The South Asian region (Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka) is notable for its large and rapidly growing population (more than one-fifth of the world total). Despite rapid economic growth during the 1990s, the nations in the region have among the lowest per capita incomes in the world. India is by far the largest South Asian country in terms of population, Gross Domestic Product (GDP), and land area, followed by Pakistan and Bangladesh. In 2005, India had an estimated growth rate in real GDP of 7.2 percent, while Pakistan and Bangladesh had estimated growth rates of 8.4 percent and 5.4 percent, respectively. India’s GDP is projected to grow 6.8 percent in 2006, with Pakistan’s growth at 6.4 percent and Bangladesh’s growth at 5.1 percent.

South Asia is in a period of transition as it strives to implement effective economic, political, social, and legal structures to support sustained growth. The International Monetary Fund (IMF) and the World Bank have arranged several billion dollars in assistance to the region. The IMF has prescribed such measures as cuts in subsidies (especially energy subsidies), deregulation, anti-poverty efforts, and increased privatization in the near future.

Economic and population growth in South Asia have resulted in rapid increases in energy consumption in recent years, well above rates seen in the OECD. The Energy Information Administration (EIA) estimates of South Asia’s primary energy consumption showed an increase of 52 percent between 1993 and 2003 (EIA energy statistics include only “commercial” energy sources and not animal waste, wood, or other biomass, which accounts for more than half of South Asia’s total final energy consumption). In 2003, South Asia accounted for approximately 4.0 percent of world commercial energy consumption, up from 3.1 percent in 1993. Despite this growth in energy demand, however, South Asia continues to average among the lowest levels of per capita energy consumption in the world, but among the highest levels of energy consumption per unit of GDP.

Discounting “non-commercial” sources of energy including animal waste, wood, and other biomass, South Asia's commercial energy mix in 2003 was 44 percent coal, 35 percent petroleum, 13 percent natural gas, 6 percent hydroelectricity, 1 percent nuclear and 0.3 percent “other.” There are significant variations within the region. Bangladesh’s energy mix, for example, is dominated by natural gas (67 percent in 2003), while India relies heavily on coal (52 percent in 2003). Sri Lanka and the Maldives are overwhelmingly dependent on petroleum (84 percent and 100 percent, respectively); Pakistan is diversified among petroleum (38 percent), natural gas (41 percent), and hydroelectricity (14 percent). The Himalayan countries of Bhutan and Nepal have the highest shares of hydroelectric power in their energy consumption mix at 82 percent and 37 percent, respectively, in 2003. South Asian nations are faced with rapidly rising energy demand coupled with increasingly insufficient energy supplies. Most of South Asia is already grappling with energy shortfalls, typically in the form of recurrent, costly, and widespread electricity outages. Because of the economic and political ramifications arising from such shortfalls, improving the supply of energy, particularly the supply of electricity, is an important priority of national and local governments. The countries of South Asia are looking to diversify their traditional energy supplies, promote additional foreign investment for energy infrastructure development, improve energy efficiency, reform and privatize energy sectors, and promote and expand regional energy trade and investment.

Another implication of rising energy demand in South Asia is its impact on the region’s level of carbon dioxide emissions. As of 2003, South Asia accounted for 4.7 percent of global carbon dioxide emissions. With the demand for coal in India projected to increase rapidly in the coming years (from 431 million short tons (Mmst) in 2003 to 544 million short tons (Mmst) in 2010) and the recent introduction of coal into the fuel mix of other countries in the region, a significant increase in emissions in the future is expected.