With increasing foreign exchange reserves and stable macroeconomic policies, south Asia, including India and Sri Lanka, is poised for "substantial progress" in human development, the World Bank has said.
The bank, however, warned that investment climate surveys routinely show infrastructure as a leading impediment to business growth in south Asia, including India, with shortcomings in electricity service identified as the greatest obstacle to business operations, above corruption and taxes.
"Infrastructure quality in South Asia is low relatively to other regions, with the exception of cell phones, and hundreds of millions of people have no access to basic services," a note from the World Bank to the Development Committee of the international financial body and International Monetary Fund says.
The bank also pointed out that South Asia still faces "enormous challenges." Of the region's 1.4 billion people, 599 million live on less than one dollar a day - about half the world's poor.
"Human deprivation is severe, particularly for disadvantaged populations and children. The rate of illiteracy, at 44 per cent, is the highest in the world, and the region accounts for one-third of all maternal deaths," it said.
Within India, access to water is intermittent in all major cities (no city with a population of more than one million has a 24-hour water supply). Limited reach and poor quality of infrastructure services is a major constraint to growth and achievement of the Millennium Development Goals, it says.
Extending access to infrastructure services to both business and households, especially the poor, will be critical to sustaining the region's high growth rates, and ensuring that its benefits are shared with the region's large number of poor.
Across South Asia, the utilities responsible for service provision remain almost universally in the public sector and are characterised by inefficiencies and weak governance, the bank says.
Stressing the increasing importance of regional infrastructure integration and energy trade, the bank says the south Asian region has enormous potential for mutually beneficial trade in energy and energy resources.
The size and dispersion of its hydropower and natural gas resources, the highly differentiated size of its economies and associated energy demand levels and growth suggest significant benefits from greater integration.
The region's proximity to countries of Central Asia and the Middle East with huge proven reserves of natural gas also provides excellent opportunities for import of gas at competitive prices to meet growing needs in the power sector.
As intra-regional trade and trade with close neighbours expand, there will be an increasing need to develop new, and improve existing, transport corridors and bolster the efficiency of transport and trade facilitation services, the note said.
"However," says the bank, "in contrast to other regions, movement on the regional integration agenda in infrastructure in south Asia has been slow, mirroring the historic slow growth and low level of intra-regional trade in general."