WITH NEWS EMERGING THAT BANGLADESH HAS SURPASSED INDIA'S PER CAPITA GDP, THE INTERNET IS ABLAZE WITH FAKE RHETORIC. HOWEVER, ALL IS NOT LOST. HERE'S WHY.
How the times have changed! Regarded by many in India as a mere afterthought, Bangladesh has emerged victorious in the race of economics! In its annual report, IMF has declared that the per capita GDP of Bangladesh surpasses that of India. India’s per capita GDP, in nominal US dollar terms, is projected to be $1,876.53 in 2020, lower than $1,887.97 projected for Bangladesh. The difference although minimal is a testament to the successful economic policies of the South Asian minnow.
However, stats often lie. Even in this case, the per-capita GDP does not account for inflation! For reference, Per Capita GDP refers to the total value of goods & services produced within a country divided by the total population. So basically, Per Capita GDP reflects wealth creation per person. However, the GDP estimated by IMF is on a nominal basis. It means that rise in prices i.e. inflation is not taken into account. hence, the GDP is overstated to a certain extent.
Another more reliable measure of economic comparison is GDP in terms of PPP (Purchasing Power Parity). It refers to the sum of goods & services produced which are valued at prices prevailing in the United States. Thus, the comparisons are more accurate & realistic. In terms of PPP, India's economy was 11 times larger than Bangladesh's in 2019.
Still, the recent developments should serve as a stark reminder to policymakers in New Delhi that the economic dynamics are changing. The rise in Per Capita GDP is not an outlier. Bangladesh has outperformed India in several other economic metrics, The two graphs below (sourced from The Times Of India) highlights how Bangladesh is closing the gap.
One of the main reasons for such good performance is India's much larger population size. Economic policies are easier to implement & execute if the population is smaller. however, it is important to note that Bangladesh is the world's most densely populated country.
Bangladesh's groundbreaking work should be appreciated, Its focus on improving human capital, urbanization, enhancing healthcare & education and most importantly establishing a fledging export economy is laudable. However, India's economic potential has never been in doubt. It's expansive demographics, geographic advantages, large domestic market, rising middle class, strong service sector, stable growth rates and a burgeoning entrepreneurial spirit bodes well for the future.
The ball is in the policymaker's court. India's destiny is in their hands. Whether they take the road of economic prosperity or divisive politics only time will tell. One thing is for certain: the fate of the Indian economy hangs in the balance.
On that sombre note, I bid your farewell.
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