Constraints on Economic Development in South Asia: Escalating External Debt and Diminishing Exports
Keywords:
Economic Growth, Exports, External Debt, South Asia, Regional TradeAbstract
Purpose
The article delves into the limitations of economic expansion in South Asia, with a particular focus on escalating external debt and dwindling exports in the area. It reviews the existing literature on the correlation between external debt, exports, and economic growth, taking note of the differing viewpoints on this subject. The study looks at how exports and external debt affect South Asia’s economic growth, emphasizing the benefits of exports and the drawbacks of debt on GDP. To support economic growth in the area, policy alternatives include strengthening institutions, diversifying the export base, boosting regional trade, and luring foreign direct investment.
Method
The study employs the linear Autoregressive Distributed Lag (ARDL) methodology to analyze the effect of external debt and exports on economic growth in a panel of five South Asian nations comprising Pakistan, Bhutan, Bangladesh, India, and Nepal from 2002-2021.
Findings
The result analysis suggests exports has positive and significant impact on GDP whereas debt has negative and insignificant impact on GDP also the revenue used as proxy for financial development has positive impact.
Originality Value
The paper underscores the significance of promoting regional trade, attracting foreign direct investment, fortifying institutions, and diversifying the export base as potential policy solutions to surmount these constraints and encourage economic growth in South Asia.
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