Look East, India: Bangladesh is about to get past India economically. There are lessons for us

In India’s overheated political rhetoric, references to Bangladesh are mostly negative. The salient characterisation is that it’s an economic basket case, forcing desperate job seekers to cross illegally into India. Current evidence, however, indicates otherwise. IMF forecasts that Bangladesh will edge past India this year in per capita GDP.

Bangladesh’s economic progress has been consistent, signifying that its gains are durable. Over the last eight years, its economy expanded for a while by over 6%, then 7% before it hit 8.2% in 2019. In a world undermined by the pandemic, Bangladesh’s export oriented economy is forecast to expand 3.8% this year. India’s trajectory is a marked contrast. Its growth rate has been uneven and this year IMF projects a contraction of 10.3%. If there was a moment of divergence, it has to be 2017. Following the ill-conceived demonetisation India’s growth rate sputtered, while Bangladesh’s expansion only got faster.

Per capita GDP weaves in another measure that is the stuff of hope – and trope. Bangladesh’s fertility rate has fallen faster than India, and at 2 it’s below the replacement rate. As a Muslim majority country, this belies the right wing myth that Muslims (in general) reproduce faster than Hindus (in general). As an outlier in economic performance, Bangladesh holds lessons for us. The springboard for its growth has been a tighter integration into global value chains for textiles. India, however, has reverted to its old import substitution approach by using tariffs to protect domestic industry. An export-oriented approach remains the best bet to revive India’s economic performance. The government must also expand economic cooperation and connectivity with Bangladesh, one of our best friends in the neighbourhood. Beijing is courting Dhaka as well, and if we diss Bangladesh for petty reasons of domestic politics we will lose the economic as well as the strategic game.

This piece appeared as an editorial opinion in the print edition of The Times of India.


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