India, the world’s largest democracy and one of the fastest-growing economies, has emerged as a beacon of inclusive economic power in South Asia. This narrative of growth is not just about numbers but also about the holistic development that seeks to uplift all sections of society. The economic growth in South Asia is projected to be strong at 6.0 per cent in 2024. This growth is primarily driven by robust economic performance in India. However, there are significant structural challenges that could undermine this growth, impacting the region’s ability to create jobs and respond to climate-related issues effectively. Despite the positive outlook, the growth for most countries remains below pre-pandemic levels and relies heavily on public spending. Additionally, private investment growth has slowed considerably across all South Asian nations, and the region is not generating enough jobs to match its rapidly expanding working-age population.
In Bangladesh, the economic output is expected to rise by 5.7 per cent in the fiscal year 2024-25. However, high inflation and restrictions on trade and foreign exchange are limiting economic activities. Bhutan’s economy is forecasted to grow by 5.7 per cent during the same period, supported by increased electricity production, and growth in mining, manufacturing, and tourism sectors.
India, which represents the majority of the region’s economy, is expected to achieve an output growth of 7.5 per cent in the fiscal year 2024-25. This growth is expected to moderate to 6.6 per cent over the medium term, with robust activity in services and industrial sectors. In the Maldives, the output growth is projected to be 4.7 per cent in 2024, a downgrade of half a percentage point from earlier forecasts, as tourists are increasingly opting for lower-cost guesthouses over high-end resorts.
Nepal’s output is anticipated to grow by 4.6 per cent in the fiscal year 2024-25, driven by an expected increase in hydropower exports. However, recovery outside the hydropower sector is likely to be slow. Pakistan’s economy, which contracted in the fiscal year 2022-23, is expected to grow by 2.3 per cent in 2024-25, driven by improved business confidence. Sri Lanka’s output growth is forecasted to strengthen to 2.5 per cent in 2025, supported by modest recoveries in reserves, remittances, and tourism.
Based on these macroeconomic indicators, the Indian economy showed exceptional performance in 2023. In January 2024, the National Statistical Office of India estimated that the country’s real GDP would grow by 7.3 per cent for the 2023–24 financial year, marking the highest growth among major economies. This estimate surpasses the International Monetary Fund’s (IMF) December 2023 projection, which predicted a 6.3 per cent growth. Even if the IMF’s projections are accurate, India’s GDP is still set to expand at least two percentage points more than China’s.
India represents the majority of the region’s economy and is expected to achieve an output growth of 7.5 per cent in the fiscal year 2024-25. This growth is expected to moderate to 6.6 per cent over the medium term, with robust activity in services and industrial sectors
India’s economic story has been one of transformation. From a primarily agrarian economy at independence in 1947 to becoming the fifth-largest economy in the world in 2022, India’s growth trajectory has been significant. The liberalisation of the Indian economy in 1991 marked a watershed moment. The dismantling of the License Raj, reduction in trade barriers, and opening up to foreign investments spurred economic growth. Subsequent reforms, such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC), further streamlined economic activities and improved the business environment.
The Digital India initiative launched in 2015 aimed to transform India into a digitally empowered society and knowledge economy. Initiatives like Aadhaar, the world’s largest biometric ID system, have revolutionised the delivery of government services and financial inclusion. The Unified Payments Interface (UPI) has transformed the landscape of digital payments, making transactions easier and more accessible. Programmes such as Make in India and Smart Cities Mission focus on boosting manufacturing and urban infrastructure. The government’s emphasis on infrastructure development, including highways, ports, and the ambitious ‘Bharatmala’ and ‘Sagarmala’ projects, has significantly enhanced connectivity and logistics efficiency.
Economic growth in India has been accompanied by efforts to ensure social inclusion and poverty reduction. India has made substantial progress in reducing poverty. The World Bank estimates that the poverty rate has fallen from 45 per cent in 1994 to around 20 per cent in 2020. Government schemes like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) have played a crucial role in providing employment and income support to rural households. Education and skill development are pivotal to India’s inclusive growth. The Right to Education Act, Sarva Shiksha Abhiyan, and Skill India initiative aim to provide universal education and vocational training. These initiatives are critical in creating a skilled workforce that will contribute to and benefit from economic growth.
Economic growth in India has been accompanied by efforts to ensure social inclusion and poverty reduction. India has made substantial progress in reducing poverty. The World Bank estimates that the poverty rate has fallen from 45 per cent in 1994 to around 20 per cent in 2020
The National Health Mission, Ayushman Bharat, and Swachh Bharat Abhiyan are landmark programmes aimed at improving healthcare and sanitation. Ayushman Bharat, touted as the world’s largest healthcare scheme, aims to provide free health coverage to the economically disadvantaged, ensuring that health emergencies do not push families into poverty. India’s technological landscape has seen rapid advancements, making it a global hub for innovation and technology. India is a global leader in IT and software services, with Bengaluru and Hyderabad being major tech hubs. The IT industry not only contributes significantly to the economy but also creates millions of jobs, driving socio-economic growth.
India’s start-up ecosystem is thriving, with Bengaluru, Delhi-NCR, and Mumbai emerging as start-up hubs. Government initiatives like Start-up India and various incubation centres provide support to budding entrepreneurs, fostering innovation and creating job opportunities. The Indian Space Research Organisation (ISRO) has put India on the global map with Chandrayaan missions. In defence, the push for indigenisation under the ‘Make in India’ programme aims to reduce dependence on imports and build a robust domestic defence industry.
India’s economic and strategic position makes it a pivotal player in South Asia and beyond. India’s leadership in SAARC is crucial for regional cooperation. Initiatives like the South Asia Satellite project underscore India’s commitment to using technology for regional development. India’s role in SAARC emphasises the importance of economic and security cooperation in a volatile region. India engages actively in bilateral and multilateral forums, including BRICS, G20, and the United Nations. These engagements help India secure its economic interests, foster trade relations, and contribute to global economic governance. India’s Neighbourhood First policy emphasises the importance of good relations with neighbouring countries. Through trade agreements, infrastructure projects, and development assistance, India aims to promote regional stability and economic integration.
Job creation remains a pressing challenge. The informal sector employs a large portion of the workforce, often without social security and benefits. Formalising the economy and creating quality jobs are essential
Despite its achievements, India faces several challenges that need to be addressed to sustain inclusive growth. Economic inequality remains a significant issue. While urban areas have seen rapid development, rural areas still lag in terms of infrastructure and opportunities. Bridging this gap is crucial for balanced growth. Job creation remains a pressing challenge. The informal sector employs a large portion of the workforce, often without social security and benefits. Formalising the economy and creating quality jobs are essential. India’s growth needs to be environmentally sustainable. Addressing pollution, managing natural resources, and mitigating climate change are critical for long-term development. Improving governance and reducing corruption are essential for the efficient implementation of policies and schemes. Transparency, accountability, and strong institutions are the bedrock of sustainable development.
India influences economic development in South Asia through various channels, including trade, investment, and regional cooperation initiatives. The country’s robust economic performance attracts foreign investments that often extend to neighbouring countries. Additionally, India’s initiatives in regional forums like SAARC and BIMSTEC promote economic integration and collaborative development efforts across South Asia.
India’s economic growth is indeed a critical factor for South Asia’s prosperity. As the largest economy in the region, India’s growth has a spillover effect, benefiting neighbouring countries through increased trade, investment, and economic cooperation. The shared economic interests and interconnectedness of South Asian economies mean that India’s growth can significantly influence the region’s overall economic health.
India’s journey as a beacon of inclusive economic power in South Asia is a testament to its resilience and ambition. The country has made significant strides in economic growth, social inclusion, technological advancement, and regional leadership. However, addressing the challenges of inequality, employment, environmental sustainability, and governance will be crucial for sustaining this growth. As India continues to evolve, its commitment to inclusive development will determine its future trajectory, not only as a regional leader but as a global economic powerhouse.
–The writer is a Special Advisor for South Asia at the Parley Policy Initiative, Republic of Korea. He has authored and edited six books and has various research interests covering Sino-Indian border issues, transboundary rivers, water security, defence, and Indo-Pacific studies. He tweets @The_China_Chap. The views expressed are of the writer and do not necessarily reflect the views of Raksha Anirveda
–The writer is a Special Advisor for South Asia at the Parley Policy Initiative, Republic of Korea. He regularly provides commentary on India-China border issues, water security, and transboundary river challenges in South Asia. You can follow his updates on X at @The_China_Chap. The views expressed are of the writer and do not necessarily reflect the views of Raksha Anirveda
