Despite obstacles such as conflict, corruption and high fiscal deficits in some countries, South Asia has achieved impressive economic growth and poverty reduction in the past decade, thanks mainly to economic reforms in the 1990s. If this growth accelerates to 10 percent a year, theregion could see single-digit poverty rates by 2015. A closer look at the evidence suggests that much remains to be done to achieve these accelerated growth rates. First, economic growth in the past decade has resulted in growing income inequality which may act as a constraint to higher growth. Second, while conflict, corruption and high fiscal deficits may not have constrained growth in the past, their persistence may become binding in the future. Third, a comparison withEast Asia--a region that has sustained 7-10 percent growth rates--shows that South Asia's export-orientation, inflows of foreign direct investment, workers’ skill levels, infrastructure and ease of doing business are also substantially less advanced than East Asia's. South Asia’s savings,investment and productivity are also lower. These challenges suggest a set of policy choices for South Asian countries aimed at increasing investment and productivity, and the quality of labor,while addressing the problem of lagging regions and poor service delivery. Finally, the least integrated region in the world, South Asia can benefit from regional cooperation in trade, waterand energy, among other things. While the policy agenda appears daunting, the dynamism and openness that characterizes South Asia today makes us optimistic that some, if not all, of these challenges can be met and the region will be substantially free of poverty in a few decades