New Delhi: According to the International Monetary Fund (IMF), India will fall below Bangladesh in terms of gross domestic product (GDP) per capita this year, due to the national lockdown imposed to contain the spread of the COVID-19 pandemic.
According to the IMF-World Economic Outlook (WEO), Bangladesh’s GDP per capita in dollar terms is expected to grow 4% in 2020 to $ 1,888. On the other hand, India’s GDP per capita is expected to decline 10.5% to $ 1,897, the lowest level in the past four years. The GDP figure for both countries is at current prices.
However, India’s GDP per capita in dollar terms is expected to grow 8.2% to $ 2030 in 2021, compared to an expected growth of 5.4% for Bangladesh to $ 1,990.
Nepal and Bhutan are expected to grow their economies this year, while the IMF has not released data for Pakistan for 2020 and beyond.
Global growth would contract 4.4% this year and return to 5.2% in 2021, according to the report.
Sad projection
The decline projection comes after India reported a 23.9% contraction of its GDP for the June quarter, making it the worst performer among the G20 economies. The Reserve Bank of India admitted last week that the economy will contract 9.5% in fiscal year 21, with a slight recovery in economic activity in the March quarter.
What makes this situation even worse is that until five years ago, India’s GDP per capita was almost 40% higher than that of Bangladesh. In the past five years, Bangladesh’s GDP per capita has grown at a compound annual growth rate of 9.1%, compared to the 3.2% growth reported by India over the same period.
With the ongoing trade war between the United States and China, in addition to other global tensions, Bangladesh has adapted over the years to the changing landscape and managed to increase its exports, leading to an increase in GDP growth. per capita. The country is now ready to overtake India, which had a significant advantage over it a few years ago.
Bangladesh’s GDP growth in recent years has reportedly averaged around 8%, at a time when economic growth in the rest of the world was slowing. HSBC Bank had predicted that Bangladesh would be the world’s 26th largest economy by 2030.
PPP GDP Comparison
However, according to the government, in terms of purchasing power parity, the IMF estimates that India’s GDP per capita in 2020 will be $ 6,284 compared to Bangladesh’s $ 5,139.
In 2019, India’s GDP was 11 times higher than Bangladesh’s, while the population was eight times higher, the government said, in a response to congressional leader Rahul Gandhi’s Twitter comments about the projections. of the IMF.
In 2019, India’s GDP in terms of purchasing parity was 11 times that of Bangladesh, while the population was 8 times greater. In terms of purchasing power parity, the IMF estimates India’s GDP per capita in 2020 at $ 6,284 compared to $ 5,139 for Bangladesh: Government sources in Rahul Gandhi’s tweet pic.twitter.com/WOd7R1ONrd
– ANI (@ANI) October 14, 2020
A fast growing export sector
China is Bangladesh’s largest trading partner, with annual bilateral trade valued at approximately $ 15 billion. Trade with India is only a little over a third of that amount.
According to the economists who spoke with Commercial standard, Bangladesh’s economic growth has been based on its fast growing export sector and a steady increase in the rate of savings and investment in the country.
Bangladesh shipped goods worth an estimated $ 45.7 billion worldwide in 2019 – a 44% increase from 2015, show data. With a population of 166.6 million people, its total exports of $ 45.7 billion in 2019 translated into roughly $ 275 for every resident of the South Asian country.
In contrast, Indian exports have stagnated in recent years. India’s merchandise trade has weakened even before the pandemic hit the economy and external demand. According to a report, the country’s exports have been in negative territory since June 2019. Added to that, due to the COVID-19 pandemic, both exports and imports began to decline since March, leading to a trade surplus. in June for the first time in 18 years.
In terms of GDP per capita, Bangladesh has grown at a compound annual growth rate of 9.1% since 2015, compared to the 3.2% growth reported by India during the period. This has allowed Bangladesh to close the economic gap with its giant neighbor.
Bangladesh’s gross savings rate was recorded at 30.1% in June 2020 and 29.5% in June 2019, down from a record low of 27.4% in June 2018, the data showed.
Reports show that savings certificate sales in Bangladesh have increased by leaps and bounds. The flow of credit to the private sector is also growing. Other than imports, the pandemic does not appear to have had much of a detrimental effect on the Bangladeshi economy.
In India, the savings rate hit a 15-year low as the slowdown in the economy affected that segment, weakening the country’s macroeconomic position. India’s gross savings fell to 30.1% of GDP in fiscal 2019 from 34.6% in fiscal 2012 and 36% in 2007-08, data from the Central Statistical Organization shows.
According to the WEO database, India’s economic contraction in 2020 will be the worst since the economic crisis of 1990-91, when GDP per capita contracted by 17.5% in 1991. India’s GDP per capita in terms of dollars had contracted for the last time 1% year-on-year. year in 2012 due to the depreciation of the currency. In total, India’s per capita GDP in dollar terms contracted eight times in 40 years, five of which occurred before 2000.
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