Illustration: Ramandeep Kaur
Illustration: Ramandeep Kaur | ThePrint
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New Delhi: While the International Monetary Fund’s prediction that Bangladesh will surpass India in terms of per capita gross domestic product has sparked anxiety, the metrics being compared are incorrect and misleading, economist and former chief economic advisor Arvind Subramanian has said.

In a Twitter thread Saturday, he wrote, “The India-vs.-Bangladesh GDP per capita comparison (post @IMFNews WEO) has sparked anxiety & acrimony. But wrong numbers being compared. NO, on more appropriate metric, India has not been surpassed and, according to IMF, unlikely to be in near future.”

According to the World Economic Outlook report released by the IMF this week, while Bangladesh’s per capita GDP in dollar terms is expected to grow by 4 per cent this year to $1,888, India’s per capita GDP is expected to decline 10.5 percent to $1,877. The figures have sparked a controversy, with the Opposition targeting the Centre for the slowdown.

Former Congress President Rahul Gandhi took a jibe at the government, tweeting, “Solid achievement of 6 years of BJP’s hate-filled cultural nationalism: Bangladesh set to overtake India.”


Also read: Demonetisation, GST, lockdown sans relief dealt body blow to Indian economy — Raghuram Rajan


‘Other, more apt yardsticks than what IMF has used’

Weighing in on the controversy, Subramanian, however, said that GDP per capita is only an estimate for one indicator of the average standard of living or welfare in a country. There could be several other indicators of the standard of living in the country like the human development index, for example, he said. And even if one were to take GDP as the indicator, there can be many ways to measure it.

“We need to measure ‘real’ GDP in local currency after taking out effects of inflation and then, convert all local currency estimates of real GDP into comparable dollars,” he said, adding the IMF has three ways of doing this, while the World Bank has four.

The IMF has focused only on comparisons based on GDP measured at current market exchange rates, but these are not always an apt yardstick for global comparisons on welfare because they might not include domestic inflation or productivity growth.

The more appropriate basis of comparison, Subramanian wrote, is purchasing power parity (PPP) exchange rates, even as GDP is kept constant. Using this metric, India is ahead of Bangladesh, and despite the coronavirus-induced lockdown and its effect, will probably remain so.

However, even here, there are caveats, Subramanian cautioned: “IMF’s historical numbers are themselves based on countries’ local currency GDP estimates which are subject to uncertainty for both India and Bangladesh… And IMF forecasts can also be off.”

The economist also said India has no room for complacency since its economic growth had been slowing even before Covid, and the impact of the pandemic has been severe. India would return to the pre-Covid level of real per capita GDP only in 2022, which means three lost years, he added.

Moreover, Bangladesh’s performance over the last two decades on growth, manufacturing exports and a range of other social indicators such as fertility and female labour participation has been “remarkable,” he said. “Bangladesh is a miracle-in-the-making offering development lessons for all.”


Also read: India’s public debt ratio to jump to 90% due to Covid, IMF says


 

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12 Comments Share Your Views

12 COMMENTS

  1. Whenever the weakness of the government is badly exposed and they are unable to find out any safe corner for hiding their face. Shekhar Gupta always comes for rescue. No wonder he has often been proven wrong.

  2. Physical quality of life index is a better estimate of well being than GDP. Bhutan is a case in point. The comparison of car (GDP, taxes, fuel, servicing….) versus bicycle (low cost,low on GDP, taxes…). is very appropriate.
    This is not to state that Bangladesh is not doing good. And India can definitely do better.

    • The most important is social indicators, not GDP etc.

      Bangladesh has been soaring in the key social indicators for a while now.

  3. Some Bangladeshis in the social media are predicting that Bangladesh should include some eastern states in its fold. Going by the change is social demography in West Bengal and Assam, those ideas are not far fetched.

    • Our hdi is more than Bangladesh and u comparing india to a small country i live in Bihar were gdp per capita is 600 and where gdp per capita is 6k so we have much more opportunities than regular Bangladesh even sri lanka

  4. PPP is really meaningful global comparison for different currencies and not the Dollar exchange rate used by IMF

    Govt should make policy for domestically produced energy, like Coal, base on PPP basis so that Power as well as innumerable goods using coal as energy source become affordable for 80% Indian population below middle class, including BPL.

    Today housing is beyond the reach of even middle class due to high cost of steel and cement being produced using coal.

  5. I see hordes of comments coming on. Bashing Dr Subramanian and those bashing them. Peace out dear brothers and sisters and dear lgbtq.

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