Economy of South Asia

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Around 500 BC, the Mahajanapadas minted punch-marked silver coins.^{[citation needed]} The period was marked by intensive trade activity and urban development.^{[citation needed]} By 300 BC, the Maurya Empire had united most of the Indian subcontinent except Tamilakam, which was ruled by the Three Crowned Kings.^[14]The resulting political unity and military security allowed for a common economic system and enhanced trade and commerce, with increased agricultural productivity.^{[citation needed]}

The Maurya Empire was followed by classical and early medieval kingdoms, including the Cholas, Pandyas, Cheras, Guptas, Western Gangas, Harsha, Palas, Rashtrakutas and Hoysalas. The Indian subcontinent, due to its large population, had the largest economy of any region in the world for most of the interval between the 1st and 18th centuries.^{[15][16][17][18]} Angus Maddison estimates that from 1-1000 AD India constituted roughly 30% of the world's Population and GDP.^[16]

India experienced per-capita GDP growth in the high medieval era, coinciding with the Delhi Sultanate.^{[citation needed]} By the late 17th century, most of the Indian subcontinent had been reunited under the Mughal Empire, which for a time Maddison estimates became the largest economy and manufacturing power in the world, producing about a quarter of global GDP, before fragmenting and being conquered over the next century.^[19] Bengal Subah, the empire's wealthiest province, had an advanced, productive agriculture, textile manufacturing and shipbuilding, in a period of proto-industrialization.^[20][21]

By the 18th century, the Mysoreans had embarked on an ambitious economic development program that established the Kingdom of Mysore as a major economic power.^{[citation needed]} Sivramkrishna analyzing agricultural surveys conducted in Mysore by Francis Buchanan in 1800–1801, arrived at estimates, using "subsistence basket", that aggregated millet income could be almost five times subsistence level.^[22] The Maratha Empire also managed an effective administration and tax collection policy throughout the core areas under its control and extracted chauth from vassal states.^[23]

The role and scale of British imperial policy during the British Raj (1858 to 1947) on India's relative decline in global GDP remains a topic of debate among economists, historians, and politicians. Some commentators argue that the effect of British rule was negative, and that Britain engaged in a policy of deindustrialisation in India for the benefit of British exporters, which left Indians relatively poorer than before British rule. Others argue that Britain's impact on India was either broadly neutral or positive, and that India's declining share of global GDP was due to other factors, such as new mass production technologies or internal ethnic conflict.

The economy of India is a developing mixed economy with a notable public sector in strategic sectors.^[64] It is the world's fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP); on a per capita income basis, India ranked 141th by GDP (nominal) and 125th by GDP (PPP).^[65] From independence in 1947 until 1991, successive governments followed the Soviet model and promoted protectionist economic policies, with extensive Sovietization, state intervention, demand-side economics, natural resources, bureaucrat driven enterprises and economic regulation. This is characterised as dirigism, in the form of the Licence Raj.^[66][67] The end of the Cold War and an acute balance of payments crisis in 1991 led to the adoption of a broad economic liberalisation in India and indicative planning.^[68][69] Since the start of the 21st century, annual average GDP growth has been 6% to 7%.,^[64] India has about 1,900 public sector companies,^[70] Indian state has complete control and ownership of railways, highways; majority control and stake in banking,^[71] insurance,^[72] farming,^[73] dairy, fertilizers & chemicals,^[74] airports,^[75] nuclear, mining, digitization, defense, steel, rare earths, water, electricity, oil and gas industries and power plants,^[76] and has substantial control over digitalization, Broadband as national infrastructure, telecommunication, supercomputing, space, port and shipping industries,^[77] among other industries, were effectively nationalised in the mid-1950s.^[66][67][78]

Nearly 70% of India's GDP is driven by domestic consumption;^[79] country remains the world's fourth-largest consumer market.^[80] Apart from private consumption, India's GDP is also fueled by government spending, investments, and exports.^[81] In 2022, India was the world's 10th-largest importer and the 8th-largest exporter.^[82] India has been a member of the World Trade Organization since 1 January 1995.^[83] It ranks 63rd on the Ease of doing business index and 40th on the Global Competitiveness Index.^[84][85] India has one of the world's highest number of billionaires and extreme income inequality.^[86][87] Economists and social scientists often consider India a welfare state.^{[88][89][90][91]} India is officially declared a socialist state as per the constitution.^[92][93] India's overall social welfare spending stood at 8.6% of GDP in 2021-22, which is much lower than the average for OECD nations.^[94][95] With 586 million workers, the Indian labour force is the world's second-largest.^[96] Despite having one of the longest working hours, India has one of the lowest workforce productivity levels in the world.^{[97][98][99][100][101]} Economists often say that due to structural economic problems, India is experiencing jobless economic growth.^{[102][103][104][105][106][107]}

During the Great Recession, the economy faced a mild slowdown. India endorsed Keynesian policy and initiated stimulus measures (both fiscal and monetary) to boost growth and generate demand. In subsequent years, economic growth revived.^[108]

In 2021–22, the foreign direct investment (FDI) in India was $82 billion. The leading sectors for FDI inflows were the Finance, Banking, Insurance and R&D.^[109] India has free trade agreements with several nations and blocs, including ASEAN, SAFTA, Mercosur, South Korea, Japan, Australia, UAE, and several others which are in effect or under negotiating stage.^[110][111] In recent years, independent economists and financial institutions have accused the government of manipulating various economic data, especially GDP growth rate.^{[112][113][114][115][116][117][118]}

The service sector makes up more than 50% of GDP and remains the fastest growing sector, while the industrial sector and the agricultural sector employs a majority of the labor force.^[119] The Bombay Stock Exchange and National Stock Exchange are some of the world's largest stock exchanges by market capitalisation.^[120] India is the world's sixth-largest manufacturer, representing 2.6% of global manufacturing output.^[121] Nearly 65% of India's population is rural,^[122] and contributes about 50% of India's GDP.^[123] India faces high unemployment, rising income inequality, and a drop in aggregate demand.^[124][125] According to the World Bank, 93% of India's population lived on less than $10 per day, and 99% lived on less than $20 per day in 2021.^[126] According to a 2021 report by the Pew Research Center, India has roughly 1.2 billion lower-income individuals, 66 million middle-income individuals, 16 million upper-middle-income individuals, and barely 2 million in the high-income group.^[127] As per The Economist, 78 million of India's population are considered middle class as of 2017, if defined using the cutoff of those making more than $10 per day, a standard used by the India's National Council of Applied Economic Research.^[128] India's gross domestic savings rate stood at 29.3% of GDP in 2022.^[129]

The economy of Bangladesh is a major developing mixed economy.^[130] As the second-largest economy in South Asia,^[131][132] Bangladesh's economy is the 35th largest in the world in nominal terms, and 25th largest by purchasing power parity. Bangladesh is seen by various financial institutions as one of the Next Eleven. It has been transitioning from being a frontier market into an emerging market. Bangladesh is a member of the South Asian Free Trade Area and the World Trade Organization. In fiscal year 2021–2022, Bangladesh registered a GDP growth rate of 7.2% after the global pandemic.^[133] Bangladesh is one of the fastest growing economies in the world.

Industrialisation in Bangladesh received a strong impetus after the partition of India due to labour reforms and new industries.^[134] Between 1947 and 1971, East Bengal generated between 70% and 50% of Pakistan's exports.^[135][136] Modern Bangladesh embarked on economic reforms in the late 1970s which promoted free markets and foreign direct investment. By the 1990s, the country had a booming ready-made garments industry. As of 16 March 2024, Bangladesh has the highest number of green garment factories in the world with Leadership in Energy and Environmental Design (LEED) certification from the United States Green Building Council (USGBC), where 80 are platinum-rated, 119 are gold-rated, 10 are silver, and four are without any rating.^[137] As of 6 March 2024, Bangladesh is home to 54 of the top 100 LEED Green Garment Factories globally, including 9 out of the top 10, and 18 out of the top 20.^[138] As of 27 April 2024, Bangladesh has a growing pharmaceutical industry with 12 percent average annual growth rate. Bangladesh is the only nation among the 48 least-developed countries that is almost self-sufficient when it comes to medicine production as local companies meet 98 percent of the domestic demand for pharmaceuticals.^[139] Remittances from the large Bangladeshi diaspora became a vital source of foreign exchange reserves.^[140] Agriculture in Bangladesh is supported by government subsidies and ensures self-sufficiency in food production.^[141][142] Bangladesh has pursued export-oriented industrialisation.^[143][144]

Bangladesh experienced robust growth after the pandemic with macroeconomic stability, improvements in infrastructure, a growing digital economy, and growing trade flows.^[145] Tax collection remains very low, with tax revenues accounting for only 7.7% of GDP.^[146] Bangladesh's banking sector has a large amount of non-performing loans or loan defaults, which have caused a lot of concern.^[146][147] The private sector makes up 80% of GDP.^[148][149] The Dhaka Stock Exchange and Chittagong Stock Exchange are the two stock markets of the country.^[150] Most Bangladeshi businesses are privately owned small and medium-sized enterprises (SME) which make up 90% of all businesses.^[151]

The economy of Pakistan is categorized as a developing economy. It ranks as the 24th-largest based on GDP using purchasing power parity (PPP) and the 46th largest in terms of nominal GDP. With a population of 241.5 million people as of 2023, Pakistan's position at per capita income ranks 161st by GDP (nominal) and 138th by GDP (PPP) according to the International Monetary Fund (IMF).

In its early years, Pakistan's economy relied heavily on private industries. The nationalization of a significant portion of the sector, including financial services, manufacturing, and transportation, began in the early 1970s under Zulfikar Ali Bhutto. During Zia-ul Haq's regime in the 1980s, an "Islamic" economy was adopted, outlawing economic practices forbidden in Sharīʿah and mandating traditional religious practices. The economy started privatizing again in the 1990s.

The economic growth centers in Pakistan are located along the Indus River; these include the diversified economies of Karachi and major urban centers in Punjab (such as Faisalabad, Lahore, Sialkot, Rawalpindi, and Gujranwala), alongside less developed areas in other parts of the country. Pakistan was classified as a semi-industrial economy for the first time in the late 1990s, albeit an underdeveloped country with a heavy dependence on agriculture, particularly the textile industry relying on cotton production. Primary export commodities include textiles, leather goods, sports equipment, chemicals, and carpets/rugs.

Pakistan is presently undergoing economic liberalization, including the privatization of all government corporations, aimed at attracting foreign investment and reducing budget deficits. However, the country continues to grapple with challenges such as a rapidly growing population, high illiteracy, political instability, a hostile neighborhood, and heavy foreign debt.

The economy of Afghanistan is listed as the 124th largest in the world in terms of nominal gross domestic product (GDP), and 102nd largest in the world in terms of purchasing power parity (PPP). With a population of around 41 million people, Afghanistan's GDP (nominal) stands at $14.58 billion as of 2021, amounting to a GDP per capita of $363.7 (according to a World Bank report). Its annual exports exceed $2 billion, with agricultural, mineral and textile products accounting for 94% of total exports. The nation's total external debt is $1.4 billion as of 2022.

The Afghan economy continues to improve due to the influx of expats, establishment of more trade routes with neighboring and regional countries, and expansion of the nation's agriculture, energy and mining sectors. The billions of dollars in assistance that came from expats and the international community saw this increase when there was more political reliability after NATO became involved in Afghanistan.

Despite holding over one trillion dollars in proven untapped mineral deposits, Afghanistan remains one of the least developed countries in the world. Its unemployment rate is over 23% and about half of its population lives below the poverty line. The main factor behind this has been the continuous war in the country, which deterred business investors and left much of the population fighting among each other instead of catching up with the rest of the world. Afghanistan has long sought foreign investment in order to improve its economy. The population of Afghanistan increased by more than 50% between 2001 and 2014, while its GDP grew eightfold. After the U.S. withdrawal from Afghanistan and the Taliban's return to power in 2021, the Biden administration decided to confiscate or withhold $9.5 billion worth of assets from the Afghanistan Central Bank to stop the Taliban from accessing it.

The official currency of Afghanistan is the afghani (AFN), which has an exchange rate of around 70 afghanis to 1 United States dollar. The country has a central bank called Da Afghanistan Bank (DAB). A number of local banks also operate in the country, including the Afghanistan International Bank, Azizi Bank, New Kabul Bank and Pashtany Bank.

The economy of Bhutan is based on agriculture and forestry, which provide the main livelihood for more than 60% of the population. Agriculture consists largely of subsistence farming and animal husbandry. Rugged mountains dominate the terrain and make the building of roads and other infrastructure difficult. Bhutan is among the richest by gross domestic product (nominal) per capita in South Asia, at $3,491 as of 2022, but it still places 153rd, and among the poorest in the world. The total gross domestic product is only $2,653 million, and 178th according to IMF.

Bhutan's economy is closely aligned with India's through strong trade and monetary links and dependence on India's financial assistance. Most production in the industrial sector is of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labour. Model education, social, and environment programs are underway with support from multilateral development organisations.

Each economic program takes into account the government's desire to protect the country's environment and cultural traditions. For example, the government, in its cautious expansion of the tourist sector, encourages visits by upscale, environmentally conscientious tourists. Detailed controls and uncertain policies in areas such as industrial licensing, trade, labour, and finance continue to hamper foreign investment. Hydropower exports to India have boosted Bhutan's overall growth, even though GDP fell in 2008 as a result of a slowdown in India, its predominant export market.

Since 1961, the government of Bhutan has guided the economy through five-year plans in order to promote economic development.^[152]

On 8 December 2023, Bhutan graduated from the UN's list of least developed countries (LDCs), making it only the 7th country to do so and the first in 3 years.^[153][154]

In ancient times, Maldives were renowned for cowries, coir rope, dried tuna fish (Maldive fish), ambergris (maavaharu) and coco de mer (tavakkaashi). Local and foreign trading ships used to load these products in the Maldives and bring them abroad.

Nowadays, the mixed economy of Maldives is based on the principal activities of tourism, fishing and shipping. This results from the Maldives' strategic geographic positioning near crucial sea routes essential for China's energy provisions. Consequently, China has persistently utilized its economic resources to enhance its sway over the Maldivian government.

Tourism is the largest industry in the Maldives, accounting for 28% of GDP and more than 60% of the Maldives' foreign exchange receipts. It powered the current GDP per capita to expand 265% in the 1980s and a further 115% in the 1990s. Over 90% of government tax revenue flows in from import duties and tourism-related taxes.

Fishing is the second leading sector in the Maldives. The economic reform program by the government in 1989 lifted import quotas and opened some exports to the private sector. Subsequently, it has liberalized regulations to allow more foreign investment.

Agriculture and manufacturing play a minor role in the economy, constrained by the limited availability of cultivable land and shortage of domestic labour. Most staple foods are imported.

Industry in the Maldives consists mainly of garment production, boat building, and handicrafts. It accounts for around 18% of GDP. Maldivian authorities are concerned about the impact of erosion and possible global warming in the low-lying country.

Among the 1,190 islands in the Maldives, only 198 are inhabited. The population is scattered throughout the country, and the greatest concentration is on the capital island, Malé. Limitations on potable water and arable land, plus the added difficulty of congestion are some of the problems faced by households in Malé.

Development of the infrastructure in the Maldives is mainly dependent on the tourism industry and its complementary tertiary sectors, transport, distribution, real estate, construction, and government. Taxes on the tourist industry have been plowed into infrastructure and it is used to improve technology in the agricultural sector.

The economy of Nepal is a developing category and is largely dependent on agriculture and remittances. Until the mid-20th century Nepal was an isolated pre-industrial society, which entered the modern era in 1951 without schools, hospitals, roads, telecommunications, electric power, industry, or civil service. The country has, however, made progress toward sustainable economic growth since the 1950s. The country was opened to economic liberalization, leading to economic growth and improvement in living standards when compared to the past. The biggest challenges faced by the country in achieving higher economic development are the frequent changes in political leadership, as well as corruption. Nepal has consistently been ranked as one of the poorest countries in the world.

Nepal has used a series of five-year plans in an attempt to make progress in economic development. It completed its ninth economic development plan in 2002; its currency has been made convertible, and 17 state enterprises have been privatised. Foreign aid to Nepal accounts for more than half of the development budget. Government priorities over the years have been result in the development of transportation and communication facilities, agriculture, and industry. Since 1975, improved government administration and rural development efforts have been emphasised.

Agriculture remains Nepal's principal economic activity, employing about 65% of the population and providing 31.7% of GDP. Only about 20% of the total area is cultivable; another 40.7% is forested (i.e., covered by shrubs, pastureland and forest); most of the rest is mountainous. Fruits and vegetables (apples, pears, tomatoes, various salad greens, peach, nectarine, potatoes), as well as rice and wheat are the main food crops. The lowland Terai region produces an agricultural surplus, part of which supplies the food-deficient hill areas.

GDP is heavily dependent on remittances (9.1%) of foreign workers. Subsequently, economic development in social services and infrastructure in Nepal has not made dramatic progress. A countrywide primary education system is under development, and Tribhuvan University has several campuses. Although eradication efforts continue, malaria had been controlled in the fertile but previously uninhabitable Terai region in the south. Kathmandu is linked to India and nearby hill regions by road and an expanding highway network. The capital was almost out of fuel and supplies, due to a crippling general strike in southern Nepal on 17 February 2008.

Major towns are connected to the capital by telephone and domestic air services. The export-oriented carpet and garment industries have grown rapidly in recent years. Together, they account for approximately 70% of the country's merchandise exports. The Cost of Living Index in Nepal is comparatively lower than many countries but not the least. The quality of life has declined to a much less desirous value in recent years. In the 2021 Global Hunger Index, Nepal ranks 76th out of the 116 countries with sufficient data to calculate 2021 GHI scores. With a score of 19.1, Nepal has a level of hunger that is moderate. Nepal has the worst road infrastructure in Asia.

The mixed economy of Sri Lanka was worth $84 billion by nominal gross domestic product (GDP) in 2019^[155] and $296.959 billion by purchasing power parity (PPP).^[156] The country had experienced an annual growth of 6.4 percent from 2003 to 2012, well above its regional peers. This growth was driven by the growth of non-tradable sectors, which the World Bank warned to be both unsustainable and unequitable. Growth has slowed since then. In 2019 with an income per capita of 13,620 PPP Dollars^[157] or 3,852 (2019) nominal US dollars,^[158][159] Sri Lanka was re-classified as a lower middle income nation with the population around 22 million (2021)^[160] by the World Bank from a previous upper middle income status.^[161]

Sri Lanka has met the Millennium Development Goal (MDG) target of halving extreme poverty and is on track to meet most of the other MDGs, outperforming other South Asian countries. Sri Lanka's poverty headcount index was 4.1% by 2016. Since the end of the three-decade-long Sri Lankan Civil War, Sri Lanka has begun focusing on long-term strategic and structural development challenges, and has financed several infrastructure projects.

High foreign debt, economic mismanagement under the governments of Gotabhaya and Mahinda Rajapaksa,^[162] and lower tourism revenue led to the country defaulting on its sovereign debt in April 2022.^[163] The economy contracted 7.8% in 2022, and the percentage of the population earning less than $3.65 a day doubled to around 25% of the population. On March 20, 2023, the IMF has loaned US$3 billion to the country as part of a 48-month debt relief program.^[164]