Bangladesh could well march past India

India has had an unfortunate history of losing out to its economic counterparts over time. It first began in 1965 when the East Asian economies stood at more or less the same income level as India. 

Then the former group of countries adopted more pro-market reforms and focused on making the export sector more competitive while India shifted leftward on the economic policy spectrum under Indira Gandhi and strengthened the so-called ‘license-raj.' 

For the following three decades, the East Asian economies would grow at a breakneck pace leaving India far behind. A similar fate awaited India following the market reforms of Deng Xiaoping in China after 1978. The current economic heft of China makes it difficult to imagine that its income levels were similar to that of India before Deng came along.

Now, it appears that history is about to repeat itself as the economic successes of Bangladesh gradually gain momentum. 

Bangladesh is now a regular feature in the top 10 fastest-growing economies around the world. It grew at 7.28 per cent last fiscal year. As a result, it was its seventh year in a row that its GDP growth had exceeded 6 per cent. 

This is a small feat by no means, especially considering the fact that the period coincided with the slowing down of most of the emerging countries around the world. In fact, in the last few years the country's growth rate has exceeded that of India itself. 

In the three years preceding 2016, the per capita income of Bangladesh had grown by about 40 per cent while India grew at a measly 14 per cent. At this rate, it is estimated that Bangladesh could exceed India's per capita income by 2020.

The Bangladesh growth story is more exciting due to its inclusive nature unlike most emerging economies. A World Bank study on the country's growth for the period 2005-10 found that the average income of the poorest 40 per cent households grew faster than for the rest of the country by 0.5 per cent. During the same period, India's poorest 40 per cent did far worse.

Bangladesh also outperforms India when it comes to social development indicators like infant mortality, education and gender equality.

The only explanation for Bangladesh's growth performance can be attributed to two major factors – both institutional. One is the long-standing garment industry and the second is the country's developed NGO network. 

Crucial insights explain: First, it highlights the importance of working upon the strengths to build a competitive edge in the world market. Second, it shows the effectiveness of ensuring development at the grass root levels in reducing poverty and driving inclusive growth. India especially falters on both of these fronts.

If status quo is maintained, Bangladesh will evolve into yet another nation that marches past India on the developmental path. 

By: Amit Kapoor is chair, Institute for Competitiveness