World Bank Sees Taxing Times for South Asia

Amid growing unrest and accompanying uncertainties in the region, the World Bank has unveiled its South Asia Development Update April 2025, projecting, as expected, not a rosy scenario.

Part of the report reads: Growth prospects for South Asia are dimming. The global economic environment has become more challenging
and is a source of heightened downside risks. 

"After a decade of repeated disruptions, South Asia’s buffers to cushion new shocks are slim. Tackling some of its greatest inefficiencies and vulnerabilities could help South Asia navigate this unusually uncertain outlook: unproductive agriculture sectors, pressures from rising global temperatures, and fragile fiscal positions," goes the report. 

For most South Asian countries, increased revenue mobilization is a prerequisite for strengthening fiscal positions. Even taking into account the particular challenges of collecting taxes in South Asian economies — such as widespread informal economic activity and large agriculture sectors — South Asian economies face larger tax gaps than the average emerging market and developing economy (EMDE). 

This suggests the need for improved tax policy and administration. Until fiscal positions have strengthened, the burden of climate adaptation will disproportionately fall on the private sector, the report states. If allowed sufficient flexibility, private sector adaptation could offset about one-third of the likely climate damage by 2050. This may, however, require governments to remove obstacles that prevent workers and firms from moving
across locations and activities. 

As growth prospects dim, the challenge grows to create jobs for South Asia’s rapidly expanding working-age population. South Asia’s large diasporas could become a source of strength if their knowledge, networks, and other resources can be better tapped for investment and trade.