World Bank declares South Asia "second-fastest growing region"

Led by a growth of the Indian economy, the economic growth in South Asia

(currently at 5.4 percent) is expected to expand to 6 percent in 2015 and 6.4 percent in 2016, thus making the region that also includes Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka "potentially ... the second fastest growing region in the world after East Asia and the Pacific" according to the World Bank's twice yearly publication "South Asia Economic Focus".

The Indian economy, which contributes 80 percent to the region’s output, is set to grow by 6.4 percent in fiscal year 2015/16 after 5.6 percent in fiscal year 2014/15. Pakistan, the region’s second biggest economy, is expected to grow at 4.4 percent in fiscal year 2015 after 4.1 percent this year. Bangladesh’s economy is forecast to grow by 6.2 percent in fiscal year 2014/15 and an estimated 6.1 percent in 2013/14. Sri Lanka's economy is expected to continue its strong growth of 7.8 percent this year and bring it to 8.2 percent in 2015.

South Asia is home to one fourth of the world population and has the world’s largest concentration of poor people.

“The outlook over the next years for South Asia indicates broad economic stability and a pick-up in growth with potential risks concentrated on the fiscal and structural reform side,” said Martin Rama, chief economist for South Asia at the World Bank. “Future growth will increasingly depend on strong investment and export performance.”

And exports have been strong in many South Asian countries, even reaching double digits in some of them, spurred on by a demand for ready-made garments in case of Bangladesh and the textile and garment industry in general in India, Pakistan and Sri Lanka. Sales abroad were boosted by the depreciation of the Indian rupee in 2013 and other factors like an increase in export diversification by type of product and the share of emerging markets in total exports.

According to the report, "these are manifestations of an increasingly stronger position of the region in global markets", adding that "countries in the region should build on this strength. As East Asian labor costs increase, South Asia has an opportunity to become the manufacturing hub of the world; but achieving this will require boosting competitiveness."

In terms of risks and challenges, the South Asian economies will have to overcome policital turmoil and non-sustainable fiscal policies that could undermine stability and investor confidence. But the report also points to "sound macroeconomic policies and economic reforms" that could spur faster growth.