South Asia Economic Focus Reshaping Norms Report: World Bank

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• Recently, the World Bank has released a report stating that growth in the Indian Subcontinent will be slower than previously projected, due to the impacts of the war in Ukraine.

Key highlights of the report

• Economic growth in southern Asia will be slower than previously projected due to the impacts of the war in Ukraine.
• Growth: It projects the region to grow by 6.6 per cent in 2022 and by 6.3 per cent in 2023.
  • The 2022 forecast has been revised downward by 1 percentage point.
• Though GDP growth continues to be solid during the recovery, all countries in the region will face challenges ahead.
• Uneven growth: Although the region’s economy is growing again, the recoveries have been uneven across sectors, countries, and groups of people.
• Gender equality: South Asia lags other regions, apart from the Middle East and North Africa, in gender outcomes and in attitudes towards gender equality.
  • Social norms are even more traditional than people’s individual attitudes.

Major challenges

• Countries in the Indian Subcontinent are already grappling with rising commodity prices, supply bottlenecks and vulnerabilities in financial sectors.
  • The war in Ukraine will amplify these challenges, further contributing to inflation, increasing fiscal deficits and deteriorating current account balances.
• South Asia has faced multiple shocks in recent years, including the scarring effects of the COVID-19 pandemic.
  • High oil and food prices caused by the war in Ukraine will have a strong negative impact on peoples’ real incomes.
• Another challenge the region faces is the disproportionate economic impact the pandemic has had on women.
  • It is linked with deeply rooted social norms.
• In India, household consumption will be constrained by the incomplete recovery of the labour market and inflationary pressures.
• Maldives faces vulnerabilities due to its large imports of fossil fuels as a share of GDP and a reduction in tourists from Russia and Ukraine.
• In Sri Lanka, the economic outlook is highly uncertain due to fiscal and external imbalances.
• In Afghanistan, higher food prices will exacerbate food insecurity.
• Pakistan’s challenges in the current environment are its energy subsidies, which are the largest in the region.
• Bangladesh will face weaker demand from Europe for its exports.

Suggestions/Recommendations

• Governments need to carefully plan monetary and fiscal policies to counter external shocks and protect the vulnerable, while laying the foundation for green, resilient and inclusive growth.
• The war and its impact on fuel prices can provide the region with much-needed impetus to reduce reliance on fuel imports and transition to a green, resilient and inclusive growth trajectory.
• The report recommends that countries steer away from inefficient fuel subsidies that tend to benefit wealthier households and deplete public resources.
• Countries in the Indian Subcontinent should also move towards a greener economy by gradually introducing taxation that puts tariffs on products which cause environmental damage.
  • The introduction of green taxation can have multiple quantifiable benefits for South Asia, including improved energy security, environmental gains and increased fiscal revenues.
• Revenues could be utilised for adaptation against climate-related disasters and to strengthen social safety net systems.
• Government should recommend policies that will support women’s access to economic opportunities, tackle discriminatory norms, and improve gender outcomes for inclusive growth.
• The introduction of green taxation can have multiple quantifiable benefits for South Asia, including improved energy security, environmental gains and increased fiscal revenues,

Source:TH