Lessons for India from the Bangladesh growth story
Amit Kapoor/ India Times
The International Monetary Fund launched the biannual World Economic Outlook this month with a sombre warning that though the worldwide economic system is reviving, the ascent will probably be “long, uneven, and uncertain.” However, the report made headlines for fairly a special purpose in India. The database launched with the report confirmed that India’s projected per capita GDP will fall beneath that of Bangladesh in 2020. The numbers present that the Covid-19 disaster has hit the Indian economy a lot more durable than Bangladesh when it comes to progress. But even earlier than the pandemic, the latter had maintained a a lot steadier tempo of progress during the last decade with its concentrate on low-skilled labour exports. So, it was inevitable for the economic system of Bangladesh to catch as much as India in per capita phrases.
The IMF projections, nonetheless, must be understood in higher element to acquire a clearer image. The situation centres across the IMF projections for GDP per capita in present costs for 2020, which stands at $1887.97 for Bangladesh and $1876.53 for India. The identical projections for 2021 put India above Bangladesh once more. The attention-grabbing factor to notice is that India’s GDP per capita projections for 2019 stood at $2097.78 whereas for Bangladesh they stood at $1816.04. The Covid-19 blow to India has, thus, been fairly important however virtually non-existent for its subcontinental neighbour. This distinction is mirrored in Covid-19 numbers as effectively. Currently, India has 5,534 instances per million individuals versus 2,380 in Bangladesh. Economic arguments apart, India can draw classes from Bangladesh on its relative resilience to the pandemic.
But coming again to the expansion numbers, it should first be famous that GDP per capita in present costs is just not the most effective metric for comparability between international locations because it doesn’t eradicate results of inflation. A rustic with increased inflation may present increased GDP per capita in present costs though the residents within the nation should purchase a smaller basket of merchandise with the identical sum of money. Due to this purpose, the GDP at fixed costs based mostly on buying energy parity is a extra dependable metric. As per IMF projections in the identical database, India’s GDP per capita at fixed costs stands at $5944.69 whereas for Bangladesh it stands at $4861.45. Thus, in actual phrases India nonetheless eclipses Bangladesh.
Nevertheless, these information shouldn’t be grounds for complacency as there’s a lot to study from the Bangladesh progress story. India’s GDP per capita in actual phrases was 1.four instances that of Bangladesh in 2016 however has narrowed every year since then. As of 2020, the projections place the ratio at 1.2. Further, in general GDP phrases (at present costs), India’s economic system was 14.eight instances that of Bangladesh in 2010. As of 2020, the ratio has fallen to eight.15. Thus, the earlier decade has been worrying for the Indian economic system. Even if Bangladesh won’t overtake India in actual phrases any time quickly, important learnings may be drawn from the nation’s efficiency lately.
Bangladesh has adopted the playbook adopted by the East Asian economies and China that led to their distinctive progress trajectories during the last 5 a long time. It has leveraged upon its low-skilled labour drive and developed an export competency on merchandise like textiles, that are labour-intensive. Vietnam has additionally adopted an identical technique and together with Bangladesh are capturing a bulk of the industries which might be exiting China. A serious benefit of focussing on low-skilled labour for growing international locations is that the labour-intensive employment absorbs a good portion of the increasing workforce and reduces the dependency on agriculture.
India has taken a special path to progress. Instead of low-skilled manufacturing jobs, the companies sector has change into the nation’s financial powerhouse attributable to its pool of English-speaking expert workforce. In the method, India missed its bus on turning into a manufacturing-led economic system. The draw back of this path is that the companies sector is just not labour-intensive and, thus, fails to create jobs at a commensurate tempo as individuals be part of the workforce in a growing economic system. The result’s unemployment and talent mismatch, which India is experiencing to a substantial extent. In a working paper by Prateek Kukreja, the 68th spherical of the NSS Employment and Unemployment Survey is used to indicate that the proportion of overeducated staff in jobs is drastically excessive in Indian manufacturing. In the textiles and garments business, this determine stood at 68 per cent in 2011-12. This exhibits how the Indian labour drive is grossly untapped and important financial good points may be made by means of the suitable and enough job creation.
The current financial efficiency of Bangladesh needs to be a wake-up name for India to concentrate on low-skill manufacturing. The want of the hour is to allow the creation of industries that present mass employment. To accomplish that, it’s essential for India to fireside its manufacturing cylinder and solely then can it outpace the expansion of its friends within the neighbourhood and past.