Resource Curse or Resource Blessing? Natural Resource Dependence and Economic Development in South Asia

Abstract

The relationship between natural resource dependence and economic development has long been debated, oscillating between the notions of a “resource curse” and a “resource blessing.” This study investigates the dynamics of resource dependence and growth in South Asian economies—Bangladesh, India, Pakistan, Nepal, and Sri Lanka—covering the period 1990–2022. Using a panel data approach with fixed-effects and generalized method of moments (GMM) estimations, the analysis explores the impact of resource rents (oil, gas, minerals, and forest) on GDP growth, while accounting for institutional quality, trade openness, human capital, and investment. The results reveal a nuanced picture: while resource rents exert a negative influence on growth in Pakistan and Bangladesh due to weak institutions, governance challenges, and rent-seeking behavior, India and Sri Lanka demonstrate a resource blessing effect, leveraging resources effectively through stronger governance and diversified economic structures. The findings highlight the conditional role of institutions in mediating the resource–growth nexus. This study contributes to the ongoing discourse by situating South Asia within the global resource debate, emphasizing that natural resources can be either a curse or a blessing depending on governance quality and economic diversification. Policy recommendations call for institutional strengthening, diversification of resource revenues into human capital and infrastructure, and regional cooperation to mitigate the risks of resource dependence.