ISAS Working Papers

In order to quicken the pace of economic growth and social development, policymakers in South Asia need to go beyond the conventional production function approach. According to that approach, capital accumulation and application of labour to more productive activities increase the rate of economic growth. The process goes on for as long as backward economies have labour surpluses. This is still the case in South Asia where the majority of the population lives in the countryside, mostly engaged in low productivity economic activities. The study of economic progress not only in developing countries, but also in developed countries, led to the realisation by some economists that knowledge was also a major contributor to growth. They brought it into the production function as an endogenous factor rather that keeping it out as an exogenous contributor. However, knowledge accumulation meant educating the work force and also providing skills needed by modernising economies. This is one of the many roles the state must play but has neglected in South Asia.