South Asian economies have grown rapidly during the last two decades recording an average growth rate of 6 percent annually. Incidence of poverty has been reduced although the absolute number of poor has increased in the last two years because of the external shocks and internal turbulence in some countries. The private sector has been the principal driver of the economic turnaround as increased competition resulted in improved efficiency with productivity growth accounting for half of overall growth. Structural reforms in trade, taxation, investment and foreign exchange regimes over more than a decade have contributed to this growth in productivity. Integration in the global economy through trade, investment, technology transfer and movement of labor picked up speed since 1991 and has begun to pay dividends. The scope for further gains remains vast as both trade/gross domestic product (GDP) and foreign direct investment (FDI)/ GDP ratios are low. Despite these favorable outcomes and a resilience to face external shocks, the region has the highest number of poor in the world, human development indicators place it in the lowest category, income and regional inequalities are on the rise and social cohesion is still an elusive goal. This paper argues that the growth and poverty reduction record could have been better if the potential of regional economic cooperation had been exploited, bilateral relations among neighboring countries were warmer and hostilities and trust deficits between countries were absent.