Comment on “South Asia's Conundrum: Turning Potential into Sustained Progress”

Abstract

Kathuria (2025) should be congratulated on writing about the experiences of five or six countries in South Asia given the heroic nature of the task. I will concentrate my comments in my remarks in kind of three broad areas.

My first set of comments relates to some of the common challenges and opportunities that Kathuria did not touch upon. The first and most obvious common challenge is climate change. We have seen recently real environmental extreme and even calamitous events in Nepal, India, and Pakistan. So, what would South Asia have to do to address some of these climate-related challenges? The second obvious common thing that is happening in all these countries, Sri Lanka, India, Pakistan, Bangladesh, and Nepal, is the rise of identity-based majoritarian politics. Does this kind of majoritarian politics have any implications for addressing the challenges? Even the economic challenges that Kathuria has so carefully and elaborately laid out. There are two dimensions to this. One is of course that it affects bilateral relations, and therefore it is good to be made aware that economic cooperation on some of these issues will be much more difficult. It is going to have a kind of direct impact on bilateral relations and bilateral approaches to cooperation and regional cooperation more broadly. What is it going to do within each country, to the investment climate, to the scope for conflict and all of those things that affect a long-run development? These may be political issues, but I think in this case we cannot escape at least some of the economic long-term economic consequences of politics.

Is South Asia's demographic dividend one common kind of opportunity? If you look at all these alarming population projections that we are seeing around the world, we observe aging in advanced countries, and absolute declines in population in China, Korea, East Asia, and maybe even in Europe. Is there a possibility that South Asia could benefit from their labor surplus compared to other countries, advanced countries in even in Asia that are going to face growing labor shortages? So is there a kind of common kind of South Asian opportunity stemming from not just its own demographic dividend, but also from the kind of demographic collapse in the rest of the world?

My second set of comments relate to Kathuria's approach of going through the challenges in each country. The approach I would like Kathuria (2025) to have taken is to examine South Asia through a regional approach rather than through individual country approaches. The latter could be dealt with in more detail in some of the other papers in this issue. Let me give just two examples related to macroeconomic instability and trade. Kathuria very rightly and nicely points out that Pakistan, and Sri Lanka, and even Bangladesh, and Nepal have experienced macroeconomic instability, but India has escaped this. Why is it that you know one country seems to have escaped macroeconomic instability and all the others have kind of fallen into this. Is it all just a country-specific explanation? That is, did India do all the right things on macro stability, while all the other countries did not, or is there some commonality that one can draw upon to explain the phenomenon of most South Asian countries falling into macroeconomic instability?

Is there a more common unified explanation for what is happening on the trade front? Is it just a change in the global zeitgeist where everyone is turning inward and therefore these countries are also turning inward? Given the way the world is changing, then maybe it is not so unusual that these South Asian countries are changing too. But this begs the question is South Asia right to succumb to these global winds of change? What is it about India (or maybe Bangladesh) that makes it less or more unsuitable for industrial policy or protectionism than say China or the United States? What is the case for India to do or not do industrial policy if the rest of the world is also doing it? This is the kind of common patterns where I think we would nicely benefit from some kind of common explanation or at least a contrast with what is happening in the rest of the world. If all these countries are turning inward, does it enhance the case for a South Asian cooperation trade integration or not? Similarly, in the context of climate change and the push to renewables, what is the role for South Asian cooperation?

Regional cooperative approaches offer one way of addressing some of the common challenges. What kind of role can India in regional cooperation? Is it incumbent on India, to create the conditions for, greater energy cooperation, greater trade cooperation? If not, why not? If yes, how should this be done? What should India be doing?