The study, which was the first comprehensive analysis on performance of South Asian educational systems said "many South Asian teachers barely know more than their students".
"Students are poorly prepared in practical competencies such as measurement, problem-solving and writing of meaningful and grammatically-correct sentences," the report said.
It said that one quarter to one third of those who graduate from primary schools lack basic numeracy and literacy skills that would enable them to further their education.
"Higher and clear standards must be enforced, absenteeism curbed and non-merit-based promotions halted," it suggested.
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It recommended use of financial incentives to boost quality and encouraging greater private-sector participation by easing entry barriers and encouraging well-designed public-private partnerships.
South Asian governments cannot afford to improve educational quality by themselves, it felt.
"Poor quality of education in South Asia, as reflected in low learning levels, traps many of its young people in poverty and prevents faster economic growth and more broadly shared prosperity," it said.