COVID-19 and Throttling South Asia’s Economy

The year started with the health emergency­­—Covid-19—which later became a global pandemic and gave rise to an economic as well as humanitarian crisis. The governments across the world decided to implement nationwide lockdowns to contain the spread of the virus and save lives. As a result, economic activities were put on halt and millions became jobless. The nation-wide lockdowns and decline in economic activity across globe led the world economy in the worst recession proceeded by the Great Depression of 1930. South Asian region constitutes a quarter of the global population and more than one-third its total population lives under the poverty line and suffer from social pandemics like hunger and poverty and have minimal opportunities and facilities respectively. This overpopulated and relatively deprived region was most stricken from the economic recession and the quarantine period of six months obliterated the developmental pace countries of this region had secured so far. People living at the extreme margins have been influenced by the disintegrated social protection, extensive informal economic activities and huge vacuum in public health infrastructure. The pandemic has also undermined the progress this region has made to achieve the Sustainable Development Goals (SDGs).

Although the novel coronavirus pandemic had affected the economic development of all countries but South Asia is among the most affected one. The virus had many maleficent effects, which will be experienced by the global population in the years to come. The Asian Development Bank (ADB) estimated that COVID-19 had resulted in economic losses worth $4 trillion and coerced the countries to turn inwards. Territorial borders were closed, masses were sequestered, and international institutions doing their utmost to not lose their influence, and ideals of cooperation and interaction do not subside. World witnessed a surge in isolationism, racism, ethnocentrism, protectionism and inequality, and new forms of inequality, injustice, discrimination became surfacing in terms of international travel. Besides, there had been different types of barriers in the health sector as well, where the underdeveloped countries received less attention and contagion became a blame game. The new types of racism have been witnessed by fanning the flames of hatred which already existed. This never-ending blame game is sowing new seeds of conflicts and anarchy in the world. Today, the world is interconnected and interdependent, and a development in one part of the world have repercussions for other regions as well.

The policies of protectionism, which are adopted by the nations across the globe, have thrown the global supply chains into disarray. As the anxiety and fear increased, there has been an increase in the opposition by the countries for cooperation and trade exchange, as they want to hoard the supplies for their personal use. The consequences and implications of this protectionism is hindering the global cooperation and prevalence of such practices can abolish the liberal order of the world.  It will also have a ripple effect on the other halves of the world, specifically for South Asian region. The South Asian region has already witnessed a public health disaster in the pandemic. There is economic instability, poor governance, political turmoil, terrorism and unending conflicts in the region. The virus has threatened the social and economic environment of the South Asian region because it is already densely populated and practicing social distancing is impracticable. Geographically, the region is located near the hotspots of coronavirus like China and Iran. Recently, there has been an upsurge in the infected patients despite all the precautionary measure taken to prevent the spread of the coronavirus.

South Asia is the region having highest urban population density and it also have the top five most densely populated cities of the world. The region constitutes more than a fifth of the global population and accounts for 15 per cent of the global economic production. The overpopulation of this region and inadequate health facilities had costed thousands of lives during this pandemic. The only available means for the governments of South Asian countries were to adopt the social distancing measures for controlling the spread of this novel virus. The countries of the region also lack scientific development, which is why they are not able to develop the vaccine and testing kits for this novel disease. World Bank estimates tell that nearly 100 million people could cross the threshold of poverty by the pandemic and thereafter. It is also estimated that the economic activity in the South Asian region might shrink by 2.7% in the current year. The region was expected to rise as the next global hub of business and trade but the obstacles brought in by the pandemic will halt its growth drastically. The difference in growth between the South and the rest of Asian economies will be grow over the period. According to the statistics of the World Bank, the average per capita income of South Asian states in 2018 was $1900 in comparison with $4500 for the ASEAN countries and China, it is almost $9700.

While comparing the growth rate before and after the COVID crisis, a huge difference from +6.1% to -2.7% has been witnessed for South Asia. This represents a massive difference of -8.8% points overall. It will be going to have some serious consequences for the region both economically and socially as it is a valuable loss of income. The livelihood and wellbeing of the residents of this region will be highly affected even after the pandemic. Maldives tops the list of the countries which

had been affected badly with a squeeze of -13% in the GDP which was at +6.1% earlier. Then there is India which has -3.2% GDP growth post-pandemic and this rate was +7.1% before COVID. The other countries’ economies like Bangladesh, Bhutan and Nepal may grow to some extent with the marginal amount. Among many reasons of economic recession, one of the major reasons is the unavailability of workers, raw materials, less demand and disruptive supply chain along with many other logistic problems. Among other reasons, the escalating protectionism, especially between USA and China and other developed countries also impeded the global economic activity. The closure of the international borders and the restrictions on transport due to this pandemic has been a shock to the trade. Due to these restrictions, the World Trade Organization has expected that there will be a downturn in the global trade between 13 to 32 per cent in the current year. This decline in trade will be in double digits according to WTO. The exporters of the region are facing the challenge of cancellation of production orders. South Asian economies like Bangladesh are highly dependent on exports of a few products like readymade garments and has access to only two markets i.e. European Union and US. There is a minimal possibility to find any other market for its products, which is why Bangladesh is facing this challenge of order cancellations of exports. Nepal also has access to the aforementioned big markets for its handicrafts products and its economy is also affected by the cancellations. Nepal’s 1.1 million population is directly or indirectly linked to the exports business and they have no employment in the current times. There has been a 54% reduction in the exports of Pakistan mainly due to the deferral of orders in the textile sector. India has faced a loss of US $25 billion in its exports. Sri Lanka has 52% of its exports in its apparel industry, it faced a loss of US $1.5 billion from March to June this year, and the reason is obvious.


Tourism has played a crucial role in building up the economies of the South Asian region. This informal sector generates income for millions of people both directly and indirectly. It constitutes 9% of the South Asian GDP. The GDP share of Maldives is 66.13%, Pakistan 7.14%, Nepal 7.93%, India 9.34%, and Sri Lanka with 12.51%. The available data reveals that the tourist arrivals in Nepal, Sri Lanka and India have seen a recession of 70% in March this year. When the virus hit Pakistan, it was in the middle of initial years of the loan agreements signed with the IMF. The conditions and demands put forward by IMF while sanctioning the loan were already responsible for growth to be standstill. In the near future, it is expected that the growth rate will remain low and revival of exports is only way to boost the country’s economy. It is a difficult time as the growth production is already low and because the main export markets of Pakistan are facing a downturn economically due to pandemic. Therefore, any hope for the economic revival instantly remains bleak.


The countries in South Asia need to work on their priorities, their capabilities and what are the extreme challenges faced by them. The solution to all the problems of South Asian countries is cooperation on a larger scale. The wisest step by these countries was taken in March 2020 to conduct a virtual SAARC conference after many hurdles, especially the Indo-Pak relationship has been a huge impediment in the inefficient working of SAARC. We have been witness to the concept of disaster diplomacy and how it had been remained transitory. The region remained poorly integrated and divided despite all the threats of economic recession due to COVID and no effective measures have been taken to tackle this unseen enemy. When the natural disasters hit they are short-lived and the damage caused by them can be rebuilt but COVID is something new and it has changed the global political economy. It has changed how countries relate to each and other and also the human behavior. The effects of COVID are going to be long term and it will act as an impetus between the relationships of the two states.



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About Sabha Khurshid 2 Articles
Sub Editor at TAT and Melang and Research Associate Coppair