"The tragedy is that not only China, but even Bangladesh is now doing better on almost every one of these social indicators than India is doing .... Every country Nepal, Bhutan, Sri Lanka and Bangladesh are ahead already," Sen said, while addressing Delhi Economics Conclave organised by CII.
He said that among the six South Asian countries, India has slipped to fifth position from second in 1990 on parameters like education, life expectancy, immunisation, maternal mortality, etc.
Only Pakistan is below India on human development index, he said, adding that "because...(it has) its own problems connected to terrorism".
India has higher percentage of child under-nourishment than any other country in the world, even in Africa, he said.
"We (India) need to maintain economic growth as growth generates public revenue and with public revenue we need to do things such as health care, immunisation, education...the government has to do a lot more," he added.
Referring to his meeting with the Prime Minister, Sen said, "I spent an hour with Manmohan Singh yesterday but I did not have any illusion that if I could convince him that everything will go fine, not because he is not a good Prime Minister, as I think he is, because that's not the way Indian democracy works".
Commenting on the challenges being faced by the government at present, he said :"In a democracy, you have to carry the party, the coalition and the political system, including the opposition with you".
Sen also expressed his views in favour of balanced liberalisation and economic reforms.
"I do not think that there is any conflict in liberalisation .... Each time you have to see if it is doing good for the people or not," Sen said.
"What we need is economic reforms, but reforms are not just about doing enough to addressed issues which are of great importance to those relatively prosper...reforms are right but the formula that works for the only 20 per cent people of the country is not right," he added.