India, the fastest growing major economy, is seen as the powerhouse of South Asia, but this may soon change.
Having already stolen a march over India on key social indices, small neighbour Bangladesh is now on the verge of establishing a lead on the economic front too.
According to the Asian Development Bank (ADB), Bangladesh is expected to post a growth rate of 7.5 per cent in 2018-19 against the 7.3 per cent projected for India.
India’s eastern neighbour saw a GDP growth of 7.28 per cent in the last financial year, according to the Bangladesh Bureau of Statistics (BBS), while India grew at 7.1 per cent.
The country’s per capita income is also growing at a pace three times India’s: According to United Nations Conference on Trade and Development figures cited in a Dhaka Tribune report, while India’s per capita income rose by 13.8 per cent between 2013 and 2016, Bangladesh’s grew by 39 per cent.
According to some estimates, if the country continues to keep up its gross national income (GNI) and GDP growth at the same pace for the next two years, it will overtake India’s per capita income by 2020.
A long journey
Formed from the poorest regions of Pakistan, Bangladesh has come a long way since its independence in 1971.
The country’s GDP growth rate in 1972 was recorded at negative 14 per cent. Two years later, Bangladesh was steaming ahead with a growth rate of 9.6 per cent when a catastrophic famine, which killed an estimated 1.5 million people, brought the country on its knees again. The ensuing economic crash saw the GDP growth rate slip to a negative 4 per cent.
After the famine, the government started redeveloping the country with the help of international relief funds. NGOs also stepped up, and the introduction of high-yielding rice and wheat in the 1970s started to boost agricultural growth.
The country’s robust position today can partly be attributed to its stellar micro-credit system, which began to take root in the 1980s and stands as a model for developing economies. And then there is the fact that the government has been known to focus on women empowerment and prioritise health and education.
Talking to ThePrint, Jayshree Sengupta, economist and senior fellow at Observer Research Foundation (ORF), said the economic surge could be traced to growth in private sector investment and remittances from Bangladeshis abroad.
Exports, especially from Bangladesh’s burgeoning readymade garment industry, have played a massive role too.
Bangladesh is a labour-intensive country like India. However, it does not have strict labour laws like India does.
In 1947, before Independence, India passed the Industrial Disputes Act, which put in place a mechanism for the resolution of conflict that recognises the rights of employers as well as workers.
This law was inherited by Pakistan as well, but the country’s military regime repealed the law from what was then East Pakistan in 1958 following differences with trade unions.
Thus, when Bangladesh separated from Pakistan, it did not have the law.
This helped Bangladesh establish itself as a hub for cheap labour, and a base for its booming manufacturing industry.
The garment industry in Bangladesh is one of the strongest drivers of the economy, having given employment to almost 2.7 per cent (44 lakh) of the country’s 16.3 crore people. Nearly 70 per cent (30 lakh) of these are women.
China’s retreat from low-end manufacturing has helped cement Bangladesh’s position in the sector, and the country has been wooing global investors with its cheap work force.
In India, high oil prices, weak exports and depreciation of the rupee due to a slowdown in capital flows have impacted the economy. Just this week, the rupee, Asia’s worst performing currency this year, fell to a historic low of 74/$ Monday.
“We saw an 8.2 per cent economic growth rate in the first quarter of this fiscal and that was largely due to the base effect of the previous year,” Abhijit Sen Gupta, a senior economics officer at ADB, told The Print. “In the next quarters, we are likely to see a sort of slowing down of growth.”
According to Sen Gupta, if India wants to keep up with its neighbour, it should focus on reducing bottlenecks in sectors such as infrastructure, manufacturing, services and exports, which are critical to quality job creation.
“The export engine, along with investment, needs to be fired to sustain high growth rate,” he said.
Bangladesh has also made significant strides vis-à-vis social development indicators such as life expectancy, infant mortality and gender parity.
In a study on ‘human capital’ published in the medical journal The Lancet, India ranked a notch below Bangladesh.
The study aimed to measure the strength of human capital — described as the level of education and health in a population — in the world’s 195 nations between 1990 and 2016. The parameters included years lived, functional health status and educational leaning.
According to the World Bank, in 2017, Bangladesh recorded an infant mortality rate of 27, which means that these many children died on average within the first year for every 1,000 live births. For India, the rate was 32.
The average life expectancy for an individual in Bangladesh is 72.58 years, against 68.8 years in India.
What’s helped Bangladesh
Experts say that Bangladesh owes much of this progress to efforts made by non-government organisations like Grameen Bank and BRAC.
Grameen Bank, for one, is a globally renowned microfinance initiative that earned its founder Muhammad Yunus a Nobel Peace Prize and inspired replicas in more than 100 countries.
The initiative aims at poverty alleviation by giving loans to small-scale entrepreneurs who do not qualify to receive traditional bank loans. According to the bank’s website, it has “grown to provide collateral-free loans to 7.5 million clients…97 per cent of whom are women”.
This has helped boost financial inclusion in the country. According to World Bank data, 34.1 per cent of Bangladeshi adults with bank accounts made digital transactions in 2017, against the average of 28.8 per cent for South Asia.
Although Bangladesh’s health expenditure as a share of GDP is still lower than India’s, several initiatives taken by the government have helped boost education and women empowerment.
The government has made primary education free and compulsory, giving girl students stipends and scholarships for their entire school education. The government has a strong social safety net for women with initiatives such as four to six months of paid maternity leave, and allowances for divorced and destitute women.
Women now make up nearly 70 per cent of Bangladesh’s garment industry and over 60 per cent of fish farmers.
Bangladesh has set an example for developing economies with its women empowerment initiatives, with the World Economic Forum (WEF) ranking the country number one in gender equality among south Asian nations in 2017 as well as 2016.
It has also registered an impressive performance on reducing poverty, a parameter on which India has made significant advances as well.
Bangladesh was ranked seventh, a good eight slots ahead of India (15), in the political representation of women on the WEF gender gap index.
This is because 50 of the 350 seats in the Bangladesh parliament, roughly 14 per cent, are reserved for women. Meanwhile, in India, 62 of 543 MPs elected in 2014, or 11 per cent, are women, with a law on reservation yet to see the light of day.
Don’t forget the NGOs
“Bangladesh’s high economic growth can be attributed to the sustained investments that Bangladesh has made in enhancing people’s productive capacities, especially by way of promoting basic health and education,” said development economist Dr A.K. Shivakumar.
“That life expectancy at birth is higher and child mortality lower in Bangladesh today than in India, when it was not so during the early 1990s, is testimony to the better access that Bangladeshis have to basic social services,” he said.
“To an extent,” he added, “the high growth has also been fuelled by the social transformation brought about by the greater freedoms young girls and women enjoy in Bangladesh today.
“The growing employment opportunities for young women in the garment industry, as well as the collectivisation and empowerment of women brought about by the spread of the microfinance movement, has contributed to it as well,” he said.
Experts are also unanimous in crediting NGOs for the turnaround in Bangladesh’s fortunes.
“Non-government organisations have played a critical and complementary role to the state in reducing poverty and in expanding social and economic opportunities for a vast majority of Bangladeshis,” said Shivakumar.
ORF’s Sengupta agreed, even as she expressed scepticism about the government’s role.
“It is not a very nice picture in Bangladesh,” she said. “They have a very authoritarian government which has completely suppressed dissent. Women are working without wages.”
By 2017, Bangladesh was being lauded for becoming almost open-defecation free, a journey India is striving to complete. Between 2003 and 2015, Bangladesh’s open-defecation rates have fallen from 42 per cent to 1 per cent.
Meanwhile, the Indian government’s sustained fight to make the country open-defecation free with Narendra Modi’s pet ‘Swachh Bharat mission’ began only in 2014.
Under this mission, 76 per cent of India’s villages have been declared open-defecation free as of October 2018. India has taken a leaf out of Bangladesh’s Community-Led Total Sanitation (CLTS) model, introduced in 1999, which focuses more on generating demand for basic indoor toilets than releasing subsidies.