In-depth studies on poverty and vulnerability in Afghanistan, Bhutan, and Maldives are absent so far; however, level of poverty is thought considerably low in Maldives, highest in Afghanistan among South Asian countries and somewhere around South Asian average in Bhutan. These approximations are based on the differentials of the per capita income in the region. In terms of the purchasing power parity (PPP), the per capita annual income of Maldives (over US$5,000) stood highest in the region followed by Bhutan (US$4,837) and Sri Lanka (US$4,243) for 2007, according to the latest estimates of the United Nations Development Program. Although the reliability of the per capita income of Bhutan is under question, in the case of others, the PPP per capita annual income is less than US$3,000 – lowest in Nepal with slightly more than US$1,000.
Although per capita income is significantly higher in Bangladesh and Pakistan than in Nepal, the level of poverty in terms of the head count ratio has been estimated higher in the former – in the range of 33-49 percentage of the population – as compared to Nepal (31 percent), according the latest estimates of the World Bank. It signifies wider income inequality in these two Muslim countries as compared to Nepal.
South Asia is a least integrated region in the world if compared with ASEAN, EU, NAFTA, and others. The poorer countries in the region – Nepal, Bangladesh and Bhutan – trade significantly with India; more specifically, Nepal’s two-thirds regional trade is with India. On the other side, the first two biggest economies in the region – India and Pakistan – trade very little with South Asia (less than 3 percent of their global trade).
NATURE OF POVERTY
In terms of economic well-being and performance, the whole of South Asia can be divided into two blocks. One has better development infrastructures and possesses higher growth potential; the other South Asia is sluggish in terms of economic performance and development infrastructure. The first group of countries associates India, Pakistan, Maldives and Sri Lanka; the second group consists of Afghanistan, Nepal, Bangladesh, and possibly Bhutan too. Most of the second group countries are poor, land-locked (except Bangladesh), and with internal conflicts. In addition to these, individual countries have additional country-specific problems. Along with economic liberalism, public investment is declining in Bangladesh. Furthermore, private investment is also not growing well since 2006. The major problem in the Bangladesh economy according to a recently completed study by the World Bank is the lack of reasonable investment growth in infrastructures such as energy, transportation and communication. This has caused a major setback in the efforts of poverty reduction because the time and monetary cost of Bangladeshi products are becoming costlier in the world market. The same is the case of Nepal too. Since 2005, the growth of foreign direct investment has almost been zero in Nepal. More discouragingly, it remained negative during 2006 and the country faced capital flight with obvious negative impacts on employment generation that culminated with the out-migration flows of Nepali youths to the relatively fast growing Gulf region.
In agricultural activities, South Asian poor economies lack the commercial production and export of high-value food products. Although there are efforts, but no major breakthrough in favor of poor farmers has occurred in these poor economies – not only for Nepali, Bangladeshi, Bhutanese and Afghan poor farmers but also for Indian poor farmers. Although India has been experiencing approximately 9 percent annual GDP growth rate since the last two years, it has mostly confined to the urban sectors such as manufacturing, information technology (IT) industries, and other service sectors. Those who are poor are mostly rural farmers and they are untouched by these changes. Different studies show that because of the low agriculture productivity and deteriorating living conditions, approximately 20,000 poor Indian farmers commit suicide every year. This problem is high in Andhra Pradesh, Maharastra, Kerala, and Punjab. Even among them, the rate is highest in Maharastra where the annual suicide rate of Indian farmers remained approximately 5,000 according to the estimates of the past few years.
Lack of commercial production of high-value agricultural products and the lack of proper destinations of the existing low-value ones are the common problems of the South Asian village economies. However, there are some exceptions in this regard: Ganga Bridge in northern Bihar has contributed to the access of farm products of the region to the immense market of Patna. The same role has been played by the Jamuna Bridge in Bangladesh in Rajshahi area. However, the mega projects similar to these targeting the rural poor lack in the region as a whole.
Weak development infrastructure is causing chronic poverty in South Asia. Even the fast growing Indian economy’s rural area faces the same problem. Transportation, communication, software, and automobiles industries have very weak connection to the rural economy; therefore, translating the growth in poverty reduction has become a challenge in India. The Indian agriculture has dual problems: On the one hand, environmental concerns of the Western economies limit its penetration to the latter’s market while, on the other, farm productivity within the domestic economy is low. The domestic problem of Indian agriculture is poor irrigation facilities, lack of forward and backward linkages of agricultural activities, fragile rural agricultural roads and excessive government regulations, which is quite similar to other SAARC countries.
POTENTIAL INTERVENTIONS
World Bank has envisaged the potential decline of poverty in South Asia to 1 percent provided that the region attains 10 percent sustainable annual GDP growth till 2015. But, except India, this target is almost impossible to achieve in the coming five years.
The Doha round of trade negotiation considered the need for addressing food crisis in developing countries while undergoing multilateral trade liberalisation. This issue is fully relevant to the whole of South Asia. More specifically, Nepal’s foreign trade is utmost liberal in the region; therefore, it possesses the scope of enjoying the privileges associated with agricultural trade provided that it develops its capacity of high-value agricultural export. Overall, South Asia needs to diversify their farm products toward meeting growing global demand to be used in making bio-fuel. The success in this regard paves the way for potential entry of their agro-products in Western markets. In order to promote commercial farming of high-value crops that have geographical potentials in South Asia, and connected to the livelihoods of the poor, the member countries need to remove the non-tariff barriers to enhance their production and regional trade before fully integrating them in the world markets.
Emergence of slum and squatter urban areas is the looming problem in poverty reduction in South Asia. It is more apparent in Bangladesh and in many suburb areas of major Indian cities. Since the last one decade, this problem has also seriously emerged in Nepal too. Majority of these settlements are at the banks of the rivers such as Bagmati and Bishnumati in Kathmandu of Nepal, Yamuna in Agra and Ulhas in Mumbai of India, and Buriganga, Sitalakhya, Turag and Balu in Dhaka of Bangladesh. This is the major factor behind the widening inequality in South Asian urban areas where the population growth rate is fastest in the world now. But, the region lacks specific policy on legalisation or resettlement of urban poor dwelling in these areas so far.
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