South Asia Development Update October 2024

Women, Jobs, and Growth

South Asia’s growth is on track to exceed earlier expectations, in a broad-based upturn. The region is expected to remain the fastest-growing among emerging market and developing economies (EMDEs). Several risks could upend this generally promising outlook, including extreme weather events, social unrest, and policy missteps, such as reform delays. But South Asian countries also have considerable untapped potential that could help them further boost productivity growth and employment and adapt to climate change. In particular, with about two-thirds of the region’s working-age women out of the labor force, raising female employment rates to those of men could increase per capita income by as much as one-half. Measures to accelerate job creation, remove obstacles to women working, and equalize gender rights would be more effective if combined with a shift toward social norms that looked more favorably on working women.

Main Messages

Chapter 1. Rising Tide, Hidden Rocks

Output growth in South Asia is on track to exceed earlier expectations, at 6.4 percent in 2024 and 6.2 percent a year in 2025–26, in a broad-based upturn. It is expected to remain higher than in all other emerging market and developing economy (EMDE) regions. This outlook is subject to downside risks from extreme weather events, social unrest, debt distress, and reform delays. The region’s fragile fiscal and external positions leave few buffers against these downside risks. Boosting productivity growth and employment, especially among women, while adapting to climate change remain core policy challenges. Raising employment among women to levels comparable to those among men could raise output by as much as one-half in the long term. Increased openness to global trade and investment, along with the removal of obstacles to the growth of firms, could attract foreign investment, accelerate the diffusion of new technologies, and spur the private investment needed for job creation.
Box 1.1 Sheltered: Implications of Geoeconomic Fragmentation for South Asia

The global economy is fragmenting along geopolitical lines. South Asian economies have limited exposure to geopolitical shocks as they are among the quarter of EMDEs that are least open to global trade and investment. However, their lack of openness is not only protective. It also limits their ability to take advantage of the reshaping of global supply chains and trade. Although South Asian countries maintain fairly diverse trade and investment ties, they would benefit from further opening to global trade and investment, improvements in infrastructure and logistics, and greater institutional effectiveness. Cultivating diversified trading partners and creditors across the geopolitical spectrum could help South Asian countries mitigate vulnerabilities in a more open and dynamic economy.
Spotlight 1. Heat and Floods in South Asia: Household and Firm Exposure

Climate change is increasingly exposing South Asia to extreme heat, floods, and other weather shocks, but some groups are more exposed than others. Poorer South Asian households experience more heat than wealthier ones. In urban areas, poorer households also experience more damage and disruption from recurring flooding. And, in India, smaller firms are more exposed to both heat and flooding. These disparities highlight a need to remove obstacles to relocation, especially for the poor, and to spur the growth of firms. Information on the location of the most climate-affected people can inform targeting mechanisms for social protection systems that can readily respond to shocks.
Spotlight 2. Mind the Side Effects: Remittances and Economic Structure

Several South Asian countries are among the EMDEs with the highest remittance inflows relative to GDP. While remittances help reduce poverty and improve household education and health, large inflows can create currency appreciation pressures and international competitiveness losses, with adverse consequences for exports, non-agricultural sectors, and private investment. Governments can encourage remittance inflows but offset the associated loss of competitiveness by reducing other costs of doing business. For example, they can shift away from trade-related taxes and create an environment conducive to faster productivity and employment growth.
Chapter 2. Empower to Prosper: Women Working for Growth

Over the past three decades, South Asia has benefited from strong economic growth, accompanied by a shift toward services sectors, growing exports, and stronger legal protections for women. These changes have expanded opportunities for all, including for many women. And yet, women’s employment remains a source of untapped potential. South Asia’s female labor force participation remains among the lowest in the world: only 32 percent of working-age women in the region participate in the labor force, far below the EMDE average of 54 percent. This low participation rate represents a costly misallocation of resources: raising this rate to that of men could boost per capita incomes by up to one-half. A wide range of policies could help women enter the workforce. These include legal reforms to improve gender equality, faster job creation in non-agricultural sectors, and the removal of barriers to women working outside the home. Such measures are likely to be more effective if accompanied by a shift toward social norms that look more favorably upon women’s employment.

Charts & Data

Output growth

Growth in South Asia is expected to exceed earlier expectations, in a broad-based upturn, and to be faster than in other emerging market and developing economies.

^{Sources: Macro Poverty Outlook (World Bank); World Bank.
Note: e = estimate; f = forecast; EMDEs = emerging market and developing economies; SAR = South Asia. Bars show the average for fiscal year. Aggregation method is weighted average.}

Trade openness

South Asia’s lack of openness limits the region’s ability to leverage diverse geopolitical ties and benefit from the ongoing reshaping of global supply chains.

^{Sources: Aiyar and Ohnsorge (2024); World Development Indicators (database); World Bank.
Note: Red shades denote interquartile range for other EMDEs. Gray shades denote interquartile range for other small states. Trade is defined as the sum of goods and services exports and imports. Maldives uses 2022 data. Other EMDEs comprise 72 economies, and other small states comprise 13 economies (as defined in World Bank 2024l).}

Household wealth in urban locations with different temperatures

Households with lower wealth experience more heat than better-off ones in South Asia and smaller firms are more exposed to heat in India, suggesting the potential benefit of targeted policies to support such groups.

^{Sources: ERA5; Relative Wealth Index; World Bank.
Note: RWI refers to the Relative Wealth Index (Chi et al. 2022). OLS regression coefficients showing the relationship between relative wealth and temperature in urban areas. Temperature bins (in degrees Celsius) on the X-axis. Relative wealth, measured by the RWI, on the Y-axis. The bars indicate the mean Relative Wealth Index estimate for a given temperature bin. Whiskers indicate 95 percent confidence intervals. State fixed effects included. Standard errors are clustered at the district level.}

EMDE characteristics, by magnitude of remittance inflows

Countries with higher remittances have had higher imports and lower private investment.

^{Sources: Macro Poverty Outlook (World Bank), World Development Indicators (database), World Bank.
Note: RHS = Right-hand side. Bars represent country-decade real GDP-weighted average of EMDE country characteristics for the top (“High”) and bottom (“Low”) quartiles, based on average remittances-to-GDP ratios. Bars on the left-hand side shows imports of goods and services, in percent of GDP. Bars on the right-hand side shows private gross fixed capital formation, in percent of GDP. The whiskers are interquartile ranges. Sample includes up to 139 EMDEs, for decades in 1980-2023.}

South Asia: Female employment shares

South Asian countries have female labor force participation rates that rank among the lowest in emerging market and developing economies.

^{Sources: International Labour Organization; World Development Indicators (database); World Bank.
Note: Red shaded region indicates interquartile range of EMDEs excluding South Asia (Afghanistan, Bangladesh, Bhutan, India. Maldives, Nepal, Pakistan, Sri Lanka). EMDE averages are weighted by working-age population. Female (male) labor force participation rate is the share of the female (male) working-age population (15+) employed or looking for work, measured using ILO’s ILOStat modeled data. Even if national data, based on national definitions, were used for South Asia, all countries except Bhutan and Maldives would remain in the bottom quartile among EMDEs. All regional averages are weighted by working-age population. Afghanistan has not published any official statistics since 2020.}

Women’s legal rights and social norms

South Asian countries have legal frameworks that are among the least women-friendly in the world. They also have some of the most conservative gender attitudes in the world, with 70 percent of the population expressing beliefs that are opposed to women working outside the home.

^{Sources: UN Comtrade; World Bank World Development Indicators (database); World Bank Women, Business, and the Law (database); World Bank Global Labor Database labor force survey microdata (database); World Bank-Facebook Survey on Gender Equality at Home (database); World Bank.
Note: Diamonds show the share of respondents who agreed with the “female homemaker” norm by region; data is from 2020. Bars show the average legal index score by region. All regional averages are weighted by the working-age population.}

Blogs

How can South Asia unlock its untapped potential?

The growth outlook for South Asia is promising, but the region can do more to realize its full economic potential such as increasing women's employment and opening up to global trade. World Bank South Asia Vice President Martin Raiser explores in this blog.
Rising Tide, Hidden Rocks: South Asia’s outlook in five charts

Output growth in South Asia is on track to exceed earlier expectations, at 6.4 percent in 2024 and 6.2 percent a year in 2025–26, and remain higher than in all other emerging market and developing economy (EMDE) regions.
Empower to prosper: women, jobs, and growth in South Asia

“Empower to prosper.” It’s a simple but powerful idea. What would happen if women had access to job opportunities and gained more agency? Could this significantly boost growth in South Asia?