GDP expansion in South Asia from 1995 to 2015
Anywhere in the planet, the pursuit for faster and
quicker economic growth by countries and economies is being sought and tested.
This is because no amount of income and property redistribution will be
successful if the economic pie remains small. The pie must expand first so that
the share of various sectors and stakeholders will rise in absolute amount,
even if their percentage share remains the same or small.
Let us review the economic expansion of South Asian
economies over the past two decades, from 1995 to 2015, and draw some lessons
from them.
In nominal prices, India’s GDP has expanded 5.7x;
Pakistan’s GDP by 3.4x; Bangladesh’s by 4.5x; Sri Lanka’s by 6.3x; and Nepal’s
by 4.2x.
In PPP values for the same period, India’s GDP has
expanded by 5.6x; Pakistan’s by 3.3x; Bangladesh’s by 4.5x; Sri Lanka’s by
4.4x; and Nepal’s by 3.3x. These are modest growth and may be fine, although
certain sectors in these countries would be unhappy with such expansion of
their economy after 20 years. They would wish to copy many South East Asian
economies that expand their GDP by 6-10x after two decades.
In per capita GDP at current or nominal prices from 1995
to 2015, South Asian economies’ per capita income has expanded between 2.2x (Pakistan’s)
to 5.3x (Sri Lanka’s). In PPP values, the per capita income expansion was
between 2.1x (Pakistan’s) to 4.2x (Maldives’).
Compared to the levels enjoyed by developed Asian
economies like Singapore, Brunei, Hong Kong and Japan, their per capita GDP are
really huge.
If we review again the growth trajectory of many Asian
tiger economies aside from Japan – S. Korea, Taiwan, Singapore and Hong Kong –
they managed to grow fast because of (a) market- and outward-oriented economic
policies, (b) technological advances and competition, and (c) prevalence of the
rule of law. So while their governments started with cronyism and
state-sponsored industrialization, the main contribution of their governments
was the promulgation and respect for the rule of law. Laws that generally apply
to everyone, little or no exception.
Doing business in this kind of environment is stable and
relatively easier. Entrepreneurs can put their huge savings and borrowings to
long-term business projects knowing that rules and policies remain for many years
and not changed midway to favor certain business interests that are close to
the President or Prime Minister of the country.
It is good that a number of South Asian economies are
slowly realizing this. More trade liberalization, whether via regional, bilateral
or unilateral liberalization, any of such move will produce net gains
(advantages are larger than disadvantages) because people trade only if they
realize there is net gain for them.
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Business 360-33, Cheap energy now and in the future, January 28, 2016
Business 360-34, Hydropower in Asia, March 17, 2016
Business 360-35, Economic expansion in South Asia, May 28, 2016
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