Introduction

Part I Introduction

1 South Asia at a Glance A Taxonomy of Growth Challenges

The Development Challenges of South Asia

Large Population and Population Growth

Low Growth of Human Capital and Poor Human Development Indicators

Literacy and Education

Health

Poverty

Continued Dependence on Low Productivity Agriculture

Low Rates of Capital Formation and Savings

Large Debt Burden

Corruption

Political Instability

Industry, Trade, and Aid: Stylized Features of South Asia's Economy

Structure of the Economy

Trade Challenges in SAARC

Multifibre Arrangement

WTO Readiness

The Economics of Aid and Debt

Causes of Debt: The Case of Pakistan

Summary

Notes

References

Additional Works Consulted

2 The Political Economy of South Asia

India's Policies Toward the Subcontinent: The Political Dimension

India's Policies Toward the Subcontinent: The Economic Dimension

U.S. Policy Toward the Subcontinent: Political Aspects

U.S. Policy Toward South Asia: The Economic Dimension

China's Policies Toward South Asia: Political Factors

China's Policies Toward South Asia: Economic Factors

Concluding Comments: A Political Economy of South Asia?

Notes

Part II Macroeconomic Performance and Issues in Economic Growth

3 India's Economic Growth Miracle in a Global Economy Past and Future

Historical Perspectives

Traditions and Opportunities

Globalization

International Governance Reform

Theory of Economic Growth and Development

Model I Human Capital and Growth

Model II Human Capital and International Trade—Rapid Growth or Growth Miracle?

Model III Demographic and Industrial Transition 5

Discussion and Remarks

The Deeper Determinants of Growth 6

Innovation-Based Economic Growth

Growth Strategies

Government Failure Approach

Market Failure Approach

An Institution-Building Strategy

The Economic Role of Institutions

Social Capital and Informal Institutions

Summary and Concluding Remarks

Notes

References

4 Twin Deficits in South Asian Economies Observations and Empirical Evidence

Twin Deficits: Theoretical Perspective and Empirical Evidence

Twin Deficits: The South Asian Experience

Internal and External Balances in South Asia

Bangladesh

Bhutan

India

Nepal

Pakistan

Sri Lanka

The Historical Trend of Twin Deficits in South Asia

Twin Deficits in South Asian Economies: Econometric Analysis

Methodology and Data

Empirical Results

Concluding Remarks

Notes

References

5 Emergence, Severity, and Contours of the Fiscal Deficit in India and South Asia

Why Does the Fiscal Deficit Matter?

The Fiscal Deficit: What Does It Measure?

Sustainability of the Domestic Fiscal Debt

The Fiscal Deficit Experience in South Asia

The Fiscal Deficit Situation in India

Toward More Sustainable Fiscal Deficits in South Asia

Conclusions

Notes

References

6 Foreign Public Capital and Economic Growth of Developing Countries A Selected Survey

Theoretical Literature on the Effects of Foreign Capital

Context and Origins

The Harrod-Domar Model

Rostow's Approach

Rosenstein-Rodan's Approach

The Gap Models

The Dutch Disease Mechanism

Foreign Capital and Domestic Savings

Fungibility of Foreign Capital

Theoretical Literature on Debt Issues

Debt Cycle Model

Debt Overhang Theory

Conclusion

Notes

References

7 Foreign Investment and Economic Growth A Case Study of India

Foreign Direct Investment and the Developing Countries

Foreign Direct Investment in India

Major Sources of Foreign Direct Investment

Sectoral Trends

Regional Distribution of Foreign Direct Investment

Determinants of Foreign Direct Investment in India

Concluding Remarks

Notes

References

8 Human Capital Investment and Development in South Asia

The Neoclassical Growth Theory

Endogenous Growth Theories Incorporating Human Capital

Human Capital and Economic Growth: The Evidence

Endogeneity in Estimated Models

Human Development in South Asian Countries

Human Development Index

Literacy

Gross Enrollment Ratios

Tertiary Education

Government Expenditure on Education

Determinants of Schooling

Evaluating the Programs of the Educational Sector

Bangladesh

Pakistan

India

Conclusion

Notes

References

9 Poverty in Pakistan and South Asia Concept, Measurement, and Analysis

What Is Poverty?

Measuring Poverty

Extent of Poverty in Pakistan

Steps Taken by the Government to Alleviate Poverty

Impact of IMF/World Bank Structural Adjustment Programs on Poverty in Pakistan

Poverty Trends in Other South Asian Countries

India

Bangladesh

Sri Lanka

Poverty in South Asia: A Comparison with Other Regions

Conclusion

Notes

References

Part III Globalization, Trade, and Development

10 South Asia's Trade and Commercial Relations with Canada

Importance of Trade in the South Asian Economies

Volume, Composition, and Direction of South Asian Trade

Evolution of South Asian Trade Policies and Priorities

Engagement in the World Trade Organization

Textiles and Clothing

Nonagricultural Market Access

Services

Agriculture

Governance of the Multilateral Trading System

Canada's Trade Relations with South Asia

Notes

References

11 Regional Economic Cooperation Under SAARC Possibilities and Constraints

Free Trade in South Asia: The Empirical Evidence

The Experience of Preferential Trade in South Asia

The Political-Economy Relations in South Asia: Is There a Role for SAFTA?

Conclusion

Notes

References

12 Repositioning SAFTA in the Regionalism Debate

The Debate on RTAs

Arguments in Favor of RTAs as Building Blocks

Arguments for RTAs as Stumbling Blocks

Contemporary Debate on Regionalism: Other Viewpoints

South Asian Perspective on RTAs

Concluding Remarks

Notes

References

Web Sites

13 Market-Oriented Policy Reforms and Export-Led Industrialization The Sri Lankan Experience

The Policy Context

Trade Policy

Foreign Direct Investment Policy

Accompanying Policies and the Investment Climate

Manufacturing Performance

Growth Trends

Trends and Patterns of Manufactured Exports

Employment

The Role of Foreign Direct Investment

Conclusions

Notes

References

14 Globalization and Economic Development

Drivers of Globalization

Globalization of the Labor Market

Globalization of Capital Markets

The Case Against Globalization

Implications of Globalization for South Asia

Conclusions

Notes

References

Part IV Corruption in Governance and Its Effects

15 Decentralization of Governance and Development

Departures from the Fiscal Federalism Literature

Adapting the Theory of Decentralization for Developing Countries

Empirical Evaluation of Decentralized Delivery of Public Services

Decentralization and Local Business Development

Conclusion

Notes

References

16 Governance Issues in India

Corruption Perception Index

Per Capita Relationship

Broad Governance Indicators

Bribe Payers Index

Conclusion

References

17 Corruption in South Asia Causes and Consequences

Corrupt Agents

Corrupt Governments

Reform in Empirical Research

Policy Distortions

Lack of Competition

Freedom of the Press, the Judiciary, and Democracy

Recruitment and Salaries

Cultural Determinants

Additional Variables

Conclusions

Notes

References

18 Military Expenditure in South Asia A Case Study of Economic Irrationality

The Changed Security Environment

Milex in South Asia

Some Economic and Social Consequences of Arms Races

Milex and Economic Growth

Milex and Poverty

Is Milex Decision Making Economically Rational?

The Case for Demilitarization

References

List of Contributors

Index