Why is South Asia, in general, so underdeveloped compared to the West?

By Ashraff Hathibelagal

South Asia remains significantly less developed than Western countries (e.g., those in North America and Western Europe) in terms of GDP per capita, human development indicators, infrastructure, and industrialization. As of recent estimates around 2024–2025, South Asia's average GDP per capita is approximately $2,700 USD, compared to over $50,000 USD in many Western European countries and higher in North America. This gap reflects a combination of historical, economic, institutional, demographic, and geopolitical factors.

Historical Factors: Colonial Exploitation and Deindustrialization

South Asia was among the world's richest regions until the 18th century, with India alone accounting for about 25% of global GDP around 1700. British colonial rule (particularly 1757–1947) reversed this through policies of deindustrialization, where local manufacturing (e.g., textiles) was deliberately suppressed to favor British exports, turning the region into a supplier of raw materials (cotton, indigo, opium). This led to a sharp decline: India's share of global industrial output fell from 25% in 1750 to 2% by 1900, and its world GDP share dropped to 4% by 1950.

Colonial economies prioritized extraction over local development, draining resources (estimated "drain of wealth" theories suggest billions transferred to Britain) and leaving minimal infrastructure or institutions for independent growth. Post-independence partitions (e.g., 1947 India-Pakistan divide) caused massive disruption, violence, and economic setbacks.

In contrast, Western Europe industrialized early (from the 18th century), benefiting from the Scientific Revolution, Enlightenment institutions, and colonial profits reinvested at home.

Post-Independence Policies and Economic Models

Many South Asian countries adopted inward-looking, protectionist policies (e.g., India's "License Raj" until the 1990s), sheltering industries but stifling competition, innovation, and exports. This contrasted with East Asia's export-oriented models (e.g., South Korea, Taiwan), which integrated into global markets and achieved rapid industrialization.

South Asia focused more on low-tech, resource-based exports, missing higher-value manufacturing booms. Liberalization in the 1990s boosted growth (India averaged 7–8% annually in recent decades), but started from a low base.

Institutional and Governance Challenges

Weak institutions—corruption, political instability, poor regulatory quality, and ineffective governance—hinder investment and growth. Studies show better institutional quality (e.g., rule of law, low corruption) strongly correlates with FDI inflows and sustained development in Asia. South Asia scores lower on global governance indicators than East Asia or the West.

Persistent social issues like caste discrimination (in parts of India/Nepal) limit equal opportunities, education access, and mobility. Conflicts (e.g., India-Pakistan tensions, civil wars in Sri Lanka) divert resources to military spending.

Demographic Pressures

South Asia is the world's most densely populated region (around 400–800 people per sq km in many areas, vs. much lower in the West), with over 2 billion people. High population growth strains resources, infrastructure, education, and jobs, keeping per capita income low despite aggregate GDP growth.

Large informal sectors and low productivity in agriculture (employing a high share of the workforce) exacerbate this. Western countries benefited from earlier demographic transitions (lower fertility, aging populations with high productivity).

Geopolitical and Regional Factors

Low intra-regional trade (only ~5% of total trade, vs. much higher in Southeast/East Asia) due to trust deficits, border disputes, and protectionism. It's cheaper for Indian firms to trade with distant partners than neighbors.

Limited regional integration (e.g., SAARC's ineffectiveness) contrasts with Europe's EU model.

Progress and Outlook

South Asia has made strides: poverty reduction, rising middle classes (especially in India), and sectors like IT/services/pharma. Growth rates often exceed the West's, suggesting potential catch-up. However, closing the gap requires stronger institutions, education investment, regional cooperation, and sustainable policies addressing climate vulnerabilities and inequality.

These factors interact cumulatively: colonial legacies weakened starting points, poor policies delayed recovery, and ongoing challenges perpetuate the divide. While not inevitable, overcoming them demands targeted reforms.

Why are South Asian countries more corrupt than South-East Asian countries?

South Asian countries (e.g., India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, Maldives, Afghanistan) generally score lower on perceived public sector corruption than most Southeast Asian ones (e.g., Indonesia, Thailand, Philippines, Vietnam, Malaysia), according to Transparency International's Corruption Perceptions Index (CPI). The CPI scores range from 0 (highly corrupt) to 100 (very clean).

Latest CPI Data (2024, released in 2025)

• Southeast Asia average (excluding outliers like Singapore): Around 39 points overall for the region, pulled up significantly by Singapore (84, one of the world's least corrupt).
• Typical scores: Malaysia (~50–53), Thailand (~35–40), Indonesia (~34–40), Vietnam (~41–42), Philippines (~34), Cambodia/Myanmar (low 20s or below).
• South Asia: Generally lower, with Bhutan as a standout (~68–72). Others: India (~40), Maldives (~40), Sri Lanka (~32–34), Pakistan (~29), Bangladesh (~23–26), Afghanistan (~17–20).

Excluding Singapore (an extreme outlier due to its unique governance) and Bhutan, South Asia tends to have higher perceived corruption (lower scores) than core Southeast Asian nations like Malaysia, Vietnam, Thailand, or Indonesia. The premise holds when comparing similar development levels.

Key Factors Explaining Higher Perceived Corruption in South Asia

Differences arise from a mix of historical, institutional, political, and socio-economic factors. No single cause dominates, but these interact to create persistent challenges.

1. Weak Institutions and Rule of Law
   South Asia often features weaker judicial independence, bureaucratic efficiency, and anti-corruption enforcement compared to Southeast Asia's higher performers. Studies using qualitative comparative analysis highlight combinations of fragile political and economic institutions (e.g., low government effectiveness, poor regulatory quality) as drivers of higher corruption in South Asia. In contrast, countries like Malaysia and Vietnam have implemented more consistent reforms, even under authoritarian-leaning systems.

2. Political Instability and Dynastic/Fragmented Politics
   Frequent political crises, coalition governments, and family-dominated politics in countries like Pakistan, Bangladesh, and Sri Lanka foster patronage networks and impunity. Southeast Asia has seen more stable authoritarian or semi-authoritarian regimes (e.g., Vietnam's one-party system, Thailand's historical military influence) that, while not democratic, can enforce anti-corruption measures centrally when prioritized.

3. Colonial Legacies and Post-Independence Paths
   British colonial rule in much of South Asia left extractive bureaucracies prone to rent-seeking. Post-independence, socialist-leaning policies delayed market reforms. Southeast Asia (influenced by Dutch, American, or shorter colonial periods) pursued export-oriented industrialization earlier, attracting FDI that demands lower corruption.

4. Economic Structure and Natural Resources
   Greater reliance on natural resources or aid in parts of South Asia can fuel rent-seeking. Research on both regions finds resource abundance correlates with higher corruption.

5. Democracy vs. Authoritarianism Trade-Offs
   South Asia's noisy democracies allow more media exposure of scandals but weaker accountability due to electoral populism and vote-buying. Some Southeast Asian states use authoritarian tools to curb petty corruption (e.g., Singapore's model influencing Malaysia).

6. Regional Integration and External Pressures
   ASEAN in Southeast Asia promotes some anti-corruption cooperation and economic ties. South Asia's SAARC is largely ineffective amid India-Pakistan tensions.

Notable Exceptions

• Bhutan stands out in South Asia with strong scores due to its focus on governance and low inequality.
• Singapore skews Southeast Asia upward; without it, the regions are closer.
• Improvements: Vietnam and Maldives have risen in recent years through reforms.

What allowed corruption to rise in South Asian countries?

Corruption in South Asian countries did not suddenly "rise" post-independence in a linear fashion—perceived levels have fluctuated, with periods of stagnation or minor improvements—but systemic vulnerabilities emerged and persisted due to a combination of colonial legacies, post-independence policy choices, and ongoing political dynamics. These factors created fertile ground for patronage, rent-seeking, and impunity.

Colonial Legacies: Extractive Institutions and Bureaucratic Foundations

British colonial rule (and shorter influences elsewhere) left behind extractive bureaucracies designed for resource drainage rather than public service. Administrative structures emphasized control, hierarchy, and discretionary powers, with opaque processes that encouraged rent-seeking among officials.

• The inherited civil service and police systems (e.g., the Indian Police Act of 1861, still largely in force in parts of the region) prioritized loyalty and suppression over accountability.
• Post-1947 partitions and independence disruptions exacerbated weak institutions, with minimal reforms to colonial-era laws fostering corruption in land administration, licensing, and taxation.

These legacies persist: studies highlight how colonial-era "babudom" (excessive red tape) and centralized power concentration enabled petty and grand corruption.

Post-Independence Economic Policies: The License Raj and Rent-Seeking Opportunities

In the decades after independence, many South Asian states adopted heavy regulation and state-controlled economies (e.g., India's "License Raj" from the 1950s to 1991), requiring permits for business activities. This created massive opportunities for bribery and favoritism, as officials held discretionary power over approvals.

• Convoluted tax systems, licensing, and government monopolies fueled black money, tax evasion, and patronage networks.
• Socialist-leaning policies delayed liberalization, unlike in parts of Southeast Asia, keeping economies inward-focused and prone to corruption.

Liberalization in the 1990s (e.g., India) reduced some petty corruption but exposed grand corruption in privatization and contracts.

Political Instability, Patronage, and Dynastic Politics

Frequent coalitions, military interventions (e.g., in Pakistan, Bangladesh), and fragmented politics fostered patronage systems where leaders distribute resources (jobs, contracts, welfare schemes) to build loyalty.

• Dynastic and family-based politics (prominent in Pakistan's Sharifs/Bhuttos, Bangladesh's Hasina/Zia families, Sri Lanka's Rajapaksas, India's Gandhis) perpetuate networks of nepotism and impunity. Power inheritance reduces accountability, as loyalty trumps merit.
• Electoral populism and vote-buying in noisy democracies allow scandals to surface but rarely lead to consequences, due to weak enforcement.

Political instability diverts resources and weakens anti-corruption bodies.

Weak Institutions and Lack of Accountability

Independent watchdogs (e.g., anti-corruption commissions) often face interference, underfunding, or political appointments.

• Judicial delays, low whistleblower protections, and opaque public institutions hinder prosecutions.
• Social norms blending gift-giving with bribery blur lines, especially in hierarchical societies.

Recent Transparency International CPI (2024) shows South Asia lagging, with stagnation attributed to these factors.

Why It Persisted Rather Than "Rose"

Corruption was present pre-independence but became more entrenched post-1947 due to the mismatch between democratic aspirations and inherited authoritarian tools. Economic growth (e.g., India's recent boom) sometimes coexists with corruption via predictable rent-seeking, but inequality and scandals (e.g., coal scams in India) highlight costs.

Progress in places like Bhutan (strong governance focus) or recent reforms shows it's not inevitable, but breaking cycles requires judicial independence, e-governance, reduced patronage, and curbing dynastic dominance—challenges that remain acute.

How could the current bad situation have been avoided?

The current high levels of perceived corruption in South Asia—rooted in colonial-era extractive bureaucracies, post-independence protectionist policies, dynastic politics, and weak institutions—could have been mitigated or avoided through a series of alternative historical choices and proactive reforms. While hindsight is imperfect, evidence from successful Asian cases (Singapore, Hong Kong, South Korea) and policy analyses highlights feasible paths not taken.

Earlier and More Aggressive Economic Liberalization

South Asian countries delayed shifting from inward-looking, state-heavy models until the 1990s crisis forced reforms. Adopting export-oriented industrialization earlier—like East Asia's "tigers" (South Korea, Taiwan) from the 1960s—could have reduced rent-seeking opportunities in licensing and monopolies.

• India's slow growth (averaging ~3-4% until 1991) stemmed from heavy regulation; unilateral liberalization in the 1970s-1980s, as Sri Lanka partially did in 1977, might have attracted FDI sooner and built competitive industries with less bureaucratic discretion.
• Avoiding prolonged socialist policies post-independence (influenced by Soviet models) could have limited state intervention that bred corruption in resource allocation.

Strong Political Will and Independent Anti-Corruption Institutions

The critical missing ingredient was sustained top-level commitment to curb corruption, as seen in Singapore's success under Lee Kuan Yew.

• Establishing truly independent, well-resourced anti-corruption agencies (like Singapore's Corrupt Practices Investigation Bureau or Hong Kong's ICAC) from the 1950s-1970s, insulated from political interference, could have enforced laws impartially.
• Avoiding misuse of agencies for political vendettas (e.g., in Pakistan or Bangladesh) and ensuring they target causes like low salaries and red tape.
• Competitively paying civil servants and politicians (Singapore model) to deter petty corruption, combined with strict penalties.

Reducing Patronage Through Political and Institutional Reforms

Dynastic and fragmented politics entrenched patronage networks.

• Promoting merit-based systems over family dominance (e.g., limiting political inheritances via reforms).
• Strengthening judicial independence and external audits early on to prevent impunity.
• Investing more in education and health post-independence (diverting less to heavy industry) to build human capital and reduce inequality-driven corruption.

Enhancing Transparency and Reducing Discretion

Digital tools and simplification came late.

• Early adoption of e-governance and streamlined processes (e.g., cutting red tape via "regulatory guillotines" as proposed in some Southeast Asian contexts) to minimize bribe opportunities.
• Greater public procurement transparency and whistleblower protections, as recommended by Transparency International for Asia-Pacific.

Regional Cooperation and Learning from Peers

Ineffective SAARC contrasted with ASEAN's integration.

• Prioritizing intra-regional trade and anti-corruption cooperation to build trust and economies of scale.
• Actively emulating Singapore/Hong Kong models: high political will, independent agencies, and addressing root causes.

These alternatives weren't impossible—Bhutan shows strong governance is achievable in South Asia with focused leadership. Progress since the 1990s (e.g., India's IT boom, Bangladesh's growth) proves reforms work, but earlier action could have prevented decades of entrenchment. Today, reviving political will, digital transparency, and independent institutions remains key to breaking the cycle.