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People in Bangladesh earn more than Indians now on average

Bangladesh surpasses India in per capita income by 280 $. However, economists say this is a temporary phenomenon.

Less than five decades ago US Secretary of State Henry Kissinger had described Bangladesh as a “bottomless basket” after its liberation from Pakistan, not only has Bangladesh proved him wrong but also outpaced the bigger neighbour India in many indices of economic & human development.

Bangladesh’s per capita income has now increased from $2,064 to $2,227, higher than India’s $1,947 by $280. It registered a 9% growth for the same in the fiscal year 2020-21.  Per capita income is calculated by dividing the area’s total income by its total population.

Bangladesh’s economy is such that it is driven by the manufacturing sector in which the garment manufacturing industry plays a key part. India still is dominated by the agriculture and services sector. Also, even though Bangladesh ranks 6 places below India in the human development index it is miles ahead of India in the gender parity index and women participation in the labour force due to the women labour-centric garment industry.

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Just 5 years back there was a 40% difference in per capita income between both countries. ( Source: Twitter )

However, experts say the dip in India’s per capita income is on account of the sharp contraction in the economic growth due to the coronavirus pandemic and once it settles India will shift into a faster gear thus reversing the trend. Also purchasing power parity represents the true international comparison and India is still ahead in it.

“It’s merely a temporary phenomenon. Bangladesh is more a destination nation of labor-intensive exports but that can’t keep on driving the growth engine faster than India’s. Once the pandemic recedes these will crank up growth. I would put it as more of a statistical anomaly and of course India shooting on its feet with some useless policies. But this will come to pass,” an economist working with a foreign financial service firm said on the condition of anonymity.

However, given Bangladesh’s lower growth rate population and faster economic growth, the per capita chart will be neck to neck in the foreseeable future. Also when doing international comparisons per capita income is not an efficient way to do the same, instead Gross National Income( GNI ) per capita, PPP is a better way. According to the world bank, India ( 6920 $) is ahead of Bangladesh ( 5200 $ ) if the same is considered.

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