are significantly wealthier than others; the four Indian states of Maharashtra, Tamil Nadu, Gujarat and Karnataka are projected to account for almost 50% of India's GDP by 2030, while the five South Indian states comprising 20% of India's population are expected to contribute 35% of India's GDP by 2030.

The major stock exchanges in the region are Bombay Stock Exchange (BSE) with market Capitalization of $3.8 trillion (8th largest in the world), National Stock Exchange of India (NSE) with market capitalization of $3.27 trillion (9th largest in the world), Dhaka Stock Exchange (DSE), Colombo Stock Exchange (CSE), and Pakistan Stock Exchange (PSX) with market capitalization of $72 billion. Economic data is sourced from the International Monetary Fund, current as of April 2017, and is given in US dollars.

India is home to the Indian Premier League, which is the second-most valued sports league in the world on a per-match basis.

National economies

Poverty

Poverty rates vary greatly throughout the region, with a majority of Afghanistan relying on humanitarian aid, and 40% of Sri Lankans slipping into poverty due to the economic crisis that started in 2019. CountryPopulation below poverty line (at $1.9/day)Global Hunger Index (2021)Population under-nourished (2015)Life expectancy (2019) (global rank)Global wealth report (2019)World Bank (year)2022 Multidimensional Poverty Index Report (MPI source year)Population in Extreme poverty (2022)CIA Factbook (2015)Total national wealth in billion USD (global rank)Wealth per adult in USDMedian wealth per adult in USD (global rank)54.5% (2016)55.91% (2015–16)18%36%28.3 (103rd)26.8%63.2 (160th)25 (116th)1,463640 (156th)24.3% (2016)24.64% (2019)4%31.5%19.1 (76th)16.4%74.3 (82nd)697 (44th)6,6432,787 (117th)8.2% (2017)37.34% (2010)4%12%No dataNo data73.1 (99th)No DataNo DataNo Data21.9% (2011)14.9% (2019–21)0.9%29.8%27.5 (101st)15.2%70.8 (117th)12,614 (7th)14,5693,042 (115th)8.2% (2016)0.77% (2016–17)4%16%No data5.2%79.6 (33rd)7 (142nd)23,2978,555 (74th)25.2% (2010)17.50% (2019)8%25.2%19.1 (76th)7.8%70.9 (116th)68 (94th)3,8701,510 (136th)24.3% (2015)38.33% (2017–18)5%12.4%24.7 (94th)22%69.3 (144th)465 (49th)4,0961,766 (128th)4.1% (2016)2.92% (2016)5%8.9%16 (65th)22%76.9 (54th)297 (60th)20,6288,283 (77th)

India

Bangladesh

Pakistan

Afghanistan

Bhutan

Maldives

Nepal

Sri Lanka

See also

South Asia#Health and nutrition China-South Asia Expo

Notes

References

Sources