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Sunday, April 18, 2021

Truth India always failed to recognize : Bangladesh is doing better than India on every front

The 2021 Economic Survey rightly recognized Bangladesh holds a lesson for India to build specialization in products in which it is competitive. This comes in less than a year after a central minister's ill-informed rude comments on the neighboring country.

The mention of Bangladesh in 2021 economy survey, debunks the ill founded perception of the country as a “bottomless basket”. The survey rightly acknowledges how India can learn a lesson from Bangladesh’s export strategy. While the recognition is admirable for India’s humility, it is worthy recognizing Bangladesh is doing better than India on every Human Development Index front.

For a long time, Indians have maintained there is an un-controlled “Bangladeshi cross-over” into Indian territory. Not less than an year back, Union Minister of State for Home Affairs, G. Kishan Reddy said “Half of Bangladesh will be empty (vacant) if India offers citizenship to them (Bangladeshis). Half of Bangladeshis will come over to India if citizenship is promised (to them). Who will take responsibility? KCR? or Rahul Gandhi?”

2021 Economic survey recognition of Bangladesh success:

On 29th Jan 2021, during the opening Budget session of the Parliament, FM Nirmala Sitaraman presented the Economic Survey of India. The survey reveled many hopes on the Indian economy projecting a sharp recovery of 10-12%. Further the survey predicted the growth will continue to be 6.5% in 2022-23 and 7% in 2023-24. Of all the 2 volumes, 20 chapters and 916 pages, the mention of Bangladesh success story truly stand outs. Admirably and humiliatingly, India admits a long standing truth. The survey recognizes what India can learn from the economic success of Bangladesh.

The success of Bangladesh’s export strategy:

Explaining how Bangladesh has beaten India on exports in the past decade, the survery points out to the concept of “Revealed comparative advantage” (RCA). Simply put, RCA suggests a country is better off doing/exporting goods or services because it can produce them with fewer resources but not because it simply has a capability to produce those goods or services. In other words, a country should export goods or services where it has a comparative advantage but not an absolute advantage.

Bangladesh followed this principle to the core. If you take a look at their average exports between 2017 and 2019, almost all the goods that Bangladesh exported are the goods where the country had a highest RCA.

Bangladesh exports those commodities in which it has competitive advantage. Economic Survey 2021.
Bangladesh exports those commodities in which it has competitive advantage. Economic Survey 2021.

Hence Bangladesh was able to record a compounded annual growth rate of 8.6% over 2011-2019 versus India’s export growth of 0.9%. During the same time the world average export growth is 0.4%. Citing the above chart the survey points out “After taking an average for last three years from 2017 to 2019, the top export commodities in which Bangladesh had largest RCA …. Four of these commodities are also among the top five export commodities (in terms of share and value) of Bangladesh. This underscores that Bangladesh exports those commodities in which it has competitive advantage.”

Compare this to India’s situation, none of the export commodities in which India has highest RCA is among its top export commodities.

India Export Share vs RCA. Economic Survey 2021.
India Export Share vs RCA. Economic Survey 2021.

None of the export commodities in which India has highest RCA is among its top export commodities. Unfortunately,  India’s top RCA export commodities are mainly labor-intensive such as cotton, carpets and other textiles, etc. (second quadrant), while India exports more of capital-intensive products such as transport equipment, machinery and mechanical appliances (fourth quadrant), etc.

India admittance of Bangladesh success. Economic Survey 2021.
India admittance of Bangladesh success in Economic Survey 2021.

Bangladesh beats India on almost all fronts:

India can learn a lesson from Bangladesh not just from its export strategy but on every Human Development Index front. India trails behind Bangladesh on many indices including Global Hunger Index, Gender Development Index, and overall World Happiness Index. Overall India scores better than Bangladesh on the Human Development Index. This is because the HDI considers income and non-income parameters.

In a nutshell, it is a welcome move now India officially recognized how it can learn from neighboring countries on the economic front. However, it is equally important to show this humility on every front and work towards building progressive economic and social policies.

To follow thorough and understand more, watch this video. In this well documented video, Shekhar Gupta talks about how Bangladesh has been ahead of India in almost all major social indices but per capita GDP.

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