IMF’s per capita GDP predictions: A lesson for India

Recently, the International Monetary Fund (IMF) has predicted that Bangladesh may beat India in terms of per capita gross domestic products (GDP) in this calendar year.

According to IMF – World Economic Outlook (WEO), India's per capita GDP may decline up to 10.3 percent in the 2020-21 fiscal year, to fall as low as $1,877, the lowest in the last four years. Whereas, Bangladesh is expected to have a four percent positive growth in dollar terms, thereby raising the country's per capita GDP to $1,888 in the calender year.  

Such a decline of per capita GDP of India will make India the third poorest country in South Asia followed by Pakistan and Nepal.

After such a report by IMF, India has taken the matter very seriously and many of the Indian media houses are strongly criticizing the country's economic policies. However, the same media outlets also have been deliberately neglecting the rapid socio-economic rise of Bangladesh over the years while discussing India's shameful economic defeat.

If we review the previous economic status of both these countries, the facts may take us by surprise. For example, five years ago, Bangladesh was running 40 percent below per capita GDP of India and surprisingly took over the neighbouring country's economic growth rate in the recent fiscal year.

This attests to the gradual improvement of the economic status of Bangladesh in recent years and also shows the declining economic performance of India during the time. However, IMF expects that next year India may find sharp recovery, which entirely depends on the country's internal economic policies and gross productivity situation.

India will have to overcome the negative growth first and ensure a V-shape recovery to beat Bangladesh in the economic race, which seems almost impossible in the present context of Covid-19 situation.

In another comparison, it is shown that in the last five years, Bangladesh's per capita GDP has witnessed a compound annual growth rate of 9.1 percent, whereas India could only manage to gain 3.2 percent. This demonstrates the supremacy of the Bangladesh economy over the years.

Such an economic dynamism of Bangladesh is mostly attributed to its foreign currency earnings like fast-growing export sectors, foreign incoming remittances and consistent growth in saving and local and international investment. Besides, the size of the economy of Bangladesh has grown by 188 percent since 2009.

The comparison between Bangladesh and India can be discussed under various indicators where Bangladesh outperformed India significantly. For example, according to the Global Hunger Index, informality and Covid-19 and World Bank data sources, the life expectancy of average Bangladeshi citizen is 72.3 years whereas, in India, it is 69.16 years.

In the labour force participation, 36 percent of Bangladeshi female workers participate in the workforce which is way high than Indian female participation of only 20.335 percent. The mortality rate to unsafe water, unsafe sanitation and lack of hygienic (death per 100,000 population) is only 11.9 percent in Bangladesh while in India it is 18.6 percent.

In gender parity ranking Bangladesh ranks 50th across the world whereas India holds 112th position. Recently, the Global Hunger Index placed Bangladesh on 75 and India on 94 among 107 countries.

Bangladesh seeks 45.9 percent debt of its GDP while India takes 90.4 percent. In terms of fiscal balance as a percentage of GDP, Bangladesh is -8.8 but India is -12.4.

All these improved socio-economic indicators of Bangladesh positively contributed to the economic advancement of the country. However, in some areas, Bangladesh needs to improve significantly to become a sustainable economy. For instance, Bangladesh needs to improve it's current account balance, stabilise inflation, improve HDI, ease of doing business, and economic freedom ranking to grow further as an economic powerhouse in the world.   

Like the adage, Rome was not built in a day, neither the economy of Bangladesh. It has gone through huddles and many spikes over the years to reach where it stands now. After the independence from Pakistan, Bangladesh experienced deadly starvation, several natural disasters, impoverished condition etc.

Even in recent years, Bangladesh has given shelter to more than one million Rohingya refugees of Myanmar that gave Bangladesh a huge challenge to upgrade its economic condition.

The economic success is not a job done overnight. It took years of hard work, policy reforms, administrative willingness and strategic economic decisions. It took a long walk to make the apparel sector of Bangladesh of $ 30 billion industry representing second-largest garments industry in the world.

Bangladesh currently exports $1 billion of ICT products around the world and aiming to enhance this up to $5 billion in 2021 which seems quite an achievable target since the government is constructing ICT parks and developing pertinent infrastructures around the country.  

Besides, Bangladesh has got 600,000 IT freelancers, which forms one of the largest freelancing communities around the globe. To make the economy of Bangladesh more dynamic, the country has been establishing special economic zones that provide one-stop services for foreign investors, which are pretty appealing for them in the manufacturing and production sectors in Bangladesh.

In the last two decades, Bangladesh has improved significantly, and India can take note of these and can integrate into its development policies.

India can learn how Bangladesh manages to improve on several social and political matrix, like health, sanitation, financial inclusion and women's economic and political representation. India also can learn how Bangladesh kept the country politically stable for a long time

The land and labour policy of Bangladesh can also be a lesson for India to attract foreign investors. India can also look into tax and incentive policies prepared for the foreign companies operating in Bangladesh to enhance substantial productivity and per capita GDP.

Moreover, India needs to learn how Bangladesh managed to improve social and economic indicators which ultimately support the national economy in the long run. Eventually, India should leave the attitude of economic superiority, hostility towards strong neighbours and congratulate Bangladesh on its economic achievements.

Bangladesh regards India as a friendly neighbour and wants to grow together hand in hand through trade, commerce and cultural transfer.