Malnutrition is now costing poor countries as much as 3% of their annual economic output, the World Bank warns.
Its study into poor nutrition and food shortages described malnutrition as today's "Black Death" in relation to its economic and social impact.
The World Bank said that malnutrition makes people more vulnerable to fatal diseases such as malaria and HIV/Aids, and called for governments to do more.
The report found that the situation was worse in South Asia than Africa.
It determined that rates of under-nutrition in children across India, Bangladesh, Afghanistan and Pakistan ranged between 38% and 51%, compared with 26% in sub-Saharan Africa.
"It is intimately linked with poor health and environmental factors, and yet policymakers, politicians and economists often fail to recognize these connections"
"Nearly half of India's children are undernourished, compared with a quarter of those in sub-Saharan Africa," said Praful Patel, World Bank vice president for South Asia.
"This situation is unacceptable, and given its constant impact on the Indian economy, the Bank is working closely with the government to reinvigorate the campaign against malnutrition in South Asia," he said.
'Governments ignoring'
The World Bank estimates that nearly 60% of children who die across the world each year from common diseases such as diarrhoea and malaria could have survived had they not been malnourished in the first place.
"Poor nutrition is implicated in more than half of all child deaths worldwide - a proportion unmatched by any infectious disease since the Black Death," said Jean-Louis Sarbib, senior vice president for human development at the World Bank.
"It is intimately linked with poor health and environmental factors, and yet policymakers, politicians and economists often fail to recognize these connections," he added.
The report, entitled "Repositioning Nutrition as Central to Development" added that nearly one-third of children under five in the developing world remain underweight or stunted.
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