No slide for Sonar Bangla

Bangladesh has shrugged off the stigma of extreme poverty while India lags behind

No slide for Sonar Bangla

Optimistic: Bangladesh’s nominal per capita income is expected to cross India’s in 2025.

Aunindyo Chakravarty

Senior Economic Analyst

The legendary Pakistani comic, Moin Akhtar, once appeared on popular satire show Loose Talk, dressed as a Bangladeshi cricketer. The interviewer, as always, played by the equally funny Anwar Maqsood, asked questions about the Bangladesh cricket team’s failure on their Pakistan tour. Moin Akhtar countered each question with ‘fact’ about Bangladesh's superior economic and social indicators. For instance, when the 'interviewer' asked the ‘cricketer’ to admit that Pakistan was much better at cricket, pat came the reply that Bangladesh was much better at exports.

This episode has been uploaded on YouTube in various avatars, and their cumulative views are well over 10 million. Many of those views are from Indians. It is especially funny for us, because it works to reinforce two of our inherent prejudices — our image of a typical Bangladeshi and our belief that Pakistan is a failed experiment. In fact, depending on which side of the political divide we are on, we see Bangladeshis either with a condescending paternalistic eye, or we perceive them to be dangerous infiltrators who steal our resources and plot to undermine our national security.

So, imagine our collective surprise when the IMF announced that an average Bangladeshi will end up being better-off this year than an average Indian. In dollar terms, Bangladesh's per capita GDP — the country’s GDP divided by its population — will be $1,888, while India’s will be around $1,876. It was a perfect stick for Rahul Gandhi to beat the Modi government with, and social media erupted with jokes and memes about how PM Modi has taken India’s economy even below Bangladesh’s.

Government ‘sources’ responded by pointing out that this data didn’t account for Bangladesh's high inflation rate. The sources also said that the right way to look at it is to compare how much an average Indian and an average Bangladeshi can buy with their income. This can be done by looking at the per capita GDP in purchasing power parity or PPP terms. PPP tells us how many units of a local currency will be needed to buy the same ‘basket’ of goods and services that one dollar fetches in the US.

In PPP terms, India will still have a higher per capita income than Bangladesh, even after the precipitous fall that IMF predicts for this year. Our GDP in PPP dollars will be about $6,284, while Bangladesh’s will be $5,139. In any case, in another year, India’s per capita GDP will go back above Bangladesh’s even in US dollar terms, unadjusted for inflation. This, we are told, is what we should look at, instead of the misleading ‘propaganda’ by the Opposition.

The trouble is that this, too, is only half the story. Even if we only look at the per capita GDP in PPP terms, Bangladesh’s average income has risen by 49 per cent in the past five years, whereas our per capita GDP has risen by just 33 per cent. If the IMF’s predictions for 2020 turn out to be correct, then Bangladesh’s per capita GDP would have risen by 38 per cent during 2015-20, while India’s would have risen by a paltry 15 percent.

The IMF’s future projections, till 2025, paint an even more grim picture for us. In 2019, an average Bangladeshi earned Rs 748 for every Rs 1,000 that an Indian earned. By 2025, an Indian’s income will rise to Rs 1,374 or an increase of 37.4 per cent, while a Bangladeshi’s income will rise to Rs 1,123 or an increase of 50.2 per cent. In fact, in unadjusted dollar terms, Bangladesh’s nominal per capita income will, once again, cross India’s in 2025.

But per capita incomes can be misleading. A handful of the super-rich can pull up a country’s average income, even when the majority is very poor. A more suitable comparison is a country’s median income — half the population is below this level and consequently the other half is above it. Since this data is hard to come by, we can use the median wealth data compiled by Credit Suisse as a proxy. In 2019, the average wealth owned by an Indian citizen was $14,569, whereas average wealth in Bangladesh was less than half, at just $6,643. Median wealth in India was $3,042, while that in Bangladesh was $2,787, less than 8 per cent lower. That means that half of the people in India have more or less the same wealth as half the people in Bangladesh.

Another way to gauge how representative per capita income figures are is to take the ratio of per capita wealth to median wealth. Per capita wealth is an average that can be skewed by a small minority of very rich people, while median wealth gives us a sense of what a person right at the middle of the income scale owns. A high ratio between the two numbers will tell us that the average has been artificially boosted by a few rich and is unrepresentative of the real conditions of the wider population.

In India, the ratio between average wealth and median wealth was 4.8 in 2019, while in Bangladesh it was 2.4. Since wealth is the surplus income that has been saved, this ratio also gives us a fair idea whether the per capita GDP figure is representative of a large part of a country’s population. The high ratio for India compared to Bangladesh suggests that a larger proportion of Bangladeshis are likely to be clustered around their country’s per capita income, than is the case in India. In other words, despite Bangladesh’s lower per capita income, it is highly likely that a larger proportion of Bangladeshis are better off than us.

Of course, Bangladesh has its own problems. Its period of high growth has been accompanied by increased inequality, higher unemployment and low employment growth. Despite these issues, there can be no doubt that Bangladesh has managed to shrug off the stigma of extreme poverty and hunger that has invariably been associated with it, ever since it became independent. India, on the other hand, has slipped from being the most promising economy to one that failed to live up to its potential.

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