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OP-ED: Bangladesh edging past India

  • Published at 11:37 pm October 28th, 2020
GDP Growth
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What accounts for Bangladesh’s transformative economic change?

For nearly five decades, any discourse on South Asia was almost always focused on the bitter animosity between the two nuclear giants India and Pakistan, where the former was viewed as a large mystical country trying to establish its position in the global political and economic order -- and Pakistan as a strategically important country for super powers like the US and China. 

In fact, it was Pakistan that allowed the US to establish a gateway to Mao’s China during President Nixon’s tenure under diplomatic shrewdness of Henry Kissinger -- and under the notorious regime of President Muhammed Zia-ul Huq -- Pakistan and ISI played a critical role in arming Mujahadins in Afghanistan to fight a proxy war with the Soviets. 

Bangladesh, in those days, hardly received any spotlight when people spoke about the affairs of South Asia, but when it did -- it mostly got people’s attention for the wrong reasons: Such as, its proneness to devastating cyclones and floods. Yet, over the last decade, things have slowly changed. In fact, very recently, the IMF projections underscored that the per capita GDP of Bangladesh is expected to cross India has created quite a buzz within both South Asia and between global analyst interested with South Asia.  

How can a country overcrowded with strong proneness to natural disasters and weak governance performance achieve such economic turnaround? 

For anyone who has been observing Bangladesh closely -- this turnaround should not come as a surprise as it has been doing better than both the South Asian giants on social and human development indicators for quite some time. This was indeed the revelation that came out of Amartya Sen and Jean Drèze’s insightful work “An Uncertain Glory: India and its Contradictions” -- where the two towering economists highlighted that on indicators like life expectancy, infant mortality, child immunization, female literacy, access to improved sanitation, and total fertility rate, Bangladesh has outshined its larger South Asian neighbours for a while. 

Perhaps the most notable human development indicator has been life expectancy. In 1971, when Bangladesh emerged as an independent nation -- an average Bangladeshi expected to live only 46.5 years, which was two years lower than the life expectancy of India. But by 2018, an average Bangladeshi expected to live 72 years, which is two years higher than India. 

The only major economic dimension where Bangladesh lagged behind was income per capita, which was approximately 25% less than India in 2015. But if the current IMF projections are accurate, then this difference too is expected to disappear, and Bangladesh and India are expected to remain neck and neck till 2025.        


Source: IMF


Of course, some analysts might categorize this economic catch-up a “one-year phenomenon” or use some “statistical tricks” to make counter arguments and that this is mostly due to the devastating impact of Covid-19 in India resulting in a (-)10% growth. However, this is an incorrect way of looking at things. 

This is because every social or economic indicator is trying to capture certain aspect of economic development -- so when any nation does consistently better across a myriad of key indicators like life expectancy, infant mortality, access to sanitation, immunization, female literacy, debt management, then it would be egotistical to contend that an “economic catch-up” between the countries in question is not possible. 

Very recently, India ranked 94 among 107 countries in the Global Hunger Index (GHI) 2020 and continues to be in the “serious” hunger category, while Bangladesh ranks nearly 20 places ahead of its larger neighbour. So, what has allowed Bangladesh to turn a corner in its economic story? 

Clearly, its story was not always so optimistic, and after its independence -- the then US Secretary of State Henry Kissinger infamously branded Bangladesh as a “bottomless basket” -- and development pundits did not pay much heed to the economic prospects of an overcrowded nation with very few natural resources. 

Nevertheless, with the passage of time, incremental improvements on social and economic indicators have turned such prophesies on their heads. More specifically, after 2009 -- when Prime Minister Sheikh Hasina assumed the charge of the government -- strong political commitment to uprooting Islamic terrorism and establishing peace, sustained policy commitment to macroeconomic stability through prudent fiscal and international debt management, expansion of social security net, and execution of mega infrastructure have changed the economic scenario of Bangladesh. 

Yet, PM Hasina’s Midas touch has mostly been on the diplomatic front. Bangladesh before Sheikh Hasina has traditionally swung like a pendulum between India and China, but after 2009, its most profound diplomatic accomplishment has been Prime Minister Sheikh Hasina’s balancing act between the competing geopolitical interests of India, China, Japan, Russia, and the US, which allowed Bangladesh to protect its national interest and develop a win-win political and economic rapport with the major global powers. 

Overall, Bangladesh has experienced transformative economic change due its political leadership’s commitment to political stability, prudent macroeconomic management, strong commitment to mega-infrastructure, and the rise of sectors capable of generating decent foreign exchange earnings such as ready-made garments and remittances. To sustain this economic progress over the long-run, there is a need to improve core governance challenges, such as weak tax mobilization capacity, over-burdened judiciary, inadequate bureaucratic capacity, and excessively heavy dependence on RMG for further improving our export potential. 

Besides, with the world quickly losing faith in the doctrine of free trade and larger trading blocs increasingly harnessing more protectionism, Bangladesh needs to thoroughly examine the international context within which it competes. But as for now, its stable economic rise has again shown why matured political leadership can be so critical in a nation’s political and economic life.    

Dr Ashikur Rahman is a Senior Economist at the Policy Research Institute of Bangladesh.

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