There are two things that stand out. The Indian economy began to revive in March 2013 more than a year before the current government took office after a period of contraction following the Global Financial Crisis.
But, more importantly, since the third quarter of 2016-17 (October to December), this recovery has transformed into a secular slowing of growth. While the RBI did not declare so, many experts believe the government’s move to demonetise 86 percent of India’s currency overnight on November 8, 2016, was the catalyst that sent the country’s GDP into a tailspin.
The GDP growth rate steadily fell from over 8% in FY17 to around 4% in FY20, just before Covid-19 hit the country, as the ripples of demonetisation and a poorly designed and hastily implemented Goods and Services Tax (GST) spread through an economy already struggling with massive bad loans in the banking system.
PM Modi voiced hope in January 2020, when GDP growth fell to a 42-year low (in terms of nominal GDP), saying: “The Indian economy’s high absorbent capacity demonstrates the strength of the country’s foundations and its ability to recover.”
The foundations of the Indian economy were already weak in January last year well before the outbreak as an examination of key factors shows. For example, in the recent past (Chart 2), India’s GDP growth trend mirrored an exponential development pattern “Even before Covid-19 came the market, there was a “inverted V.”
What factors contribute to a low GDP per capita?
The five main causes of low per capita output are highlighted in the following sections. The following are the reasons for this: 1. Low Savings and Capital Accumulation Rates 2. Skilled and educated workers are in short supply; 3. technological know-how is lagging. 4. Unemployment and High Population Growth 5. Political instability and anti-production government policies.
Cause # 1. Low Rates of Saving and Capital Accumulation:
The accumulation of capital, such as roads, structures, bridges, equipment, and vehicles, is critical to economic prosperity. Saving is necessary for capital accumulation. LDCs, such as India, are so impoverished that they have very little savings.
To obtain capital, such countries frequently borrow from more developed countries. Workers have less capital equipment to work with, resulting in poor per capita incomes. As a result, their productivity and output per capita are both low. This makes it impossible for them to save. Such a vicious spiral may frequently only be ended with the help of other countries.
Is the per capita income in India low?
In 2020-21, nominal GDP per capita or GDP per capita at current prices is expected to be 145,679, down from 151,760 in 2019-20. GDP per capita for 2020-21 is 99,694 INR at constant prices (2011-12).
At current prices, India’s per capita net national income (NNI) is expected to reach 128,829 Indian rupees in 2020-21, up from 134,186 INR in 2019-20. In real terms (at 2011-12 prices), per capita income in 2020-21 is expected to be Rs. 86,659, down from Rs. 94,566 in 2019-20.
India’s GDP (nominal) per capita in 2021 is expected to be $2,191 at current prices, according to the IMF World Economic Outlook (April – 2021). In terms of nominal GDP per capita, India ranks 144th out of 194 economies. India’s GDP per capita was 6.45 percent of world GDP per capita in 1993; by 2019, it has increased to 18.4 percent. India’s nominal per capita income is nearly 60 times that of the world’s richest countries and almost eight times that of the world’s lowest. In the list of Asian countries, India is ranked 33rd.
According to PPP, India’s GDP per capita is expected to reach 7,333 US dollars in 2021. It accounts for over 40% of global GDP per capita. The Asian rank is 31 and the world rank is 128, respectively.
What is the current state of the Indian economy?
In FY22, nominal GDP is expected to expand by 17.6%, compared to a drop of 3% in FY21. It’s a lot better than the 14.4% growth rate utilized in the FY22 Budget projections back in February. When the yearly fiscal deficit is measured in terms of nominal GDP, the government will gain from a greater denominator.
How can India boost its GDP?
As a result, India appears to be on track to earn the title of world’s fastest-growing big economy this year and keep it next year.
Keep in mind that, although the Chinese economy grew by 2.3 percent in FY21, the Indian economy shrank by 7.3 percent as a result of the Covid-19 pandemic.
China’s economic growth slowed more than predicted in the third quarter, owing to a failing property industry that is facing stricter policy measures and an impending energy crisis.
According to The Economist, China’s economic growth is currently being hampered by a “triple shock from energy, property, and the epidemic.”
The difficulties of Evergrande, the insolvent Chinese property giant, are already well-known around the world.
Another stumbling block is the Chinese government’s draconian controls on the country’s tech firms.
India’s growth forecasts for FY22 have been kept at 9.5 percent by the Reserve Bank of India and Standard & Poor’s.
Then there’s the ongoing export boom, which is accompanied by increased tax revenue and lower inflation.
Another good area is the decreasing amount of bad debt burdening the financial system.
Let’s not forget about the soaring corporate earnings, the upbeat industrial production figures, and the ever-increasing number of unicorns.
There are also government initiatives such as Gati Shakti and asset monetisation that are projected to gain traction.
However, significant worries remain about whether high development can be continued in the medium future.
If the forecasts for FY22 and FY23 come true, India will experience the high growth rates of the 2000s once more. However, much work remains to be done if that pace is to be maintained in the future.
Which Asian country has the lowest per capita GDP?
Asia is the world’s largest continent. Asia covers around 30 percent of Earth’s total land area and 8.7% of its total surface area, covering 17.2 million square miles (44.58 square kilometers). As of June 2019, it is also home to more over 4.6 billion people. Asia is made up of 49 countries (though the exact number is debatable), as well as a few independent territories and special administrative entities.
China, India, Japan, and South Korea are just a few of Asia’s countries that have worldwide clout. With 1.44 billion and 1.39 billion people, respectively, China and India have the world’s highest populations. They also have two of the world’s largest economies. China’s economy is the greatest in Asia and the second-largest in the world, while India’s economy is the second-largest in Asia and the fifth-largest in the world. Other Asian countries are significantly less rich. GDP per capita, GDP per capita (PPP), and GNI per capita are just a few of the variables that may be used to assess a country’s financial health. Despite the fact that each method differs slightly, the results are very consistent. While the order may alter, every technique identifies the same 12 Asian countries as the poorest.
What is India’s GDP per capita?
According to Trading Economics global macro models and analysts, India’s GDP per capita is predicted to reach $1750.00 USD by the end of 2021. According to our econometric models, India’s GDP per capita will trend around 1850.00 USD in 2022 and 1920.00 USD in 2023 in the long run.
Is Bangladesh expanding at a quicker rate than India?
Several indications show that Bangladesh is gaining ground on Pakistan, particularly on the social and economic fronts. Bangladesh’s inspirational target level of development success in the future would most likely be nations like Thailand, Malaysia, and Indonesia, and there is still a lot more work to be done to reach that level of development.
Many notable economic analysts, periodicals, and forums link Bangladesh’s current situation to that of India. India is not only Bangladesh’s closest neighbor and greatest economic partner, but it has also emerged as the country with the most similarities to Bangladesh.
Or perhaps a more appropriate way to put it would be to state that Bangladesh has progressed so quickly and achieved so much that it can now legitimately be compared to India in terms of economics and social development.
Is India, then, Bangladesh’s new rival? Yes, from certain views and economic perspectives, but no, in terms of many other comparisons.
Furthermore, this comparison is not so simple and has a number of subtleties and nuanced elements.
Several articles published in highly reputable Indian origin publications over the last year or so have provided an economic and social comparison between India and Bangladesh, and all of these articles have one thing in common: they conclude that Bangladesh currently outperforms India on many key economic indicators and social objectives.
This was not the case even five years ago, but it appears to be becoming a more common scenario in recent years. However, on a practical and honest basis, India remains far more dominant and strong than Bangladesh, although this is mostly due to India’s massive physical size, population, and natural resources.
Income and GDP
In theory, India has fallen behind Bangladesh in terms of per capita income, since Bangladesh just declared a per capita income of $2,227 for the 2020-2021 fiscal year, up about 10% from $2,064 in the previous fiscal year.
According to the most recent government data, India’s per capita income is $1,947, owing to a drop in India’s economic growth caused by the Covid-19 pandemic.
It is crucial to note that while Bangladesh’s economy has experienced rapid GDP growth since 2004, this rate did not significantly alter the relative status of the two economies between the mid-2000s and the mid-2010s because India’s economy grew faster.
However, India’s growth rate has slowed dramatically in the second part of the decade, while Bangladesh’s has accelerated even faster. Bangladesh’s quicker development rate is due in part to significant improvements in several social and political indicators such as health, sanitation, financial inclusion, and women’s political representation.
Countries are typically compared in economic terms based on their GDP growth rate or absolute GDP. On all measures, India’s economy has done better than Bangladesh’s for the most part since independence.
India’s economy has always been over 10 times the size of Bangladesh’s in terms of GDP growth rates and absolute GDP, and it has risen faster every year. According to recent International Monetary Fund projections, India will likely grow faster again soon, putting it ahead of Bangladesh. However, due to Bangladesh’s slower population growth and comparatively faster economic growth, the two countries are expected to be very close in terms of per capita income comparisons.
Size matters
Would India still be so much more dominant than Bangladesh if it were the same size, geographically, and in terms of people and resources as Bangladesh?
Based on how major financial, social, demographic, and economic variables are currently exhibited, the simple response could be “no.”
If India and Bangladesh were twins in terms of population, size, and resources, it would be clear that Bangladesh is the better-performing twin sister in the 2020s. This is further shown by the fact that, in 2020 and this has gotten everyone’s notice – the average Bangladeshi citizen’s per capita income was higher than the average Indian citizen’s per capita income.
So, the question is whether India and Bangladesh are comparable, and the answer is a complicated yes/no. The fact is that India has significantly more resources, capabilities, and strategic advantages than Bangladesh, owing to its larger geographic expanse and a population that is nowhere near as dense.
As a result, Bangladesh’s exceptionally high population density is continually at odds with its exceedingly limited resources. Bangladesh has no choice but to make the most effective and efficient use of its limited resources and territory.
This is a significant burden that India does not have to bear, giving it a significant competitive edge. For example, if one region of India is harmed by natural disasters or unforeseen events, it has a large pool of ready and available resources and the ability to pool them and manage them quickly and effectively.
Such incidences may or may not have a significant impact on the overall economic balance and standing of the country. Bangladesh, on the other hand, does not have that luxury because it lacks the enormous pool of readily available resources required to properly absorb a catastrophic calamity, and such sad events have befallen Bangladesh numerous times in the past.
Despite such setbacks, Bangladesh always manages to overcome and eventually thrive.
What can be done to mitigate and work with Bangladesh’s comparably tiny geographic size (especially contrasted to its massive population) so that the country may still go forward and become just as economically dominating, if not more so, than India?
Japan, Singapore, and South Korea are all much smaller than India, but despite their small geographic area, they have all had phenomenal economic growth and development. So, how might Bangladesh, like Japan, Singapore, and South Korea, one day completely and utterly overcome India?
For instance, consider India, which rose to prominence as a global economic powerhouse and a force to be reckoned with by upskilling its massive labor population and eventually attempting to become what is known as a knowledge-based economy.
Knowledge-driven economy
- Institutional institutions that encourage entrepreneurship and the application of knowledge
- A thriving innovation ecosystem that encompasses academics, business, and civil society
A knowledge-driven economy is defined by its products and services, which are propelled by knowledge-intensive rather than labor-intensive activities. The premise is that, rather than giving and employing low-skilled manual labor to generate money, such an economy uses knowledge and information to create goods and services.
A knowledge-based economy necessitates a competent labor force and a considerable portion of the population with excellent analytical ability and subject-matter expertise so that data can be manipulated and development can be achieved through research and invention.
In essence, a knowledge economy allows science and academia to be commercialized, which leads to research-based breakthroughs that are protected and backed by strong intellectual property regulations. The world economy has already changed to a knowledge economy in this information age, and if Bangladesh does not follow suit, it will be left far behind.
Because Bangladesh is still an agricultural and manual labor-intensive economy, and the level of skill of its labor force is not yet at the point where truly useful and viable informational analytics or unique technological innovations can be generated, India is far superior to Bangladesh in all of these aspects that define and make a knowledge-based economy.
India, on the other hand, today dominates the global technology industry and has achieved great progress in a variety of other knowledge- and skill-intensive industries, including medical, industrial production, business consulting services, and education.
The harsh reality is that Bangladesh is still a long way behind India in terms of knowledge-based economies. However, Bangladesh has the potential to become a knowledge-driven economy because it possesses the same core underlying elements as other knowledge-driven economies a huge young population ready to study, grow, and progress.
As a result, the concern now is how to promote better knowledge focus, skill acquisition, and technical competency among the young people.
The apparent solution is to place a greater emphasis on education, training, and skill development. The idea would be to encourage and inspire workers to move away from manual labor-intensive jobs and into higher-skilled and knowledge-based jobs.
Since India has reaped significant benefits by training its youth in technology-related fields, Bangladesh should be able to accomplish the same because it has the capability and resources to do so.
However, policymakers, legislators, and those in command must have a strong desire and drive to actively foster and promote a knowledge-based focus when it comes to future vocations, and such goals must then be instilled in the brains of the country’s adolescent population.
Furthermore, fundamental modifications to the country’s educational system would be required to actively enable and incentivize students to acquire the essential skills to update themselves.
Teachers and professors must also be continually trained and educated in order to stay current with the newest advancements in their fields in order to properly pass on that information and expertise to their pupils. Practical skills, rather than academic knowledge, should be emphasized, and originality and invention should be celebrated.
This is so that no one can quickly replicate or steal something that someone else has spent a lot of time and effort developing and creating. If intellectual property rights are not completely safeguarded and guaranteed, firms and individuals would lack the drive to research, develop, and come up with new inventions and technologies, and a knowledge-based economy will never be realized.
Bangladesh’s challenges
The fact that Bangladesh has reached a point in its development cycle where it is being compared to India is surely commendable. Considerable obstacles remain, however, and continue to erect significant barriers to Bangladesh becoming a true competitor to India.
One cause for concern is that Bangladesh’s poverty rate remains much higher than India’s. Poverty is anticipated to rise even more in the short term, according to the World Bank, with daily and self-employed workers in the non-agricultural sector and salaried workers in the manufacturing sector suffering the most.
Furthermore, Bangladesh continues to lag behind India in terms of basic education, resulting in a worse ranking in the Human Development Index.
A truly sustainable developed economy cannot be achieved while still experiencing high rates of poverty and a lack of educational advancement, pointing again to the importance of focusing more on a knowledge-based economy, which has the incredible potential to alleviate poverty while also improving education and literacy.
Bangladesh now falls behind other comparator nations in several measures for “ease of doing business,” and this is due to a lack of reforms and the government’s willingness to take steps to improve the situation.
Furthermore, Bangladesh’s ability to enhance its ease of doing business indices is nearly impossible due to widespread corruption when dealing with any government regulator or authority. Demanding payments from officials has become the norm, even for the tiniest of tasks.
Furthermore, as many important business leaders have often and loudly stated, running a business in Bangladesh remains extremely difficult. For example, some businesses require many licenses and permits from various regulatory organizations, which is incredibly time-consuming and inconvenient.
It’s almost as if the entire system has been designed to make it as difficult as possible for relevant authorities to accept bribes at every level. Bangladesh is unlikely to fall below 100 on the World Bank’s ease of doing business index anytime soon as a result of this.
Despite the fact that the Bangladesh Investment Development Authority was established with the express purpose of making it easier to do business in Bangladesh, it has so far been unable to control, coordinate, and collaborate with other regulatory bodies in order to achieve its goal of becoming a one-stop service center.
If the situation is to be improved, the Bangladesh Investment Development Authority should be given more authority and power to truly make a difference and to be able to override and control 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 difficulties are not addressed and resolved in the near future, Bangladesh will continue to fall behind and lose to its competitors, who are also aggressively competing for foreign investment, and who already rank far higher on the ease of doing business index than Bangladesh.
In this ranking, India currently ranks 63rd, whereas Bangladesh ranks 168th, which is extremely shameful.
Bangladesh’s resource
Bangladesh’s most valuable asset and resource is its people, and this is one natural resource that the country has in abundance. Since a result, one of the most essential objectives must be the development of its employees, as it is the ultimate key to future success.
Bangladesh’s continuous progress and expansion must not only be sustainable, but it must also be knowledge-based, as this is the most logical and practical path to becoming a fully developed country.
Is India a developing country in 2021?
India is still a developing country. Although the country’s economy is improving, poverty remains a serious issue. India, on the other hand, is experiencing a drop in poverty. As of May 2021, it had 84 million people living in extreme poverty, accounting for 6% of the entire population. However, depending on the severity of the economic collapse, the COVID-19 pandemic is likely to push an extra number of individuals into extreme poverty. According to the yearly Poverty and Shared Prosperity Report, poverty, defined as living on less than $1.90 per day, afflicted between 9.1 percent and 9.4 percent of the world’s population in 2020. This would be a reversion to the 9.2 percent rate seen in 2017. This percentage was predicted to drop to 7.9% in 2020 if the epidemic had not affected the global economy. The World Bank examined and proposed changes to its poverty calculation methodology and purchasing power parity basis for gauging poverty around the world in May 2012. In terms of percentage, it was only 3.6 percent. Multidimensional poverty has decreased dramatically from 54.7 percent in 2005 to 27.9 percent in 20152016 as of 2020. According to Achim Steiner, the administrator of the United Nations Development Programme, India brought 271 million people out of extreme poverty over a 10-year period from 20052006 to 20152016. “Some 220 million Indians sustained on an expenditure level of less than Rs 32 / daythe poverty line for rural Indiaby the last headcount of the poor in India in 2013,” according to a World Economic Forum research from 2020.
Since 19901991, the World Bank has been changing its poverty definition and benchmarks, with a $0.2 per day income on a purchasing power parity basis serving as the standard from 2005 to 2013. To assess poverty in India, some semi-economic and non-economic indices have been proposed. For example, the Multi-dimensional Poverty Index gives a 13 percent weight to the amount of years a person spent in school or engaged in education, and a 6.25 percent weight to the individual’s financial situation when determining whether or not they are poor.
From the 1950s through the 2010s, diverse definitions and underlying small sample surveys used to measure poverty in India resulted in wildly differing estimates of poverty. According to the Indian government, 6.7 percent of the population lives below the official poverty line. According to the United Nations Millennium Development Goals (MDG) program, 80 million Indians (approximately 6.7 percent of the population) lived below the poverty line of $1.25 in 201819, according to the PPPs International Comparison Program for 2019.
Poverty in India increased under the British Raj from the late 19th century to the early 20th century, peaking in the 1920s. Throughout the 19th and early 20th centuries, famines and epidemics killed millions of people in a series of vicious cycles. Famines were not allowed to kill millions of people after India attained independence in 1947. Since 1991, India’s strong economic growth has resulted in a significant reduction in extreme poverty. Those who are not poor, on the other hand, have a precarious economic situation. According to the criteria used in the Suresh Tendulkar Committee report, India’s population below the poverty line was 354 million (29.6% of the population) in 20092010 and 69 million (21.9%) in 20112012. According to the Rangarajan Committee, the number of people living in poverty in 20092010 was 454 million (38.2 percent of the population) and 363 million (29.5 percent of the population) in 20112012. According to Deutsche Bank Research, the middle class comprises over 300 million individuals. If current trends continue, India’s proportion of global GDP will rise sharply from 7.3 percent in 2016 to 8.5 percent in 2020. Around 170 million people, or 12.4% of India’s population, lived in poverty in 2012 (defined as $1.90 (Rs 123.5)), down from 29.8% in 2009. Sandhya Krishnan and Neeraj Hatekar, economists, argue in their study that the middle class comprises 600 million people, or more than half of India’s population.
The Asian Development Bank estimates that India’s population is 1.28 billion, with a 1.3 percent annual growth rate from 2010 to 2015. In the year 2014, 9.9% of the population aged 15 and up were employed. 6.9% of the population is still living in poverty, with 63 percent living in extreme poverty (December 2018) The World Poverty Clock displays real-time poverty trends in India, based on the most up-to-date data from the World Bank and other sources. According to latest projections, the country is on track to abolish severe poverty by 2030 by achieving its sustainable development goals. According to Oxfam, India’s richest 1% of the population now owns 73 percent of the country’s wealth, while the poorest half of the population, 670 million people, saw their wealth rise by only 1%.