Bangladesh’s per capita income greater than India’s

Source: Indian Express

Syllabus: Gs3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context: For the year 2020, the per capita income of an average Bangladeshi citizen would be more than the per capita income of an average Indian citizen.

Why India’s per capita income has fallen below Bangladesh this year?

• Contracted Growth: India’s economy is over 10 times the size of Bangladesh and India’s growth surpassed Bangladesh during 2004 to 2016. However, since 2017 India’s growth rate has decelerated while Bangladesh’s growth rate increased.
• Increase in population growth: Per capita income is calculated by dividing the total GDP by the total population. Compared to Bangladesh, between 2004-2019  India’s population growth was high.
• Covid 19 impact: With India’s GDP set to reduce by 10%, India is one of the worst affected economies whereas Bangladesh GDP expected to grow by 4%.

How has Bangladesh managed to grow so fast?

• Moving away from Pakistan gave the country a chance to plan its own economic and political identity.
• Flexible Labour laws and Higher female participation in the labour force leading to stellar export performance in garments and apparel industry.
• Structure of Bangladesh’s economy is led by the industrial sector, followed by the services sector. With manufacturing sector being more labour intensive creates opportunities for more jobs and are more remunerative than agriculture.
• Whereas India, on the other hand, has struggled to boost its industrial sector and has many people still dependent on agriculture.
• Improvement on social and political metrics such as health, sanitation, financial inclusion, and women’s political representation.
• In the latest gender parity rankings, Bangladesh is in the top 50 Out of 154 countries, while India is at 112.
• The gender parity rankings measures differences in the political and economic opportunities as well as the educational attainment and health of men and women.
• Bangladesh has also performed better in the Global Hunger Index. GHI focuses on four factors: Undernourishment, Child Wasting, Child Stunting and Child Mortality.

However, the level of poverty and illiteracy is still high in Bangladesh, compared to India, resulting in low HDI rank for it. Corruption, Political conflicts and radicalisation are also threatening stability in Bangladesh.

To boost growth, India should reverse its protectionism measures — lower tariffs, embrace free trade agreements, and seek greater integration with global supply chains.