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Comparison between India, Bangladesh per capita GDP

Topics Covered: India and its neighbourhood- relations.

Comparison between India, Bangladesh per capita GDP:


Context:

This comparison is based on the International Monetary Fund’s latest update on the World Economic Outlook.

Key findings:

  • In 2020, growth of India’s gross domestic product (GDP) will witness a contraction of over 10%.
  • On average, India’s per capita GDP has been 24 per cent higher than Bangladesh’s during the last five years.
  • But, in 2020, the per capita income of an average Bangladeshi citizen would be more than the per capita income of an average Indian citizen (This happened once in 1991 too). India’s per capita GDP, in nominal US dollar terms, is projected to be $1,876.53 in 2020, lower than $1,887.97 projected for Bangladesh.

What is Per Capita Income?

It is arrived at by dividing the total GDP by the total population.

Three reasons why India’s per capita income has fallen below Bangladesh this year:

  1. Growth rate: Both countries have been growing faster in 2004. But, since 2017 onwards, India’s growth rate has decelerated sharply while Bangladesh’s has become even faster.
  2. Population growth: In the last 15 years, India’s population grew faster (around 21%) than Bangladesh’s population (just under 18%).
  3. The most immediate factor was the relative impact of Covid-19 on the two economies in 2020. While India’s GDP is set to reduce by 10%, Bangladesh’s is expected to grow by almost 4%.

What helped Bangladesh stay ahead?

  1. A key driver of growth has been the garment industry where women workers gave Bangladesh the edge to corner the global export markets from which China retreated.
  2. The structure of Bangladesh’s economy is such that its GDP is led by the industrial sector, followed by the services sector. Both these sectors create a lot of jobs and are more remunerative than agriculture.
  3. Over the past two decades, Bangladesh improved on several social and political metrics such as health, sanitation, financial inclusion, and women’s political representation.
  4. On financial inclusion, according to the World Bank’s Global Findex database, while a smaller proportion of its population has bank accounts, the proportion of dormant bank accounts is quite small when compared to India.
  5. Bangladesh is also far ahead of India in the latest gender parity rankings.
  6. It has performed well in the Global Hunger Index too.

What about other neighbours?

China’s per capita GDP in 2020 is projected to be $10,839.43, Nepal and Sri Lanka, are projected to be $1,115.56 and $3,697.89.

What next then?

The IMF’s projections show that India is likely to grow faster next year and in all likelihood again surge ahead. But, given Bangladesh’s lower population growth and faster economic growth, India and Bangladesh are likely to be neck and neck for the foreseeable future in terms of per capita income.

InstaLinks:

Prelims Link:

  1. What is GDP?
  2. What is GNP?
  3. What is Per Capita Income?
  4. PCI of India vs neighbours.

Mains Link:

Discuss why India’s per capita income has fallen below Bangladesh this year.

Sources: Indian Express.