IMPACT OF TRADE LIBERALIZATION ON ECONOMIC GROWTH AND POVERTY: The South Asian Region

Waqar-Un-NISA* and Aliya H. KHAN**

This study assesses the impact of trade liberalization in the South Asian region on economic growth and poverty, in light of reinforcement of basic objectives of General Agreement on Tariffs and Trade (GATT). For this purpose seven South Asian countries, namely Pakistan, Bangladesh, India, Sri Lanka, Maldives, Nepal and Bhutan, were selected. The study period has been divided into pre- and post-liberalization (1960 to 1995 and 1996 to 2014). Economic growth and poverty equations were separately estimated with Fixed Effect Model on the panel data. The results show a significant positive impact of openness of South Asian countries which specifically signifies the role of Bangladesh in case of growth and India in case of poverty, in the region. Gini (income inequality) of individual countries worsens the average income growth and poverty situation of South Asian region but specifically highlights a prominent role of Bangladesh and Bhutan in reducing growth, while Bhutan and India in raising poverty of the region. Unemployment policies of all the South Asian countries; specially, of India and Bangladesh worsens the economic growth and, Pakistan and Bhutan worsens the poverty situation of the region. During both periods of the study, economic growth shows a positive impact over poverty of the region. Nepal and Pakistan have a leading role in this context. Results are mostly significant but weak share of factors emphasize the adoption of effective pro-poor growth policies along with openness policies according to specific requirements of the concerned economies.