The geography of poverty has changed.More than 70 percent of the world s poor live not inlow-income countries, but in middle-income countries. In2008, nearly 570 million people lived on less than US$1.25 aday in South Asia, compared to 385 million in sub-SaharanAfrica. In addition, nearly 70 percent of the poor people inSouth Asia live in the lagging regions. Improving the livingstandards of these regions is crucial to achieving the goalof shared prosperity. Economic growth is not sufficient toenable the lagging regions of South Asia to catch up withthe leading regions, in terms of proportional reductions inpoverty rates. Policies must be specifically targeted towardachieving greater growth and poverty reduction in theseregions. One particular policy channel to achieve sharedprosperity is pro-poor fiscal transfers. For the most part,interstate fiscal transfers in South Asian countries dopromote equity through transfer of resources to poorerregions, but this outcome usually occurs when pro-poorredistribution has explicit rules and transparency. Further,simply directing financial resources to lagging regions maynot be sufficient, and may need to be complemented withincreases in capacity, transparency, and participation tofacilitate accountability at the local level. Policy makersneed to boost shared prosperity and take another look at themillennium development goal paradigm. A new lens is needed-one that shifts the focus of policy from national tosubnational level, and from leading to lagging regions,where poverty, gender disparity, and human misery are concentrated.
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