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Bangladesh is better off than India

  • Published at 12:25 am October 17th, 2018
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Outshining the big brother Bigstock

It is no longer the poor, backward neighbour. This is the first of a two-part op-ed

India, the fastest growing major economy, is seen as the powerhouse of South Asia, but this may soon change. Having already stolen a march over India on key social indices, Bangladesh is now on the verge of establishing a lead on the economic front too.

According to the Asian Development Bank (ADB), Bangladesh is expected to post a growth rate of 7.5% in 2018-19 against the 7.3% projected for India. India’s eastern neighbour saw a GDP growth of 7.28% in the last financial year, according to the Bangladesh Bureau of Statistics (BBS), while India grew at 7.1%.

The country’s per capita income is also growing at a pace three times India’s: According to United Nations Conference on Trade and Development figures cited in a Dhaka Tribune report, while India’s per capita income rose by 13.8% between 2013 and 2016, Bangladesh’s grew by 39%.

According to some estimates, if the country continues to keep up its gross national income (GNI) and GDP growth at the same pace for the next two years, it will overtake India’s per capita income by 2020.

A long journey

Formed from the poorest regions of Pakistan, Bangladesh has come a long way since its independence in 1971.

The country’s GDP growth rate in 1972 was recorded at negative 14%. Two years later, Bangladesh was steaming ahead with a growth rate of 9.6% when a catastrophic famine, which killed an estimated 1.5 million people, brought the country to its knees again. The ensuing economic crash saw the GDP growth rate slip to a negative 4%.

After the famine, the government started redeveloping the country with the help of international relief funds. NGOs stepped up, and the introduction of high-yielding rice and wheat in the 1970s started to boost agricultural growth.

The country’s robust position today can partly be attributed to its stellar micro-credit system, which began to take root in the 1980s, and stands as a model for developing economies. And then there is the fact that the government has been known to focus on women empowerment, and prioritize health and education.

Jayshree Sengupta, economist and senior fellow at Observer Research Foundation (ORF), said the economic surge could be traced to growth in private sector investment and remittances from Bangladeshis abroad. Exports, especially from Bangladesh’s burgeoning RMG industry, have played a massive role too.

Bangladesh is a labour-intensive country like India. However, it does not have strict labour laws like India does. In 1947, before Independence, India passed the Industrial Disputes Act, which put in place a mechanism for the resolution of conflict that recognizes the rights of employers, as well as workers. This law was inherited by Pakistan as well, but the country’s military regime repealed the law from what was then East Pakistan in 1958 following differences with trade unions.

Thus, when Bangladesh separated from Pakistan, it did not have the law. This helped Bangladesh establish itself as a hub for cheap labour, and a base for its booming manufacturing industry.

The RMG industry in Bangladesh is one of the strongest drivers of the economy, having given employment to almost 2.7% of the country’s population. Nearly 70% of these are women. China’s retreat from low-end manufacturing has helped cement Bangladesh’s position in the sector, and the country has been wooing global investors with its cheap work force.

In India, high oil prices, weak exports, and depreciation of the rupee due to a slowdown in capital flows have impacted the economy. Just last week, the rupee, Asia’s worst performing currency this year, fell to a historic low.

“We saw an 8.2% economic growth rate in the first quarter of this fiscal, and that was largely due to the base effect of the previous year,” said Abhijit Sen Gupta, a senior economics officer at ADB. “In the next quarters, we are likely to see a sort of slowing down of growth.”

According to Sen Gupta, if India wants to keep up with its neighbour, it should focus on reducing bottlenecks in sectors such as infrastructure, manufacturing, services, and exports, which are critical to quality job creation.

“The export engine, along with investment, needs to be fired to sustain high growth rate,” he said.

Social strides

Bangladesh has also made significant strides vis-à-vis social development indicators such as life expectancy, infant mortality, and gender parity. In a study on human capital published in the medical journal The Lancet, India ranked a notch below Bangladesh.

The study aimed to measure the strength of human capital -- described as the level of education and health in a population -- in the world’s 195 nations between 1990 and 2016. The parameters included years lived, functional health status, and educational leaning.

According to the World Bank, in 2017, Bangladesh recorded an infant mortality rate of 27, which means that these many children died on average within the first year for every 1,000 live births. For India, the rate was 32. The average life expectancy for an individual in Bangladesh is 72.58 years, against 68.8 years in India.

Priyamvada Grover works as a journalist at ThePrint. She is a former Young India Fellow and a graduate in Economics from Jesus & Mary College, Delhi University. This article was first published in the print.in.