The economy is considered the backbone of every state, ensuring harmony and peace in the country. Bangladesh is one such country that has carved a remarkable space for itself due to its economic achievements in the past. According to the World Bank, Bangladesh has become the fastest growing economy globally over the last decade, because poverty has come down from 43.5% to 14.3% just in two decades. Moreover, the country’s garment industry has grown its annual income from $19 billion to $34 billion.
Despite its recent challenges, where Bangladesh has sought help from IMF, Bangladesh has emerged as an economic star in Asia since its inception. Its economy fared better even during the Covid-19 crisis. Its per capita income in the fiscal year 2020-21 remained higher than that of its neighboring countries including India and Pakistan. During the past year, Bangladesh’s GDP per capita increased by 2723.000 USD in June 2022, as compared to 2462.000 USD in June 2021.
Bangladesh has proved itself as the most auspicious economy in South Asia
A comparative analysis of Bangladesh’s economy with other countries indicates that Bangladesh is faring way better than its regional counterparts. Pakistan was 70% richer than Bangladesh at the time of partition, but today Bangladesh is richer than Pakistan. It is estimated that Bangladesh is 45% richer than Pakistan at the present time. On the other side, India which takes pride in being a regional economic giant is also poorer than Bangladesh in terms of per capita income. Bangladesh’s per capita income is $2227 billion, while in 2020-2021 India’s per capita income was $1,947 billion.
It compels to raise the question of why Bangladesh’s economy has flourished as compared to other countries in the region. For this reason, it is important to note that Bangladesh’s economic growth depends on these pillars:
- Social progress
- Fiscal prudence
It is estimated that the world’s average export rate is 0.4%. While the Indian Ministry of Finance’s survey in 2021 stated that every year Bangladesh’s exports grew at an annual rate of 8.6% from 2011 to 2019. Bangladesh Bureau of Statics stated that for the fiscal year 2019 to 2021, the country has increased its export volume by 12.75% to more than 41 billion dollars as compared to the previous year. Bangladesh ranked 52ndin the World in terms of exports based on the conservation of economic complexity.
Due to low government spending, hardworking people, the rise of IT companies (Google and Facebook) and cheaper labor costs as compared to India and other regional countries, Bangladesh’s economy is increasing while the inflation rates are receding. The success is broadly due to the county’s focus on outputs like clothes, readymade garments, and the manufacturing industry including textile, leather, goods, jute and jute products, agriculture products, fisheries, ceramics, ships, vessels, software, electronics and electrical products.
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Another contributing factor to Bangladesh’s economy is the involvement of women in its labor force. Nearly 80% of women workers are in the manufacturing industry which holds huge significance for Bangladesh’s economy. It has contributed to women’s empowerment in the country. It enabled greater access to education, especially for women in the garment industry.
Moreover, Bangladesh has developed a public debt to GDP ratio of about 30% and 40%. However, both India and Pakistan come out of the pandemic with public debt of nearly 90% of the GDP. Fiscal restraint has given permission to Bangladesh’s private sector to take loans and invest.
Remittances have been an important source for Bangladesh’s economy too. It is the money sent by the people who work in foreign countries back to their homes. Bangladesh gets nearly 6% of its GDP from remittances. Bangladeshi workers work in different places such as salespersons, tailors, cooks, drivers and construction workers in the Middle East and by doing so, contribute to their economy.
The important role of the Bank of Bangladesh
Bangladesh bank has announced its monetary policy system (MPS) with three objectives:
- Growth of GDP
- Inflation Control
- Employment Generation
The MPS puts forward a tight monetary policy to reduce inflation and decrease exchange rate pressure. Bangladesh Bank (BB) also wants to better the economic recovery process by ensuring funds to the productive sectors as well as employment-generating activities. The monetary policy has also promoted substituting economic activities. To secure the foreign exchange reserves and control inflation and decrease the price pressure, the policy will beat down the imports of luxury goods and foreign goods. Bangladesh bank also sets its interest rates in such a way that makes it easier for banks to obtain money, which in turn helps the banks to lend money easily to the business community and the consumers.
Padma Bridge is another project which has brought prosperity to Bangladesh. According to the director of World Bank Mercy Tembon, Padma Bridge will increase economic growth and reduce poverty in Bangladesh. The project will work as a catalyst in the agriculture sector and education as well as health sectors.
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Furthermore, according to Jashim (a survey leader), the southwest region of Bangladesh has experienced 2.3 percent GDP growth. An increase in agricultural products like paddy, rice, marine fish including hilsa, and vegetables has increased the economic condition of Bangladesh within a short period of time. According to a survey of the global economy, in 2020 Bangladesh’s per capita income was $2,260, however, chances are that it will increase to $2,860 in 2025.
All these arguments, only indicate that future Bangladesh will add to its reputation in South Asia as an emerging economic power and highlight the policies which have allowed an economic boom and prosperity in the country.
The author is associated with the Institute of Strategic Studies Islamabad. His area of specialization is International Relations with a special focus on South Asia.
The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.