South Asia and the Global Financial Crisis

While most of the world’s attention has been focused on the growth and dynamism of China and the East Asian region, South Asia has quietly been growing at 6.8 per cent per year over the past decade. While people are becoming more aware of the Indian growth story, its South Asian neighbours, Bangladesh in particular, but also Pakistan and Sri Lanka, have also experienced growth spurts. Increased openness to trade particularly in the past decade has no doubt been an important factor behind the region’s robust growth. ¹ Greater private capital inflows have also played a role in promoting growth, particularly in India. ² However, this increased openness also implies that, like its East Asian neighbours, India and some of the other South Asian countries were not immune to the financial crisis, particularly following the collapse of Lehman Brothers in September 2008. This was in sharp contrast to 1997–8 when India and its South Asian neighbours were by and large unaffected by the severe financial crisis that started in Thailand and engulfed most of the rest of East Asia.