Bangladesh To Overtake India In Per Capita GDP

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What happened?

According to the IMF’s World Economic Outlook (WEO) report, India’s per capita GDP is likely to slump 10.3% to $1,877 — the lowest in four years.
Bangladesh, on the other hand, is expected to see its per capita GDP in dollar terms to grow by 4% to $1,888.
It may be noted that the GDP figure for both countries is at current prices.
Not just Bangladesh but Bhutan, Maldives and Sri Lanka are also set to outpace India’s per capita GDP in 2020-21.
The per capita GDP projection makes India the third-poorest in South Asia, just above Pakistan and Nepal who are set to report a lower per capita GDP.
The Indian economy will be the hardest-hit from the coronavirus pandemic in South Asia,
Sri Lanka’s per capita GDP is likely to contract 4% in 2020, as per the WEO database.
Nepal and Bhutan comparatively are pegged to grow their economies this year, though IMF has not disclosed Pakistan’s data for 2020 and beyond.

What makes the projection worse is the fact that India was one of the top performers in terms of per capita GDP growth a few years ago.
India’s per capita GDP, up until five years ago, was around 40% higher than Bangladesh’s.
However, over the last five years, Bangladesh’s per capita GDP has increased at a compound annual growth rate (CAGR) of 9.1%, compared to 3.2% growth recorded by India.

With the ongoing US-China trade war, apart from other global tensions,
Bangladesh has over the years adapted to the changing landscape and has managed to grow its exports, leading to a rise in its per capita GDP growth.

Bangladesh shipped an estimated $45.7 billion worth of goods around the globe in 2019 – a 44% increase since 2015.
With a population of 166.6 million people, its total $45.7 billion in 2019 exports translated to roughly $275 for every resident in the South Asian country.
China is Bangladesh’s largest trading partner, with annual bilateral trade valued at approximately $15 billion.
Trade with India is only slightly more than a third of that amount.
In contrast, India’s exports have stagnated in recent years.
India’s merchandise trade has been weakening even before the pandemic hit the economy and external demand.
The country’s exports have been in negative territory Bangladesh is also witnessing rise in rate of savings and investment in the country.
Bangladesh’s gross savings rate was recorded at 30.1% in June 2020, and 29.5% in June 2019, against a record low of 27.4% in June 2018. since June 2019.
Due to the COVID-19 pandemic, both exports and imports started declining since March, leading to a trade surplus in June for the first time in 18 years.

Bangladesh is also witnessing rise in rate of savings and investment in the country.
Bangladesh’s gross savings rate was recorded at 30.1% in June 2020, and 29.5% in June 2019, against a record low of 27.4% in June 2018.
The sales of savings certificates in Bangladesh have risen by leaps and bounds.
The flow of credit to the private sector is growing as well.
Apart from imports, the pandemic does not seem to have had too much of a detrimental effect on Bangladesh’s economy.
In India, savings rate touched a 15-year low as the slowing economy took a toll on that segment, weakening the country’s macro economic position.
India’s gross savings fell to 30.1% of the GDP in fiscal 2019 from 34.6% in fiscal 2012, and 36% in 2007-08

IMF projected that India will again surpass Bangladesh in 2021 as its economy bounces back from the pandemic.
For 2021, IMF’s projections for India and Bangladesh are $2030 and $1990, respectively.
However, the good news is unlikely to last long for India, with Bangladesh projected to match India’s nominal per capita GDP in 2024 at $2540.
In 2025, Bangladesh is forecast to surpass India again with nominal per capita GDP at $2760 against $2730 for India.

In terms of purchasing power parity,
India’s per capita GDP in 2020 is estimated by IMF at $6,284 compared with $5,139 for Bangladesh.

In the last decade, on a range of social development indicators, from infant mortality to immunisation, Bangladesh has fared better.
India trails across several (not all) composite indices from the latest Global Hunger Index to the
Gender Development Index.
Even on the 2019 World Happiness Index,
Bangladesh score better.
While, technically, on the Human Development Index, Bangladesh scores marginally less,
This is largely because the index merges income and non-income parameters.