Bangladesh is expected to overtake India in terms of gross domestic product (GDP) per capita this calendar year, thanks to a sharp contraction in the Indian economy due to Covid-19 and the economic lockdown.
According to the International Monetary Fund (IMF) -World Economic Outlook (WEO), Bangladesh’s GDP per capita in dollar terms is expected to grow 4 percent in 2020 to $ 1,888. On the other hand, India’s per capita GDP is expected to decline 10.5 percent to $ 1,877, the lowest level in four years. The GDP figure for both countries is at current prices. This makes India the third poorest country in South Asia, with only Pakistan and Nepal reporting lower GDP per capita, while Bangladesh, Bhutan, Sri Lanka and the Maldives would be ahead of India.
The WEO database suggests that the Indian economy will be hit hardest by the pandemic in South Asia after Sri Lanka, whose GDP per capita is expected to shrink 4% in the current calendar year.
By comparison, Nepal and Bhutan are expected to grow their economies this year, while the IMF has not released data for Pakistan for 2020 and beyond.
The IMF predicts a strong economic recovery in India next year, which will likely push per capita GDP ahead of Bangladesh in 2021 by a small margin.
India’s GDP per capita in dollar terms is expected to grow 8.2% in 2021, compared to an expected growth of 5.4% for Bangladesh. This will grow India’s GDP per capita to $ 2030 next year, up from $ 1,990 for Bangladesh.
Until five years ago, India’s GDP per capita was almost 40% higher than that of Bangladesh. Over the past five years, Bangladesh’s GDP per capita has grown at a compound annual growth rate of 9.1 percent, compared to the 3.2 percent growth reported by India over the period. This has allowed Bangladesh to close the economic gap with its giant neighbor. According to economists, 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. By contrast, India’s exports have stagnated in recent years, while savings and investment have declined.
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 Dollar terms had last contracted 1% in the year. y-o-y in 2012 due to currency depreciation. 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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