The Impact of COVID-19 on South Asian Economies

Tuesday, August 3, 2021 / By: Uzair Younus

The COVID-19 pandemic has caused one of the most serious public health and economic
crises faced by India, Bangladesh, and Pakistan in recent years. This report looks at the
economic impact on these nations, their prospects for the remainder of 2021, and their
relations with the United States. It identifies key areas of focus for ensuring the
subcontinent’s recovery is equitable—which, in the context of an erosion of democratic
norms, growing authoritarianism, and severe crackdown on dissent, could help avoid
economic and social instability.

Workers sanitize the interior of a shopping mall in New

Delhi, India, on June 6, 2021. (Atul Loke/New York Times)

Summary
The COVID-19 pandemic has pushed millions of households into poverty and
substantially increased income and wealth inequality in India, Bangladesh, and
Pakistan. This situation poses a serious near-term challenge for policy- makers,
especially since rising food and commodity prices compound economic insecurities.
Narendra Modi’s government in India pursued pro-growth reforms in 2020, but a
dramatic second wave of COVID-19 cases beginning in April 2021 not only caused
emotional and socioeconomic trauma but created serious economic headwinds.
A slow recovery in export earnings poses challenges for Sheikh Hasina’s
government in Bangladesh. The country is likely to remain economically and
politically stable, however, and a return to high levels of economic growth is likely in
2022 and beyond.
Pakistan managed to minimize the economic fallout of the pandemic in part through
an early reopening of the economy, but will face significant challenges to robust
growth because of long-standing structural issues in the economy.
Failure to ensure equitable recovery could generate social and political instability
and lead to heavy-handed responses from governments that in recent years have
become less tolerant of dissenting voices.

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About the Report
This report examines the impact of the coronavirus pandemic on Bangladesh, India, and
Pakistan, highlighting the social and economic costs on each country’s economy and
underscoring the risk of political upheaval if the recovery is slow or unequal. The report is
based on a research project funded by the United States Institute of Peace’s Asia Center
to assess the political and economic implications of the pandemic in South Asia.

About the Author

Uzair Younus is a visiting senior policy analyst in the South Asia Program at the United
States Institute of Peace. He also is a manager at Dhamiri, a strategic innovation firm,
and is host of the weekly podcast Pakistonomy. He previously served as director in the
South Asia practice at Albright Stonebridge Group, advising clients on crisis
management, market entry, and government relations engagement in the region.

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Issue Areas
Economics & Environment

Countries
Bangladesh India Pakistan

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