IMF report on Bangladesh surpassing India’s per capita GDP reveals economy’s ‘Achilles’ heel’

In episode 592 of #CutTheClutter, Shekhar Gupta explains how India lost a 40% per capita income lead to Bangladesh in the past 5 years.

New Delhi: The International Monetary Fund Global Economic Outlook report, which projected that Bangladesh is set to surpass India’s per capita income in 2020, has exposed “India’s Achilles’ heel”, said ThePrint’s Editor-in-Chief Shekhar Gupta in episode 592 of ‘Cut the Clutter’.

The report states that this year, the Indian economy will be among the steepest declining economies in the world. After Italy and Spain, which were infected by Covid-19 early on, and maybe even France, India’s economy will suffer the most this year because of coronavirus, said Gupta.

According to the IMF’s projection, the Indian economy will fall anywhere between 10.3 – 10.6 per cent, while Bangladesh’s economy will grow by 4 per cent. If this happens and the projections are correct, Gupta said, then by the end of this financial year Bangladesh’s per capita income will be higher than India’s.

He made a disclaimer and said that IMF’s projections are not always correct and said, “Frankly, it’s for us Indians to prove them wrong. There isn’t much time left in this financial year, but you can still try and prove them wrong.”

Decline did not happen in just 1 year

Gupta explained that if Bangladesh’s per capita income exceeds India’s, then the latter will be the fourth-richest country in South Asia after Sri Lanka, Maldives and Bangladesh.

This would be an eye opener and a very rude shock due to the common perception among Indians that Bangladesh is a basket case, especially in the current political atmosphere and in the context of the Citizenship Amendment Act (CAA), he added.

Explaining the economics of the situation, Gupta said that even if India improves in the next year with a projected growth rate of 8 per cent, it would be on a base which has already been lowered this year by the 10 per cent fall. He also cautioned that this over 10 per cent decline is not something that happened in just one year.

According to Gupta, five years ago, India’s per capita income was 40 per cent higher than Bangladesh’s.

Therefore, to potentially be below Bangladesh now would have required a lot of work, in the wrong direction. Gupta explained that data from the last five years showed that Bangladesh’s economy had grown at 9.1 per cent compounded whereas India had grown at only 3.2 per cent compounded.

Need to ask what happened in last 5 years

Looking at the figures and data, Gupta said that India needs to raise questions to its leadership and Prime Minister Narendra Modi about what happened in the past 5 years.

Leave aside this year as it was a different story, but we need to ask the government what happened in the last five years that the country lost its growth momentum to such an extent, he said, adding that Covid was only an excuse for this year.

Decisions like the nationwide lockdown and demonetisation are examples of a decisive government, which was not going through any debate or discussion.

Gupta said, “India has gone back to protectionism, India has gone back to weaponising the tax agencies and India has gone back into a trade aversion, foreign trade aversion. “

Furthermore, if Bangladesh was growing fast it was because it is an export powerhouse today, something India no longer is. And while Bangladesh’s exports have boomed, India’s exports have stalled and declined, he said.

India needs a reality check, dose of humility

Speaking about India’s position in the neighbourhood and previous equation with Bangladesh over the years, Gupta explained that India has had the best relations with the country in the past 10-15 years.

It has had the most important strategic equations with the country, Bangladesh also de-Islamised their governance and cooperated with India “beautifully and marvellously” on control of terrorism. The latter also supported India in its ‘tussle’ with Pakistan.

However, despite all this and because of India’s domestic politics, with respect to CAA, India started a completely “madcap” campaign to malign Bangladesh, said Gupta.

He then referred to an article by Swati Narayan in The Indian Express, which said that on all major indices such as global hunger index, gender development index, world happiness index, immunisation, infant mortality etc, Bangladesh was ahead of India. And India was ahead on only two indicators — per capita income and human development indicators.

Gupta said India needed a reality check and a dose of humility. It now needs to look within and gauge how we got here.

He highlights several lessons to this end. The first lesson is to respect neighbours including Bangladesh, second to acknowledge that Bangladesh was leaving us behind and that it was no fluke and third, we have to look within.

Gupta said that at present Bangladesh was the only sizeable friend in the neighbourhood and India should be careful as China’s Xi Jinping is reaching out to Bangladesh desperately with a blank cheque book.

The situation is so serious that even the US is worried about the Chinese influence in the neighbourhood, he said.

Gupta said that even though work is going on to repair relations with Bangladesh, it would be futile if we continue maligning the country. This continues to be the central point of our politics, especially with the West Bengal elections coming up.

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