All values, unless otherwise stated, are in US dollars.
GDP per capita development in South Asia from 1950 to 2022
The economy of South Asia comprises 2 billion people (25% of the world population) living in eight countries (though Afghanistan is sometimes excluded).[6][7] The Indian subcontinent was historically one of the richest regions in the world, comprising 25% of world GDP as recently as 1700,[8][9] but experienced significant de-industrialisation and a doubling of extreme poverty during the colonial era of the late 18th to mid-20th century.[10] In the post-colonial era, South Asia has grown significantly, with India advancing because of economic liberalisation from the 1980s onwards,[11] and extreme poverty now below 15% in the region.[12] South Asia has been the fastest-growing region of the world since 2014.[13]
Despite projected growth rates of about 6.0-6.1 percent for 2024-2025, South Asia continues to face significant economic challenges. A notable slowdown in private investment, especially in key sectors such as manufacturing and services, poses a major concern. Additionally, persistent employment issues, particularly low female workforce participation, highlight broader socio-economic disparities. The region is also critically vulnerable to climate-related impacts, including flooding and heatwaves, which significantly affect the agricultural sector—a fundamental component of local economies. This environmental susceptibility strains the already limited capacity of the public sector to adapt, increasing dependence on resilience initiatives from local businesses, farmers, and vulnerable communities.[14]:xv
Indus Valley Civilisation, the early civilisation of India and Pakistan, developed the economy of agriculture and craft which later spread into central India.[15]Angus Maddison estimates that from 1-1000 AD, the regions making up the present-day India contributed roughly 30% of the world's population and GDP.[16]
India experienced per-capita GDP growth in the high medieval era, coinciding with the Delhi Sultanate.[17] By the late 17th century, most of the Indian subcontinent had been united under the Mughal EmperorAurangzeb, which for a time Maddison estimates became the largest economy and manufacturing power in the world, producing about a quarter of global GDP, before fragmenting and being conquered over the next century.[18]
Until the 18th century, Mughal India was one of the most important manufacturing centers in international trade.[19] This growth of manufacturing has been seen as a form of proto-industrialization, similar to 18th-century Western Europe prior to the Industrial Revolution.[20] Indian subcontinent went through a period of deindustrialization in the latter half of the 18th century as an indirect outcome of the collapse of the Mughal Empire, and that British rule later caused further deindustrialization. [21]
India experienced deindustrialisation and cessation of various craft industries under British rule,[22] which along with fast economic and population growth in the Western world, resulted in India's share of the world economy declining from 24.4% in 1700 to 4.2% in 1950,[23] and its share of global industrial output declining from 25% in 1750 to 2% in 1900.[22] Due to its ancient history as a trading zone and later its colonial status, colonial India remained economically integrated with the world, with high levels of trade, investment and migration.[24]
The role and scale of British imperial policy during the British Raj (1858 to 1947) on India's relative decline in global GDP remains a topic of debate among economists, historians, and politicians. Some commentators argue that the effect of British rule was negative, and that Britain engaged in a policy of deindustrialisation in India for the benefit of British exporters, which left Indians relatively poorer than before British rule. Others argue that Britain's impact on India was either broadly neutral or positive, and that India's declining share of global GDP was due to other factors, such as new mass production technologies or internal ethnic conflict.
Contemporary era
Post-colonial era
A 1959 map showing how most of Asia was communist (in red), with Pakistan (blue) being more aligned with capitalist powers than India. The resulting Cold War dynamics impacted South Asian geoeconomics in the late 20th century.
In the aftermath of in the late 1940s and the Indian subcontinent's independence from British rule, Pakistan chose to have a more capitalistic economy and aligned itself more closely with the United States, while India went with a more closed economy dubbed as the "License Raj" and eventually aligned more closely with the Soviet Union. Rising economic inequality and misrule by West Pakistan towards East Pakistan contributed to the 1971 independence of Bangladesh, however. Both India and Pakistan then went through a period of economic liberalisation in the 1980s and '90s, which resulted in India going from having around half of Pakistan's GDP per capita in 1990 to surpassing Pakistan by the 2010s.[25] Bangladesh, which had started off substantially poorer than both India and Pakistan at the time of its independence, has grown substantially, and has also surpassed Pakistan's GDP per capita.[27]
Recent decades
India is the largest economy in the region (US$4.11 trillion) and makes up almost 80% of the South Asian economy; it is the world's 5th largest economy in nominal terms and the world's 3rd largest economy by purchasing power adjusted exchange rates (US$14.26 trillion).[4] India is the member of G-20 major economies and BRICS from the region. It is the fastest-growing major economy in the world and one of the world's fastest registering a growth of 7.2% in FY 2022-23.[28]
India is followed by Bangladesh, which has a GDP of ($446 billion).
a. It is one of the emerging and growth-leading economies of the world, and is also listed among the Next Eleven countries. It is also one of the fastest-growing middle-income countries. It has the world's 33rd largest GDP in nominal terms and is the 27th largest by purchasing power adjusted exchange rates (476015 trillion). Bangladesh's economic growth was 6.4% in 2022.[29] Pakistan has an economy of ($379 billion nominal GDP.[30] Next is Sri Lanka, which has the 2nd highest GDP per capita and the 4th largest economy in the region.
While in East Asia, regional trade accounts for 50% of total trade, it accounts for only a little more than 5% in South Asia.[31] Certain parts of South Asia are significantly wealthier than others; the four Indian states of Maharashtra, Tamil Nadu, Gujarat and Karnataka are projected to account for almost 50% of India's GDP by 2030, while the five South Indian states comprising 20% of India's population are expected to contribute 35% of India's GDP by 2030.[32]
Maharashtra is a "State-only", not a "State-cum-Country", Tamil Nadu is also a "State-only", not a "State-cum-Country", West Bengal is also a "State-only", not a "State-cum-Country".
Poverty rates vary greatly throughout the region, with a majority of Afghanistan relying on humanitarian aid,[40] and 40% of Sri Lankans slipping into poverty due to the economic crisis that started in 2019.[41]
Nearly 70% of India's GDP is driven by domestic consumption;[70] the country remains the world's third-largest consumer market.[71] Aside from private consumption, India's GDP is also fueled by government spending, investments, and exports.[72] As of 2025, India is the world's 7th-largest importer and the 10th-largest exporter.[73] India is often described as the ‘pharmacy of the world’, supplying roughly 20% of the global demand for generic medicines and exporting pharmaceuticals to over 200 countries in 2023–24, with around 70% of exports to highly regulated markets like North America and Europe.[74][75] India has been a member of the World Trade Organization since 1 January 1995.[76] It ranks 40th on the Global Competitiveness Index.[77][78] As of 2025, India ranks third in the world in total number of billionaires.[79] According to the World Bank, India's Gini index fell to 25.5 in 2022‑23, making it the fourth-most equal country globally, suggesting significant progress in income equality.[80][81][82][83] Economists and social scientists often consider India a welfare state.[84][85][86][87] India's overall social welfare spending stood at 8.6% of GDP in 2021-22.[88][89] With 607 million workers, the Indian labour force is the world's second-largest.[90] Although India's labour productivity is lower than advanced economies, it aligns with levels observed in many emerging Asian countries like China.[91]
In 2021–22, the foreign direct investment (FDI) in India was $82 billion. The leading sectors for FDI inflows were the Finance, Banking, Insurance and R&D.[92] India has established free trade agreements and economic‑partnership with several countries and regional blocs, including ASEAN, SAFTA, Japan, South Korea, Australia, New Zealand, Oman and the United Arab Emirates, while also concluding agreements with EFTA (Iceland, Liechtenstein, Norway, Switzerland) and the United Kingdom. India maintains Comprehensive Economic Cooperation Agreements (CECA/CEPA) with Singapore, Malaysia, Mauritius, and Japan, and continues to negotiate or review trade agreements with partners such as Chile, Canada, Israel, the European Union, and the Eurasian Economic Union. Additionally, India has bilateral investment and tax treaties with countries including Bangladesh, Uzbekistan, Kyrgyzstan, Belarus, and Trinidad & Tobago.[93][94][95][96][97]
As of 2025, the service sector accounts for around 55% of GDP. [98] India has two of the world's ten largest stock exchanges (both by trade volume and market capitalisation).[99] According to United Nations Industrial Development Organization (UNIDO) India is the world's fifth-largest manufacturer, representing 3.2% of global manufacturing output.[100] India’s digital economy was estimated at US$402 billion in 2022–23, equal to about 11.74% of GDP, and is projected to rise to around 13.4% by 2024–25 and nearly 20% of GDP by 2029–30, with its total value expected to surpass US$1 trillion by 2029.[101][102] Nearly 63% of India's population is rural,[100] and contributes about 46% of India's GDP.[103][104] India's unemployment rate remained at 3.2% in 2023–24.[105] The labour force participation rate reached 60.1% overall, with a worker–population ratio of 58.2%.[105] India's gross domestic savings rate stood at 29.3% of GDP in 2022.[106]
Industrialisation in Bangladesh received a strong impetus after the partition of India due to labour reforms and new industries.[113] Between 1947 and 1971, East Bengal generated between 70% and 50% of Pakistan's exports.[114][115] Modern Bangladesh embarked on economic reforms in the late 1970s which promoted free markets and foreign direct investment. By the 1990s, the country had a booming ready-made garments industry. As of 16 March 2024, Bangladesh has the highest number of green garment factories in the world with Leadership in Energy and Environmental Design (LEED) certification from the United States Green Building Council (USGBC), where 80 are platinum-rated, 119 are gold-rated, 10 are silver, and four are without any rating.[116] As of 6 March 2024, Bangladesh is home to 54 of the top 100 LEED Green Garment Factories globally, including 9 out of the top 10, and 18 out of the top 20.[117] As of 27 April 2024, Bangladesh has a growing pharmaceutical industry with 12 percent average annual growth rate. Bangladesh is the only nation among the 48 least-developed countries that is almost self-sufficient when it comes to medicine production as local companies meet 98 percent of the domestic demand for pharmaceuticals.[118] Remittances from the large Bangladeshi diaspora became a vital source of foreign exchange reserves.[119] Agriculture in Bangladesh is supported by government subsidies and ensures self-sufficiency in food production.[120][121] Bangladesh has pursued export-oriented industrialisation.[122][123]
Bangladesh experienced robust growth after the pandemic with macroeconomic stability, improvements in infrastructure, a growing digital economy, and growing trade flows.[124] Tax collection remains very low, with tax revenues accounting for only 7.7% of GDP.[125] Bangladesh's banking sector has a large amount of non-performing loans or loan defaults, which have caused a lot of concern.[125][126] The private sector makes up 80% of GDP.[127][128] The Dhaka Stock Exchange and Chittagong Stock Exchange are the two stock markets of the country.[129] Most Bangladeshi businesses are privately owned small and medium-sized enterprises (SME) which make up 90% of all businesses.[130]
In its early years, Pakistan's economy relied heavily on private industries. The nationalization of a significant portion of the sector, including financial services, manufacturing, and transportation, began in the early 1970s under Zulfikar Ali Bhutto. During Zia-ul Haq's regime in the 1980s, an "Islamic" economy was adopted, outlawing economic practices forbidden in Sharīʿah and mandating traditional religious practices. The economy started privatizing again in the 1990s.
The economic growth centers in Pakistan are located along the Indus River; these include the diversified economies of Karachi and major urban centers in Punjab (such as Faisalabad, Lahore, Sialkot, Rawalpindi, and Gujranwala), alongside less developed areas in other parts of the country. In recent decades, regional connectivity initiatives such as the China-Pakistan Economic Corridor (CPEC) have emerged as pivotal contributors to infrastructure and energy development, with long-term implications for economic stability. Pakistan was classified as a semi-industrial economy for the first time in the late 1990s, albeit an underdeveloped country with a heavy dependence on agriculture, particularly the textile industry relying on cotton production. Primary export commodities include textiles, leather goods, sports equipment, chemicals, and carpets/rugs.
Pakistan is presently undergoing economic liberalization, including the privatization of all government corporations, aimed at attracting foreign investment and reducing budget deficits. However, the country continues to grapple with challenges such as rapid population growth, widespread illiteracy, political instability, hostile neighbors, terrorism and heavy foreign debt.
The Afghan economy continues to improve due to the influx of expats, establishment of more trade routes with neighboring and regional countries, and expansion of the nation's agriculture, transport, energy and mining sectors. The billions of dollars that came from expats and the international community saw this increase when there was more political stability.
Despite holding mineral deposits worth over trillion dollars, Afghanistan remains one of the least developed countries in the world. Its unemployment rate is little over 13%, and around 48% of its population lives below the poverty line. The reason for this has been the continuous war in the country, which deterred major infrastructure developments and foreign investments. The population of Afghanistan increased by more than 50% between 2001 and 2014, while its GDP grew eightfold. After the Islamic Emirate's return to power in 2021, the Biden administration decided to confiscate or withhold $9.5 billion worth of Afghanistan's assets to stop the Taliban from accessing it.
Bhutan's economy is closely aligned with India's through strong trade and monetary links and dependence on India's financial assistance. Most production in the industrial sector is of the cottage industry type. Most development projects, such as road construction, rely on Indian migrant labour. Model education, social, and environment programmes are underway with support from multilateral development organisations.
Each economic programme takes into account the government's desire to protect the country's environment and cultural traditions. For example, the government, in its cautious expansion of the tourist sector, encourages visits by upscale, environmentally conscientious tourists. Detailed controls and uncertain policies in areas such as industrial licensing, trade, labour, and finance continue to hamper foreign investment. Hydropower exports to India have boosted Bhutan's overall growth, even though GDP fell in 2008 as a result of a slowdown in India, its predominant export market.
Since 1961, the government of Bhutan has guided the economy through five-year plans in order to promote economic development.[131]
On 8 December 2023, Bhutan graduated from the UN's list of least developed countries (LDCs), making it only the 7th country to do so and the first in 3 years.[134][135]
In ancient times, Maldives were renowned for cowries, coir rope, dried tuna fish (Maldive fish), ambergris (maavaharu) and coco de mer (tavakkaashi). Local and foreign trading ships used to load these products in the Maldives and bring them abroad.
Nowadays, the mixed economy of Maldives is based on the principal activities of tourism, fishing and shipping. This results from the Maldives' strategic geographic positioning near crucial sea routes essential for China's energy provisions. Consequently, China has persistently utilised its economic resources to enhance its sway over the Maldivian government.
Tourism is the largest industry in the Maldives, accounting for 28% of GDP and more than 60% of the Maldives' foreign exchange receipts. It powered the current GDP per capita to expand 265% in the 1980s and a further 115% in the 1990s. Over 90% of government tax revenue flows in from import duties and tourism-related taxes.
Fishing is the second leading sector in the Maldives. The economic reform program by the government in 1989 lifted import quotas and opened some exports to the private sector. Subsequently, it has liberalised regulations to allow more foreign investment.
Agriculture and manufacturing play a minor role in the economy, constrained by the limited availability of cultivable land and shortage of domestic labour. Most staple foods are imported.
Industry in the Maldives consists mainly of garment production, boat building, and handicrafts. It accounts for around 18% of GDP. Maldivian authorities are concerned about the impact of erosion and possible global warming in the low-lying country.
Among the 1,190 islands in the Maldives, only 198 are inhabited. The population is scattered throughout the country, and the greatest concentration is on the capital island, Malé. Limitations on potable water and arable land, plus the added difficulty of congestion are some of the problems faced by households in Malé.
Development of the infrastructure in the Maldives is mainly dependent on the tourism industry and its complementary tertiary sectors, transport, distribution, real estate, construction, and government. Taxes on the tourist industry have been plowed into infrastructure and it is used to improve technology in the agricultural sector.
Nepal’s economy is largely driven by agriculture, services, industry, and tourism. Agriculture remains the main source of livelihood for most of the population, while the service sector including trade, transport, and communications has become increasingly important. In recent years, hydropower , manufacturing, and information technology have shown growing potential, supported by government efforts to attract investment and improve infrastructure. The country continues to pursue policies aimed at sustainable growth and regional economic integration.
Sri Lanka has met the Millennium Development Goal (MDG) target of halving extreme poverty and is on track to meet most of the other MDGs, outperforming other South Asian countries. Sri Lanka's poverty headcount index was 4.1% by 2016. Since the end of the three-decade-long Sri Lankan Civil War, Sri Lanka has begun focusing on long-term strategic and structural development challenges and has financed several infrastructure projects.
High foreign debt, economic mismanagement under the governments of Gotabhaya and Mahinda Rajapaksa,[139] and reduced tourism revenue led to the country defaulting on its sovereign debt in April 2022.[140] The economy contracted 7.8% in 2022, and the percentage of the population earning less than $3.65 a day doubled to around 25% of the population. On March 20, 2023, the IMF loaned US$3 billion to the country as part of a 48-month debt relief program.[141]
In the South Asia Development Update for April 2024, the World Bank reports that South Asia is projected to sustain its position as a leading growth region among emerging markets, largely propelled by India's robust economic performance. Nonetheless, the region's dependency on the public sector for economic progress, combined with a lag in private investment and the presence of macroeconomic challenges such as high levels of debt and fiscal deficits, poses risks to its stability and growth. These factors may impede the region's capacity to effectively address climate-related issues and to make the most of the demographic dividend offered by its young population. The World Bank emphasizes the critical need for policy reforms aimed at stimulating job creation, particularly for women and in non-agricultural sectors, and for fostering private sector development to ensure continued economic growth and to leverage the demographic dividend. The update highlights that strategic responses to climate change and a focus on creating a resilient job market are indispensable for maintaining the momentum of South Asia's development trajectory.[142][143]
↑Parthasarathi, Prasannan (2011), Why Europe Grew Rich and Asia Did Not: Global Economic Divergence, 1600–1850, Cambridge University Press, p.2, ISBN978-1-139-49889-0
↑Individual country percentages may not add up to 100% due to rounding. Afghanistan not included in 2022 totals due to year mismatch. World Economic Outlook also does not count Afghanistan in the South Asia subtotals.
↑"UNGEGN List of Country Names"(PDF). United Nations Group of Experts on Geographical Names. 2007. Archived(PDF) from the original on 28 July 2011. Retrieved 28 July 2011.
↑Shirish Sankhe; Anu Madgavkar; Gautam Kumra; Jonathan Woetzel; Sven Smit; Kanmani Chockalingam (August 2020). "India's turning point"(PDF). McKinsey Global Institute. Retrieved 19 August 2024.
↑Kapur, D. and Nangia, P. (2015) 'Social Protection in India: A Welfare State Sans Public Goods?', India Review, 14(1), pp. 73–90. doi:10.1080/14736489.2015.1001275.
↑Aspalter, Christian, The State and the Making of the Welfare System in India (14 December 2010). Journal of National Development, Vol. 3, No. 1, pp. 149-79, 2003, Available at SSRN1725132
↑Jayal, Niraja Gopal. "The Gentle Leviathan: Welfare and the Indian State." Social Scientist, vol. 22, no. 9/12, 1994, pp. 18–26. JSTOR, doi:10.2307/3517911. Retrieved 5 June 2024.
↑Bava, N. (1996). The Welfare State and Liberalisation in India. Indian Journal of Public Administration, 42(3), 334-346. doi:10.1177/0019556119960312
↑"FDI Statistics"(PDF). Department for Promotion of Industry and Internal Trade, MoCI, GoI. Archived(PDF) from the original on 27 July 2022. Retrieved 31 May 2022.
↑Al Mamun, K. A.; Nath *, H. K. (15 May 2005). "Export-led growth in Bangladesh: a time series analysis". Applied Economics Letters. 12 (6): 361–364. doi:10.1080/13504850500068194. S2CID218640035.
↑World Bank. 2024. Jobs for Resilience. South Asia Development Update (April 2024). World Bank, Washington, DC. doi: 10.1596/978-1-4648-2103-5. License: Creative Commons Attribution CC BY 3.0 IGO
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