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Economy

Bangladesh's GDP: Why PM Modi Needs to Pay Attention to Comparisons Showing India in Bad Light

While there may be many ways of seeing India's recent performance against its Asian peers, several economists have pointed out India's lack of social harmony as a cause contributing to the downturn.

Prime Minister Narendra Modi has repeatedly claimed that India has done very well by managing one the lowest COVID-19 death rates while fuelling a path to economic recovery. Is this claim borne out by hard data?

Former World Bank chief economist Kaushik Basu recently tweeted two data sets ― the IMF’s projected GDP growth for 2020 and COVID-19 deaths per million ― for several comparable Asian countries.

They cast doubt on Modi’s repeated assertion that India has been highly successful in dealing with the pandemic by recording among the lowest death rates. And remember, the Prime Minister had infamously predicted in May that India would lead a global economic recovery.

The numbers show that India has the highest death rate in Asia and its projected GDP growth rate is the lowest. On both counts, India has performed abysmally.

India has had 83 COVID-19 deaths per million population, while comparable Asian countries are doing much better ― China (3 deaths), Bangladesh (34), Vietnam (0.4), Nepal (25), Pakistan (30), Thailand (0.8), Sri Lanka (0.6), Malaysia(6), Indonesia (46). India has recorded nearly double the number of deaths as the second worst performer, Indonesia.

On GDP growth projections for 2020-21, India is at minus 10% whereas many Asian peers like China, Bangladesh and Vietnam are in positive territory. Bangladesh has caught everyone’s attention because IMF data on per capita GDP shows Bangladesh surpassing India this year, largely because of the 10% shrinkage in India’s growth estimate.

Also read: Why Social Harmony Is Important for a Healthy Economy

Former economic advisor to the Modi government, Arvind Subramanian, has argued that even if Bangladesh surpasses India’s per capita GDP income in dollar terms, India would fare much better if per capita income were calculated in Purchase Power Parity (PPP) terms. Since India has a much wider base of non-dollar traded goods and services, it is bound to have a higher per capita GDP on a PPP basis.

In a PPP calculation, local services provided by barbers, plumbers and construction workers typically get assigned a dollar value for equivalent to the same service in the US and thus India’s GDP increases to three times the dollar GDP. The same would happen with Bangladesh GDP, but not to the extent it does with India which has a much wider domestic services base.

But social and political factors profoundly impact economic growth, irrespective of whether GDP is calculated in PPP or dollar terms. In fact, Subramanian has himself said that lack of social harmony and growing identity divisions in society were bound to negatively impact economic growth. Recently, Joseph Stiglitz also emphasised divisiveness as a major risk factor for India. Basu, too, elaborated this in an interview with The Wire recently.

Also read: ‘India’s Divisive Politics, Intolerance a Major Obstacle to Economic Growth’: Kaushik Basu

Bangladesh doing better than India, even in per capita dollar terms, therefore must be taken as a warning.

Asian peers like China, Vietnam and Bangladesh also have the advantage in terms of women’s participation in the labour force.

Most Asian economies that have done well and overcome the negative effects of the pandemic have women’s participation in the labour force ranging from 38% to 60%. Bangladesh’s robust export-led success is based substantially on the productivity of women workers.

In India, women’s participation is abysmal at 17%, according to the NSSO survey 2017-18. Only 17% of women above 15 years of age are looking for work. In many Hindi heartland states, the fount of the BJP’s majoritarian politics, women’s participation in the labour force touches rock bottom at 4%-7%.

One cannot imagine how populous states like Uttar Pradesh, Bihar and Madhya Pradesh can accelerate growth, whether in PPP or dollar terms, with well over 90% of women at home and not looking for work. It may be pertinent to note that the per capita GDP of populous states like UP & Bihar is less than half of Bangladesh’s per capita GDP of $1,888 projected for 2020.

Indeed, there still is not enough research in India on how caste, communal and gender discrimination could affect long-term growth prospects. COVID-19 has reinforced these inherent risks.

This article is a modified version of a piece that appeared in The India Cable.