Economic Growth in South Asia

Abstract

We investigate the proximate determinants of economic growth in South Asia from 1996 to 2010. The study is conducted in a panel data framework with a special emphasis on the role of institutions in conjunction with physical capital stock, human capital stock and openness as the major predictor variables. Moreover, we also attempt to ascertain the direct and indirect effects of corruption on the economies in South Asia and thereby estimate the effects of various constraints that could restrict high growth in the region in the near future. Human capital stock and openness are crucial to the region’s economic growth, but institutions need substantial reform if the accelerated growth rates are to be sustained. The impact of physical capital stock is subject to each country’s institutional quality. Corruption is found to have a negative influence on the economies of South Asia, and its interplay with weak institutions tends to magnify this adverse impact. In the future, institutional reform should be directed towards curbing the ill effects of corruption to sustain the growth of South Asian countries.