Are Bangladesh and India economic rivals? Yes and no

Numerous indicators confirm Bangladesh progressing ahead of Pakistan – especially on the social and economic fronts. As Bangladesh looks to the future, its inspirational targeted level of development achievement would most likely be nations like Thailand, Malaysia and Indonesia, and there is still a lot more to do in order to reach the level of development achieved by those nations.

Where Bangladesh stands now, it is most often compared to India by many prominent economic analysts, publications and forums. India is not only Bangladesh’s closest neighbour and its largest trading partner but now has possibly become the most comparable nation to Bangladesh.

Or perhaps, the more accurate way to express it would be to say that Bangladesh has progressed so rapidly and achieved so much that it has now reached a position such that it can justifiably be compared to India from an economic and social perspective.

Therefore, is India Bangladesh’s new rival? From certain angles and economic perspectives, the answer would be, yes, but in terms of many other comparatives, the answer is, no.

Furthermore, this comparison is not so straightforward and has certain complexities and nuances.

Over the last year or so there have been several articles published by highly reputable Indian origin publications providing an economic and social comparison between India and Bangladesh and all these articles have one thing in common: they ultimately state that in the present-day, Bangladesh has been beating India on many key economic indicators and social objectives.

This was not the case even five years ago but over the last couple of years, it appears to be becoming a more prevalent scenario. However, practically and honestly speaking, India is still far more dominant and powerful than Bangladesh from an overall relative basis but that’s primarily due to its huge physical size, population and natural resources.

Income and GDP

Theoretically speaking, India has slipped behind Bangladesh in terms of per capita income because very recently, Bangladesh reported its per capita income to be $2,227 in the 2020-’21 financial year which is almost a 10% increase from $2,064 in 2019-’20.

According to the latest official reports, India’s per capita income is $1,947 and this was primarily due to a reduction in India’s economic growth as a result of the Covid-19 pandemic.

It is important to note that Bangladesh’s economy has been experiencing swift GDP growth rates since 2004, but this rate did not really change the relative status of the two economies between the mid-2000s and mid-2010s because India’s economy grew quicker than Bangladesh.

However, during the second half of the 2010s, India’s growth rate has gone down sharply while Bangladesh’s has become even more rapid. A major reason for Bangladesh’s increasingly faster growth rate is because it dramatically enhanced itself on various social and political metrics such as health, sanitation, financial inclusion and women’s political representation.

From an economic perspective, countries are usually compared based on GDP growth rate, or on absolute GDP. For the most part, since independence, on both these counts, India’s economy has been doing better than Bangladesh.

In terms of GDP growth rates and absolute GDP, India’s economy has mostly been over 10 times the size of Bangladesh and grown faster every year. Based on recent International Monetary Fund projections, India is probably again going to grow faster soon and very likely push ahead of Bangladesh, but due to Bangladesh’s slower growth in population and comparatively faster-paced economic growth, the two nations are expected to be very close to each other in terms of per capita income comparisons.

Size matters

An interesting question to ask would be: if India was of similar size, geographically and had a similar population and resources as Bangladesh, then would India still be so much more dominant than Bangladesh?

The simple answer could perhaps be “no” based on the way the important financial, social, demographic, and economic indicators are currently manifested.

If India and Bangladesh were twins in terms of size, population and resources, it would become much more evident that Bangladesh is the twin sister which is doing somewhat better in the 2020s. This is further demonstrated by the fact that in 2020 – and what has caught everyone’s attention – the per capita income of an average Bangladeshi citizen was more than the per capita income of an average Indian citizen.

So, the question is whether India and Bangladesh are comparable, and the tricky answer is both, yes and no. The fact of the matter is that India has far more resources, capabilities and strategic advantages mainly due to its geographic size and its population is not nearly close to being as dense when compared to Bangladesh.

Thus, Bangladesh’s extremely high density in population is perpetually in a battle for its extremely limited resources. Bangladesh has no choice but to make the best and most efficient use of what limited resources and land it has.

This is a very heavy burden which India does not really have to worry about and that provides it with a fundamental advantage. For example, if one region of India is negatively impacted due to natural disasters or unforeseen circumstances, then it has a vast amount of ready and available resources and capability to pool together and manage that in a quick and effective manner.

Such incidents may not really impact the entire nation’s overall economic balance and standing. However, Bangladesh does not have that same luxury because it simply does not have such a large pool of readily available resources to fully absorb a major disaster and such unfortunate events have plagued Bangladesh many times in its past.

However, despite such negative occurrences, Bangladesh somehow always manages to overcome and ultimately thrive.

If Bangladesh is always going to be limited by its comparatively small geographic size (when matched to its huge population), then what can be done to mitigate this issue and work around it so that the nation can still move forward and become just as economically dominant, if not more so, when compared to India?

Japan, Singapore and South Korea are all much smaller than India but all have achieved astounding economic growth and development despite their relatively and comparatively small geographic size. So, how can Bangladesh also one day truly and fully surpass India and become like Japan, Singapore and South Korea?

For starters, it is again important to look at India that became a prominent global economic powerhouse and a force to be reckoned with by up-skilling its huge labour force and it eventually started to endeavour towards becoming what is known as a knowledge-based economy.

Knowledge-driven economy

The World Bank defines knowledge economies according to four pillars:

1. Institutional structures that provide incentives for entrepreneurship and the use of knowledges
2. Availability of skilled labour and a good education system
3. Access to information and communication technology infrastructures
4. A vibrant innovation landscape that includes academia, the private sector and civil society

The focus of a knowledge-driven economy is on its products and services that are fueled by activities that are considered knowledge-intensive rather than labour intensive. The idea is that such an economy utilises knowledge and information to create its goods and services rather than just providing and utilising minimally-skilled manual labour to earn revenues.

A knowledge-based economy requires a skilled labour force and a significant amount of its population having very good analytical abilities and expertise on their subject areas so that information can be manipulated, and progress can come from research and innovation.

Essentially, a knowledge economy enables the commercialisation of science and academics that, in turn, leads to innovations based on research that are protected and backed by strong intellectual property laws. In this information age, the global economy has already shifted towards a knowledge economy and if Bangladesh does not do the same then it will be left far behind.

In all these aspects that define and make a knowledge-based economy, India is far more superior compared to Bangladesh because Bangladesh is still an agricultural and manual labour-intensive economy and the level of skill of its labour force is not yet at the point where truly useable and viable informational analytics can happen or unique technological innovations may be generated.

Whereas, currently India dominates the global technology sector and has made significant strides in numerous other knowledge and skill-intensive sectors such as medicine, industrial production, business consulting services and education.

The hard truth is that Bangladesh is not yet anywhere close to India from a knowledge-based economy perspective. However, the positive for Bangladesh is that it can most certainly become a knowledge-driven economy because it also has the same fundamental foundational ingredients necessary – a large young population that is highly eager to learn, grow, and develop.

Therefore, now it is basically a question of how to cultivate the young population towards greater knowledge focus, skill acquisition, and technical proficiency.

The obvious answer would be to place a much higher focus and stress on education, training and skill development. The goal would be to drive the workforce away from manual labour-intensive professions and encourage and motivate them towards higher skill and knowledge-based professions.

Since India massively benefitted from training its youth in technology-based fields, it would not be too difficult for Bangladesh to achieve the same feat because Bangladesh certainly has the capability and the resources to do so.

However, there must be a significant desire and push from policy-makers, legislatures and those in command to actively nurture and promote a knowledge-based focus when it comes to potential professions and then such aspirations need to be ingrained into the minds of the youth population of the country.

Furthermore, the country’s educational system itself would require major reforms such that it would actively enable and motivate students towards attaining the necessary skills to upgrade themselves.

Teachers and professors also need to be constantly trained and educated in order to keep up with the latest developments in their fields so that they may successfully pass on that knowledge and skill to their respective students. Practical skills should be encouraged rather than theoretical knowledge, and creativity and innovation should be most cherished.

Consequently, if innovation is to be encouraged and sprouted then such innovations and creations must be protected. The primary way this protection is given is through strong intellectual property laws governing trademark, patent, industrial design and copyright that are very strictly enforced.

This is so that no one can easily copy or steal something which another has worked very hard to develop and create. If intellectual property rights are not fully protected and assured, then there will not be enough motivation for businesses and individuals to research, develop and come up with new innovations and technologies and as a result, a knowledge-based economy will never be achieved.

Bangladesh’s challenges

It is certainly praiseworthy that Bangladesh has reached a stage in its development cycle whereby it is starting to be compared to India. However, significant challenges still exist and continue to posit great barriers towards Bangladesh truly being a rival to India.

One worrisome matter is that Bangladesh’s level of poverty is still significantly greater than India’s. The World Bank has stated that poverty is expected to increase even more in the short term, with daily and self-employed workers in the non-agricultural sector and salaried workers in the manufacturing sector experiencing the highest negative impact.

Additionally, Bangladesh continues to lag behind India on standard education parameters, which inevitably has led to its lower rank in the Human Development Index.

A truly sustainable developed economy cannot be achieved while still suffering from such high rates of poverty and a lack of advancement in education, and this again points towards focusing more on a knowledge-based economy that has the incredible potential to alleviate poverty as well as upgrade education and literacy.

In several indicators for “ease of doing business”, Bangladesh currently lags behind other comparative nations, and this is driven by the absence of reforms and the lack of the government’s desire for initiatives to rectify the situation.

Furthermore, the existence of rampant corruption whenever dealing with any governmental regulator or authority also makes it almost impossible for Bangladesh to improve its ease of doing business indicators. Officials demanding bribes have become the standard for even doing the most minuscule task.

Moreover, operating businesses in Bangladesh is still highly challenging – as has been regularly and loudly voiced by many prominent business leaders. For example, in the case of some businesses, numerous licenses and permits need to be obtained from several governmental bodies, which is extremely cumbersome and time-consuming.

It is almost as though the entire system has been purposefully made very difficult so that the relevant officials have ample opportunity to obtain bribes at every level. It is because of this that Bangladesh is not expected to rank below 100 in the World Bank’s ease of doing business index anytime soon.

Even though the Bangladesh Investment Development Authority was created for the very purpose of making it easier to do business in Bangladesh, thus far this regulator has not been able to control, coordinate and collaborate with other regulatory bodies in order to truly become a one-stop service centre which it intends to be.

If this situation is to be improved, then it is suggested that Bangladesh Investment Development Authority be given more authority and power to truly make a difference and be able to override and have control over the entire process so that aspiring entrepreneurs do not have to spend so much time, money and effort simply to be regulatory compliant.

If such issues are not addressed and fixed in the immediate short term, then Bangladesh will continue to miss out and lose to its competitive nations who are also aggressively contesting for foreign investment, and those nations already rank much better than Bangladesh as per the ease of doing business index.

Currently, India ranks far better than Bangladesh in this index coming in at number 63, whereas Bangladesh ranks at number 168, which is quite simply, highly embarrassing.

Bangladesh’s resource

Bangladesh’s greatest asset and resource is indeed its people, and this is one natural resource that it has plenty of. Therefore, the development of its people has to be one of the most important objectives because it can truly be the ultimate key to future success.

Bangladesh’s continued progress and growth must not only be a sustainable one, but its economy should also be a knowledge-based one because it is the most logical and viable option for it to become a fully developed nation.

This article first appeared in Dhaka Tribune.