Monday, September 25, 2017

How Has Bangladesh Left Pakistan Behind in Per Capita Income?

A headline in the Economist magazine's recent issue screams: "Bangladesh's GDP per person is now higher than Pakistan's". Let's examine this development to understand its causes.

Per Capita GDP:

The Economist article explains its headline as follows: "Last month revealed a remarkable turnaround. Bangladesh’s GDP per person is now higher than Pakistan’s. Converted into dollars at market exchange rates, it was $1,538 in the past fiscal year (which ended on June 30th). Pakistan’s was about $1,470....Strange as it may sound, Bangladesh jumped ahead because of an advance in Pakistan. On August 25th Pakistan released the results of its census, updating earlier population estimates. They showed that the country has 207.8m people, more than 9m more than previously thought. It may now have the fifth biggest population in the world, surpassing Brazil’s. But the new count also lopped 4-5% off Pakistan’s GDP per person, the arithmetic consequence of revealing so many more people."

Savings Rate in Pakistan Source: State Bank of Pakistan

Pakistan Growth By Decades. Source: National Trade and Transport Facility

Economic Growth Trends:

One can quibble with the Economist on details of its report but the fact remains that Bangladesh's economy has been growing significantly faster than Pakistan's for about a decade. To understand why, it's important to look into savings and investments, population growth trends and security situation in the two countries. Let's examine each in a little more detail.

Investment as Percentage of GDP Source: State Bank of Pakistan

Savings and Investment:

There's a strong relationship between investment levels and gross domestic product. The more a country saves and invests, the higher its economic growth.  A State Bank of Pakistan report explains it as below:

"National savings (in Pakistan) as percent of GDP were around 10 percent during 1960s, which increased to above 15percent in 2000s, but declined afterward. Pakistan’s saving rate also compares unfavorably with that in neighboring countries: last five years average saving rate in India was 31.9 percent, Bangladesh 29.7 percent, and Sri Lanka 24.5 percent..... Similarly, domestic savings (measured as national savings less net factor income from abroad) also declined from about 15 percent of GDP in 2000s, to less than 9 percent in recent years. Domestic savings are imperative for sustainable growth, because inflow of income from abroad (remittances and other factor income) is uncertain due to cyclical movements in world economies, exchange rates, and external shocks".

Net Foreign Direct Investment Source: State Bank of Pakistan

Population Trends:

The total fertility rate (TFR) in Bangladesh has declined faster in Bangladesh than in Pakistan in the last few decades. Currently, Bangladesh is at 2.17 children per woman while Pakistan is at 2.62 children per woman.

As a result of reduced birth rates and more female labor participation rates, a larger percentage of Bangladeshi population is in the work force than Pakistan's. There are now more wage earners and fewer dependents in each Bangladeshi household. This demographic trend has helped boost Bangladesh's per capita income faster than Pakistan's. 

Rising working age population and growing workforce participation of both men and women in Pakistan will significantly boost domestic savings and investment. Increased foreign direct investment such as Chinese investment in China-Pakistan Economic Corridor over the next several decades will help fill the gap between the national savings rate and investments required to reach 7% annual GDP growth to create over 2 million jobs a year.

Security Issues:

Pakistan has paid a heavy price for its proximity to and involvement in "war on terror" in Afghanistan. It has cost Pakistan dearly in terms of loss of thousands of precious lives and lower investments due to investors' security concerns. Recent operations by Pakistan Army have helped turn the tide against terrorists, bringing more hope and greater confidence in Pakistan's future. Rising FDI in CPEC-related projects in the last couple of years are an indication of this confidence.


Pakistan is now experiencing the demographic dividend that Bangladesh has seen in the last few decades in terms of more of its population earning and fewer dependents. Pakistan's labor force is growing at 3.6% a year, much faster than its population growth rate of 2.34%. This should help boost Pakistan's per capita and its domestic savings rate.

At the same time, China-Pakistan Economic Corridor (CPEC) related projects are bringing more foreign direct investment, thereby speeding up the economic growth in the country. Pakistan's GDP growth is accelerating from less than 5% two years ago to 6% forecast for fiscal 2017-18.  In its latest economic growth projections, Kennedy School's Center for International Development (CID) at Harvard University expects Pakistan's annual GDP growth to average 5.97% over the next 8 years, ranking it as the world's 6th fastest growing economy. It is within the realm of possibility that economic growth in Pakistan could exceed 7% in the next couple of years.


Pakistan has fallen behind Bangladesh and India in per capita income as its growth rates have slipped in recent years mainly due to declining savings and investment rates and security issues.  Demographic trends and improved security situation now favor Pakistan's future growth as its workforce grows and household sizes shrink.


Akbar said...

This is sad. Before 1971, west Pakistan was the richest region in all of South Asia and many thought it will drive the economy of the entire region. South Koreans came to learn about agriculture growth and economic well being with almost no poverty!

Ahmad F. said...

Low savings and investment has been a chronic problem for Pakistan all along. Almost intractable.

Mayraj said...

GDP bias towards rich. Bangladesh GDP over Pakistan masks that. Most of economy is based in Dhaka-sonce over 80% of exports are from textile industry. That reveals how ltd its economy is. Worse: Dhaka is becomin a dystopia.

Riaz Haq said...

Ahmad: "Low savings and investment has been a chronic problem for Pakistan all along. Almost intractable."

True but it's gotten a lot worse since Musharraf's departure in 2008. You can see it in the graphs.

Riaz Haq said...

Mayraj: "GDP bias towards rich. Bangladesh GDP over Pakistan masks that. Most of economy is based in Dhaka-sonce over 80% of exports are from textile industry. That reveals how ltd its economy is. Worse: Dhaka is becomin a dystopia."

Yes, higher inequality does increase domestic savings in both Bangladesh and India. The super rich tend to save a lot more while the relatively poor end up spending most of their income to meet their needs.

And it's true that Bangladeshi economy is heavily dependent on textiles for growth.

However, BD still has the bigger investable savings pool to diversify their industrial base in the future.

If BD fails to diversify, their growth will slow as the Harvard Kennedy School projects that Bangladesh growth will slow to 2.82% average over the next 10 years, much lower than Pakistan's 5.97%.

Mayraj said...

Yes Bangladesh can use those savings;but hasn't expanded industry. May not do it as this was started under the military regime. And you know are not even taking initiative because this industry get orders via Hong Kong still!

Bangladesh's problem is that it was part of the starved Bengal Presidency. So it needs to do a lot more. These textile mogul's are keeping wages lowest in textile industry. So how can people even become consumers? You need to make local workers better off.

GDP can mask struggling economy also see for example CT with highest GDP of any state in US!

Anonymous said...

In its latest economic growth projections, Kennedy School's Center for International Development (CID) at Harvard University expects Pakistan's annual GDP growth to average 5.97% over the next 8 years, ranking it as the world's 6th fastest growing economy. It is within the realm of possibility that economic growth in Pakistan could exceed 7% in the next couple of years.---

This is not possible. For a diversified economy, the typical Incremental Capital to Output Ratio (ICOR) is about 4.

Bangladesh & India have saving-investment levels of 30%. So they can do 7-8% sustained growth rates.

Pakistan has NEVER reached that level of savings-investment. Pakistan peak national savings rate was 16% and peak foreign savings importation rate was 4%, giving it a peak investment rate of 20%. This limits Pakistan's long-term growth rate to about 5% at best.

Pakistan will never be able to match Bangladesh & India. This is not possible without MAJOR structural reform that changes the very basis of the economy.

With its low domestic savings rate, Pakistan is very susceptible to repeated bouts of capital flight induced economic crises. Given the high level of NET external debt (external debt minus foreign exchange reserves), it is only a matter of time before Pakistan goes back to the IMF. This is not an issue for Bangladesh & India. Look at the data--

Bangladesh external debt: 26 billion $
Bangladesh forex reserves: 32 billion $
===Bangladesh NET external debt: -6 billion$

India external debt: 470 billion $
India forex reserves: 405 billion $
===India NET external debt: 65 billion$

Pakistan external debt: 83 billion $
Pakistan forex reserves: 21 billion $
===Pakistan NET external debt: 62 billion$

This level of NET external debt cannot be sustained. Pakistan is now close to default.

Tashmul said...

US $

Bangladesh 510
India 557
Pakistan 893

B 848
I 1165
P 1851

B 1369
I 2019
P 2700

B 4207
I 7153
P 5375

Economic Story of South Asia 1980-2017

Neal said...

Pakistan's per capita will turn out to be higher as soon as Pakistan uses a more up to date base year. Do you know when this might happen?

I don't know why exactly Pakistan got cold feet the last time it was investigating doing so (I have heard every kind of reason from certain markers doing worse or certain vested interest sectors coming under pressure from it) but Pakistan must address this, more for a greater relevant snapshot of current Pakistan economy (for policy planning) rather than solely to push up the nominal size (that is really more of a side effect any country experiences).

The real important number is realised consumption (which only gets distorted when you have to go through market exchange rates of the currency) and markers that measure that (PPP is a good example of one that aggregates and standardises it). They are not held back/helped by base year effects as much because they do their own sampling strategy. Pakistan per capita on that is lot better than BD.

However Pakistan has to address its gross capital formation % of GDP and credit availability % of GDP to its private sector. They are still very low. There is next to no reason (even accounting for war on terror) why (credit to private sector) is at 16% and not at least twice that. Depressed GCF I can kind of understand its impact given the investment is diverted to military/security spending (which have little long term GDP materialisation given next to 0 multiplier effect) + what gets physically destroyed by war etc...but even that seems really low to me (15%) all things considered (because Pakistans numbers here were pretty depressed well before WoT began). Some big term banking/credit reform is needed and Pakistan needs to improve its finance and regulatory institutions....there is definitely something structurally bad. There is only some buffer spring that coming out of the WoT scenario would afford, it has to be harnessed to fix the underlying structural problems that existed well before and continue to do so.

Riaz Haq said...

Neal: "Pakistan's per capita will turn out to be higher as soon as Pakistan uses a more up to date base year."

State Bank: Pakistan's Actual GDP Higher Than Official Figures Show

"In terms of LSM growth, a number of sectors that are showing strong performance; (for example, fast moving consumer goods (FMCG) sector; plastic products; buses and trucks; and even textiles), are either under reported, or not even covered. The omission of such important sectors from official data coverage, probably explains the apparent disconnect between overall economic activity in the country and the hard numbers in LSM." State Bank of Pakistan Annual Report 2014

Economists have long argued that Pakistan's official GDP figures significantly understate real economic activity in terms of both production and consumption.

M. Ali Kemal and Ahmed Waqar Qasim, economists at Pakistan Institute of Development Economics (PIDE), explored several published different approaches for sizing Pakistan's underground economy and settled on a combination of PSLM (Pakistan Social and Living Standards Measurement) consumption data and mis-invoicing of exports and imports to conclude that the country's "informal economy was 91% of the formal economy in 2007-08".

And now the State Bank of Pakistan has focused on the production side of the economy in its annual report for Fiscal Year 2014. The nation's central bankers have singled out the economic activity in large scale manufacturing sector as their focus in the latest report. They say that the existing LSM (Large Scale Manufacturing) index was based on Census of Manufacturing Industries (CMI) that was conducted in 2006 which included only those sectors which had significant value addition to Gross Domestic Product (GDP) at the time of census.

In the years since 2006 CMI (Census of Manufacturing Industries) census, Pakistan has seen a significant expansion of its middle class along with rapidly growing consumer demand in sectors such as processed foods and fast-moving-consumer goods (FMCG). It's one of several major new sectors whose growth is not reflected in the official GDP figures.

Riaz Haq said...

#India's exports up just 1.2%. Share of #India's #exports in #GDP at 14-year low of 19.4%. #Modi #BJP

The share of export in India’s gross domestic product (GDP) declined to a 14-year low during the first quarter (Q1) of the current financial year (FY18). Growth in export of goods and services has remained below overall economic growth since FY15. Exports were up only 1.2 per cent at constant prices during the first quarter of FY18, against 5.7 per cent year-on-year (YoY) growth in GDP during the period. In value terms, India’s exports has been stagnant at around Rs 24 lakh crore (at 2011-12 prices) in the past three years, against 24 per cent cumulative ...

Majumdar said...

Brofessor sahib,

Yeh kya hua, kaise hua? It seems just the other day (2007 if I recall) that you walked into our humble abode on and gave us Hindoos a bloody nose. You could produce at the drop of a hat a whole range of indices- from A to Z- where Pakistan could be seen to be beating India (let alone puny BD) hollow. And now doing tu tu main main with BD....

Time to remind CO of Brigade 111 of his patriotic duty, sir?


Riaz Haq said...

Belt and Road: Xi’s initiative finds momentum and meaning in south Asia By: Elliot Wilson Published on: Tuesday, September 26, 2017 BRI may be hard to define, but it is already working wonders in parts of a region crying out for good infrastructure. Global and regional lenders are happy to go along for the ride.

The genius of China’s sprawling attempts to rework globalization in its own image is that, for now at least, it defies any attempt at clarity. Ask any two people to define the Belt and Road Initiative and you receive utterly different answers. Nawaz Sharif, former premier of Pakistan, a country that stands to benefit handsomely from the initiative, has described the BRI as a “game-changer” for his homeland. Matthew Oxenford, a research associate at Chatham House’s global economy and finance team in London, sees it as Beijing’s “flagship branding exercise”. He draws comparisons between the BRI’s nation-building efforts and the Works Progress Administration, a Depression-era US agency that put jobless men to work building much-needed roads and public buildings. This lack of clarity is often more help than hindrance. “Even if no one understands what BRI is, which they don’t, everyone does understand infrastructure,” notes Fraser Howie, author of ‘Privatizing China’. “Belt and Road allows you to justify pretty much any infrastructure development in any country along its route. BRI is a magic word that explains any project to investors, bankers, or multilaterals.”

Nayana Mawilmada, head of investments at Megapolis, a scheme to rebuild Sri Lanka’s western provinces, says: “Even when a project isn’t tacitly part of the Belt and Road Initiative, it is part of the pitch process. Just saying that something is Belt and Road-related opens up new conduits of financial resources.”

Take the example of south Asia, which is the only part of the world in which the ‘belt’ and the ‘road’ interconnect, and which has benefited more from the initiative than any other region. China’s push into the subcontinent began back in 1962, when a border dispute drove a wedge between it and India. Beijing turned to Pakistan, which became a willing buyer of Chinese-made military equipment, and more recently a direct-aid recipient: in April, the Chinese government gave Islamabad $1 billion in loans to stave off a currency crisis. China’s presence in Pakistan accelerated from 2009. First, it built and secured control over a new industrial port and naval facility in Gwadar on the Arabian Sea. This granted Beijing unfettered access to the Indian Ocean, with its busy shipping lanes, but also its lack, as the historian Robert Kaplan noted in his book ‘Monsoon’, of entrenched superpowers. From there, China pushed north, building infrastructure as it went. A 2,280-acre free-trade area sprang up in Gwadar, controlled by China Overseas Port Holding. Beijing is building new power plants, coalmines, hydroelectric dams, nuclear reactors and a highway linking Karachi on the Indian Ocean with western China via the Karakoram Pass. New pipelines built, funded and, importantly, controlled by mainland institutions, will convey Middle Eastern crude oil overland to China and send liquefied natural gas in the other direction, easing Pakistan’s constant energy and power shortages.


Neal said...

do you know when Pakistan starts using a more recent base year? It seems almost criminal for it not to and I don't understand why it has not done so for so long now. Population census was a good step, but its high time for better base year too. It can be instrumental in attracting foreign investment and also help debt-load numbers etc.

Riaz Haq said...

Neal: " do you know when Pakistan starts using a more recent base year?"

Not anytime soon. Finance Minister Ishaq Dar is preoccupied with defending himself against corruption charges in courts right now.

Riaz Haq said...

Pakistan targets import curbs to ward off currency crisis

Abbasi to impose fresh curbs on luxuries in effort to avoid devaluing rupee

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Pakistan plans to tighten curbs on luxury imports to ward off a foreign currency crisis without devaluing the rupee, Shahid Khaqan Abbasi, the prime minister, has said.

Mr Abbasi said he would rather place further controls on imports in an effort to preserve fast-dwindling foreign reserves than allow the rupee to fall against other currencies.

Some experts believe Pakistan will have to request another bailout from the International Monetary Fund within a year.

In March, the Pakistani government made it harder to import non-essential items such as vehicles, mobile phones, cigarettes and jewellery by insisting buyers put down 100 per cent of the cash upfront.

The measure drew criticism that it would encourage people to trade instead on the black market. The IMF said it had been told by Pakistani officials that the restrictions would be removed within a year but Mr Abbasi told the FT his government was planning to impose more.

“We can put regulatory duties on certain items, especially luxury finished goods, that’s possible,” he said. “We probably will do more of that, yes definitely, to discourage imports.

“Currency devaluation is not on the table, it’s not. A lot of people thought it was . . . [but] it is important to have stability for the rupee,” said Mr Abbasi.

Pakistan is running out of foreign currency as exports and payments from Pakistanis abroad fall while imports rise.

The central bank had $14.3bn of foreign reserves as of September 15, according to the most recent data — enough to cover exports for about three months. That is down from a high of $18.9bn last October.

Pakistan has been importing more than it exports for some time, but the problem has been exacerbated by having to buy Chinese supplies for projects as part of the $55bn China-Pakistan Economic Corridor.

While the scheme is aimed at improving Pakistan’s energy supply and transport networks, many economists believe that in the short term it will push Islamabad back towards the IMF.

“We will have to go back to the IMF any time now,” said Muhammad Zubair Khan, a former commerce minister who worked at the IMF for more than a decade. “The current situation is not sustainable.”

Sakib Sherani, a former economic adviser to the government, warned: “From a balance of payments crisis, we will have a full-blown macroeconomic crisis, where private sector sentiment is hit, growth stalls, inflation is high, and the central bank has to act.”

As well as restricting imports, the country has also borrowed money at short notice from various international lenders to pay off its debts. In 2016 and early 2017, Pakistan borrowed $1.2bn from state-backed Chinese banks.

Many economists believe the only long-term way out of the crunch is to allow the rupee to fall, encouraging exports and discouraging imports.

But doing so has become politically sensitive, with ministers insisting on a strong currency while central bankers warning of the likely consequences.

In July, the rupee suddenly fell 3 per cent, having traded in a narrow band since 2015. Central bank officials said they had backed away from shoring up the currency, but the move drew an angry response from the government, which stepped in to boost its value again before replacing the acting governor.

Abdul said...

BD is planning a base year too. We're still using 2005-6 base year. When it is moved to 2015-16 you'll see per capita incomes making a jump too. Considering that BD's nominal per capita according to latest IMF reports have increased to 90% of India's and India is using 11-12 base year BD's nominal GDP might actually get very close or even ahead of India's.

Neal said...

Abdul: "BD is planning a base year too. We're still using 2005-6 base year. When it is moved to 2015-16 you'll see per capita incomes making a jump too."

Won't happen (to degree you are thinking). BD is very much more a single industry kind of (export dependent) economy compared to even Pakistan, forget India. This means much much less in BD is hidden from US dollar exchange rate (also similar reason why %wise BD realised more of its PPP into nominal compared to India and Pakistan). Countries that get highest rebasing effect normally have large increases in their stock market total cap and also indices in the time period in question. BD simply has not experienced the same here that Pakistan and India have, especially if you look at the types of companies that made the most gains in all of them and how that relates to the base year snapshot composition.

Also Per capita in nominal (as useless and irrelevant the concept is in the first place to consumption and socioeconomic development esp when its below 5k threshold ), you are more like 80% of India, not 90%:,534&s=NGDPDPC&grp=0&a=

Riaz Haq said...

#CPEC Lifts #Pakistan Up In #WEF World #COMPETITIVENESS Rankings via @forbes

The China-Pakistan Economic Corridor (CPEC) is still a work in progress, but it has already helped Pakistan's economy climb several notches on the global competitiveness scale.

That's according to a just published World Economic Forum Report (WEFR), which placed Pakistan 115th out of the 137 countries ranked. (Bangladesh is ranked higher at 99)

While this ranking is still low compared to neighboring countries, it’s a big improvement from the 122th position the country occupied last year, and the 133th position back in 2014

One reason for this improvement is Pakistan’s progress in the infrastructure “pillar” of the report, where the country is ranked 110th.

Paradoxically, while Pakistan climbed in the infrastructure “pillar,” its CPEC partner moved in the other direction. China’s score for the infrastructure pillar decreased for the second year in a row, due in part to a decline in the quality of port infrastructure and the reliability of electricity supply.

That’s certainly not a good sign for the future of the CPEC partnership. It raises doubts as to whether the project will ever be completed without leaving Pakistan deep in debt. Besides, CPEC faces other challenges -- like India’s claims over areas crossed by the enormous project, and from the persistence of corruption on both sides of the partnership, as was discussed in a previous piece.

It’s these doubts, together with the persistence of corruption, that have tempered investor enthusiasm over the country’s climb in the global competition scale.

In fact, Pakistan’s equities have been headed in the opposite direction to that of the country’s competitiveness. The Global X MSCI Pakistan shares lost 5.40 percent over the last twelve months, as iShares S&P India gained close to 11 percent—see tale.

Riaz Haq said...

#Pakistan boasts the world's fastest growing retail market. Growing middle class & youth bulge are big reasons why.

Middle class expected to surpass U.K., Italy over 2016-21
By Faseeh Mangi
September 28, 2017, 1:00 PM PDT
Nearly two-thirds of Pakistan population under 30 years old
Pakistan’s retail stores forecast to grow by 50% in 5 years
Pakistan’s burgeoning youth and their freewheeling attitude toward rising incomes have turned the nation into the world's fastest growing retail market.

The market is predicted to expand 8.2 percent per annum through 2016-2021 as disposable income has doubled since 2010, according to research group Euromonitor International. The size of the middle class is estimated to surpass that of the U.K. and Italy in the forecast period, it said.

Pakistan's improving security environment, economic expansion at near 5 percent and cheap consumer prices are driving shoppers to spend up big. Almost two-thirds of the nation's 207.8 million people are aged under 30, according to the Jinnah Institute, an Islamabad-based think tank.

“We have a new millennial shopper at hand. They don’t mind spending to have the kind of lifestyle they would like,” said Shabori Das, senior research analyst at Euromonitor. “It’s not like the Baby Boomer generation where savings for the future generation was important.”

Pakistan is bucking the trend in the U.S. -- where stores are closing at a record pace as e-commerce undermines bricks-and-mortar. It's also attracting foreign operators: Turkish home appliance maker Arcelik AS and Dutch dairy giant Royal FrieslandCampina NV entered the market last year via acquisitions. Meanwhile, Hyundai Motor Co., Kia Motors Corp. and Renault SA are all building plants in the South Asian nation.

Pakistan’s retail stores are expected to increase by 50 percent to 1 million outlets in the five years through 2021, Euromonitor said. Its three biggest malls, Lucky One in Karachi and Packages Mall and Emporium Mall in Lahore, opened in the past two years.

Pakistan is mirroring what India went through about four years ago. Both countries have young populations with more income and less inclination toward saving which is a distinct difference to what retailers elsewhere are dealing with, said Das.

Jibran said...

I know you try to show only the positive of Pakistan economy but you should read ADB report on Pakistan. I don't like PML-N because they are thinking only short term growth. In 2-3 years Pakistan will start falling behind even more. Only if you show problems of the economy then you can try to fix it.

Riaz Haq said...

#India’s Growth Slowdown. #Modi #Achhedin #BJP … via @WSJOpinion

Narendra Modi promised Indians acche din, Hindi for good times, when he became Prime Minister in 2014. So an economic slowdown that has seen real GDP growth tumble to 5.7% in the second quarter threatens his popularity. The ruling Bharatiya Janata Party is now debating how the government went wrong and how to boost growth ahead of the 2019 general election.

Nitin B said...

The slowdown is temporary according to the comprehensive ADB report released last month. Demonetization and GST enaction has brought a chunk of businesses into the tax net. The success of demonetization is otherwise debated but it has made more Indians paying taxes, from 12 to 17%!
Fundamentals are on a strong footing and the economy is set for a rebound - 6months to 12 months

Riaz Haq said...

From Express Tribune:

“Every statistic has improved and we have managed to increase gross domestic product growth rate and at the same time contained the budget deficit and inflation,” said Ismail. Pakistan’s economy expanded to $313 billion, the highest in history.


Ismail admitted problems on the external front and expressed the hope that the recent two devaluations of the rupee against the US dollar would help narrow down the widening current account deficit. He said that the government did not want to curtail imports but was trying to bridge this gap by increasing exports and remittances.


Investment and savings

The investment-to-GDP ratio stood at 16.4% against the five-year target of 22.8%. This ratio was slightly better than last year’s revised rate of 16.1%. Savings slipped below last year’s level of 12% and stood at 11.4% of GDP, far below the five-year target of 21.3% of GDP.

Fixed investment remained at 14.8%. Public investment increased to 5% of GDP, which was better than the previous year. The target of private investment was also missed by a wide margin, which stood at 9.8% of GDP against the five-year target of 16.7%. Results for private investment are worse than last year when they had been estimated at 10%.

GDP growth

The PML-N government claimed to achieve an economic growth rate of 5.8% in its last year in power that is the highest over the past 13 years. But it is significantly lower than the 7% target the incumbent government wanted to achieve when it came to power in 2013.

However, the current growth rate is decent enough to give a political advantage to the ruling party in the upcoming general elections.

In 2012-13, which was the last year of the PPP tenure, the economic growth rate was 3.7%.

Just under than two-thirds of growth — 66.4% to be precise — came from the services sector, which performed slightly better than the expectations. The government achieved growth targets for services and agriculture sectors but missed the industrial sector growth target again.

Despite a better economic performance, the growth rate was still insufficient to absorb the youth bulge — Any pace of growth below 7% rate would increase unemployment.

Riaz Haq said...

Bangladesh is indeed doing well but its economy is a one-trick pony. Bangladesh is heavily dependent on ready-made garment manufacturing (RMG) exports for economic growth. "Many low-income countries, including Bangladesh, Venezuela, and Angola have failed to diversify their knowhow and face low growth prospects. Others like India, Turkey, and the Philippines have successfully added productive capabilities to enter new sectors and will drive growth over the coming decade,” said Sebastian Bustos, a lead CID researcher in trade and economic complexity methods."

Unknown said...

Watch out for BD -- in all probability it's going to emerge within the next few years in the world market with diversification of exports in pharmaceuticals,leather-products, agri-products, light-industrials, soft-wares, data-servicing, ship-building and so on.

Riaz Haq said...

UP's fertility rate nearly halved from 4.82 in 1993 to 2.7 in 2016 - and it's expected to touch 2.1 by 2025, according to a government projection.

Given the falling rates, "incentivising sterilisation is counterproductive", Ms Muttreja added, because "70% of India's increase in population is going to come from young people. So, what we need is non-permanent, spacing methods".

Fertility rates have dipped below replacement levels - 2.1 births per woman - in 19 out of India's 22 states and federally administered territories for which data has been released in the latest National Family Health Survey (NFHS). Data from the remaining nine states, including UP, is not ready yet.


Increased awareness, government programmes, urbanisation, upward mobility and greater use of modern methods of contraception have all contributed to this.

Nearly half of the world's countries have seen an extraordinary decline in fertility rates. By 2070, the global fertility rate is expected to drop below replacement levels, according to the UN.

China's fertility rate had dropped to 1.3 in 2020, while India's was 2.2 at the last official count in 2016.

Will the world's 'first male birth control shot' work?
Why do Indian women go to sterilisation camps?
So, why implement this rule now?
One reason, according to demographers, is the differing rates across India.

Six states - Uttar Pradesh, Bihar, Chattisgarh, Jharkhand, Rajasthan, Madhya Pradesh - that are home to roughly 40% of India's population also have fertility rates higher than the replacement level, 2.1. This is in sharp contrast with Kerala (1.8), Karnataka (1.7), Andhra Pradesh (1.7) or Goa (1.3).

"Also, our cities are overcrowded and ill-planned. They convey an image of over-population," Dr KS James, director of International Institute of Population Sciences, said.

Political analysts also believe UP's chief minister, Yogi Adityanath, has an eye on state elections slated for next year. And, with such a drastic move, he hopes to signal a development agenda that is removed from his controversial image as a divisive right-wing Hindu nationalist.

This is not a new idea either. In 2018, more than 125 MPs wrote to the president asking for the implementation of a two-child norm. The same year the Supreme Court dismissed several petitions seeking population control measures as it could lead to a "civil war-like situation". In the last year, three MPs from Mr Adityanath's governing Bharatiya Janata Party (BJP) introduced bills in parliament to control population.

Since the early 1990s, 12 states have introduced some version of the two child-policy.

Did it work?
It's hard to say because different states implemented different versions of it - some left loopholes and others introduced financial incentives alongside the punitive measures.

There has been no independent evaluation either but a study in five of the states showed a rise in unsafe and sex-selective abortions, and men divorcing their wives or giving up their children for adoption so they could contest polls.

But the results are mixed - four states revoked the law; Bihar started in 2007 but still has the country's highest fertility rate (3.4); and Kerala, Karnataka and Tamil Nadu have all seen a remarkable drop in fertility rates with no such norms in place.

"India is at a perfect stage as far as population distribution is concerned," Niranjan Saggurti, director of the Population Council's office in India said.

Experts say India has entered a demographic dividend - the ability of a young and active workforce to catapult economies out of poverty. How India can harness this, especially in populous states like Uttar Pradesh, remains to be seen.

Riaz Haq said...

Bangladesh now a $409b economy: GDP size up, growth down as new base year takes effect

Rejaul Karim Byron
Tue Nov 2, 2021 12:00 AM Last update on: Tue Nov 2, 2021 11:36 AM

In constant prices, it stood at Tk 27,939 billion in FY21 as per the new base year, up from Tk 12,072 billion as per the old base year, according to a document of the BBS.

In terms of dollars, the GDP size stood at $409 billion in the last fiscal year if Tk 85 per USD exchange rate is taken into account. Per capita income rose to $2,554 in FY21 as per the new calculation, which was $2,227 as per the old one.

Speaking to The Daily Star, Prof Shamsul Alam, state minister for planning, said the adoption of the new base year should have been done earlier.

Although economic growth has fallen as per the new base year, it has painted the real picture of the economy.

"The size of our economy is huge, and the new base year will reflect it," he said, adding that a real scenario would allow the government to make more informed policy decisions.

Zahid Hussain, a former chief economist of the World Bank's Dhaka office, also welcomed the new base year.

He said timely revisions to data on GDP and its components determine the accuracy of national account estimates and their comparability across countries.

With the finalisation of the new series, Bangladesh will be ahead of all other Saarc countries in terms of the recency of the national account's base year.

Only the Maldives (2014) and India (2011-12) come close, while Pakistan (2005-06) and Sri Lanka (2010) are well behind.

"Improved data sources increase the coverage of economic activities as new weights for growing industries reflect their contributions to the economy more accurately," said Hussain.

The last revision was done in 2013.

The size of the agriculture, industry and services sectors has expanded as per the new base year.

The new base year uses data on about 144 crops while computing the contribution of the agriculture sector to the GDP, which was 124 crops in the previous base year.

The gross value addition by the agriculture sector rose to Tk 4,061 billion in current prices in the last fiscal year, up from Tk 3,846 billion in the old estimate, the BBS document showed.

The industrial sector saw the addition of the data on the outputs of Ashuganj Power Station Company, North-West Power Generation Company, Rural Power Company, cold storage for food preservation, Rajshahi Wasa, and the ship-breaking industry.

In the new base year, the gross value addition of the sector stood at Tk 11,362 billion in FY21 while it was Tk 8,944 billion as per the old base year.

The BBS also carried out surveys to cover the contribution of various new services.

The data about growing ride-sharing services, privately run motor vehicles, national flag carrier Biman, private carriers US-Bangla and Novoair, private helicopter services, Bangladesh Submarine Cable Company, motion pictures, cinema halls, new banks, mobile financial services, agent banking, and private healthcare services were included.

The sector's value addition increased to Tk 18,098 billion in FY21 compared to Tk 16,144 billion from the old base year.

In a positive development, the investment-GDP ratio rose to 30.76 per cent in the last fiscal year compared to 29.92 per cent in the old base year of 2005-06.

A BBS official said the new base year would be used while calculating the GDP and other figures from now on.

Riaz Haq said...

Bangladesh rebased GDP now official in national accounting

The planning minister said the net of various products as GDP has expanded under the new base year. As a result, per capita income has increased. At the same time, GDP growth has increased.

The average per capita income has risen to $2,554 from $2,226 previously.

Agriculture sector: About 20 new crops have been added to the crop sub-sector with all the data included in this sector for GDP calculation. New crops include dragon fruit, strawberry, capsicum, latkan, kachushak, sharufa, malta etc. Cattle and poultry production data, new survey data in the forest sector and other up-to-date information have been included. As a result value addition from the agriculture sector increased in the GDP by 14.80 per cent.

Industrial Sector: Earlier, all the data included in this sector for calculating GDP included updated data from New Manufacturing Industry Survey (SMI) and construction sector survey, data from household waste collection. Overall current prices of value addition in the industrial sector have increased by 36.1 per cent.

Services sector: New survey of transport sector, Uber, Pathao, data of new private helicopter companies, new survey of real estate sector, data of mobile banks, agent banks, information of non-profit organizations of government and education and health sector have all been included. Overall, the size of value addition in the services sector showed growth by 14.3 percent in the sector.

Riaz Haq said...

The ground under Sheikh Hasina’s feet is shifting

By Avinash Paliwal

Bangladesh's foreign minister
AK Abdul Momen arrived in
India last month to fight polit-
ical fires. But he found himself
dealing with massive floods
that hit Sylhet and Assam.
Nature has its ways to convey
that not all is well in India's
near-east. Far from the glitz
about Bangladesh's economic
success, on display during the
recent inauguration of the
Padma Bridge, clampdown on
Islamists, and shrewd man-
agement of big power rivalries,
is a parallel potent reality of
Prime Minister Sheikh Has-
ina's authoritarianism,
heightened polarisation, and
economic distress. As an
Indian official mentioned to
me, and a Bangladeshi official
echoed. Hasina "has built a
house of cards"
The economic, social, and
political ground under Has-
ina's feet is shifting in real
time. It is slow enough to be
dismissed as non-urgent, but
sure enough to become press-
ing, if not dealt with urgently.
With general elections due in
2023, and external debt repay-
ment schedules kicking in
from 2024, it is a matter of
time for the veneer of (forced)
stability to lose its sheen. The
risk of dislocation, if not col-
lapse, of this so-called house
of cards has increased in
recent years, and it could
undermine whatever is left of
India's connectivity aspira-
tions in its near east.
Domestically, the Hasina gov-
ernment has exacerbated two
contradictions in a tradition-
ally polarised polity. One, she
is in power, but with little to
no electoral legitimacy. The
Awami League's (AL) manipu-
lation of the 2014 and 20118
elections (a practice not just
reserved for national elections
and against opponents),
unceasing harassment of its
key opponent, the Bangladesh
Nationalist Party (BNP), gag-
ging of media, social media
monitoring using advanced
digital surveillance, and a
forced tilt towards the conser-
vative Islamic Right as a bal-
ancing move after targeting
these formations using force,
has created wide pockets of
intense frustration.
Unlike her father, Sheikh
Mujibur Rahman, who created
a one-party State, but failed to
contain a famine in 1974, Has-
ina has placed her bets on eco-
nomic development. The argu-
ment runs that good economic
performance coupled with lib
eral use of force will make a
one-party State under Has-
ina's leadership sustainable.
But this is where the second
contradiction kicks in.
Bangladesh's external debt to
Gross Domestic Product ratio
has increased to 21.8%, import
spending has shot up by nearly
44%, forex reserves of $42
billion are falling and can
cover about five months'
worth of imports, and the rev-
enue from readymade gar-
ments export and remittances
is not keeping pace with the
fast rising costs to the

Couple this with the global
inflation created by the Rus-
sia-ukraine war and United
Statesled sanctions, and it
becomes clear why Momen is
asking India to remove anti-
dumping duties on Banglade-
shi jute exports. Further com-
plicating this situation is
Dhaka's propensity to accept
external loans for infrastruc-
tural projects at highly inflated
costs, making repayment dif-
ficult. One of the cases in point
is the 2015 Rooppur Nuclear
Power Plant deal with Russia
for which Dhaka is to repay
$13.5 billion. India paid $3 bil-
lion for a similar plant in
Why does Dhaka accept such
deals? Because external fin-
ance fuels (limited) infra-
structural growth, chronic
corruption, and keeps the
political illusion of economic
development alive. To be clear
and fair, Bangladesh's eco-
nomic journey has been more
than commendable. But to
expect an economic miracle,
which is bound to dwindle due
to internal or external shocks,
to sustain a corrupt system
pretending to be a democracy
is a tall ask. Herein, Hasina has
ensured that neither the
Islamists nor the BNP
which enjovs public sympathy,
even if it may not get a fair
election - pose a serious
challenge to her.

Riaz Haq said...

The ground under Sheikh Hasina’s feet is shifting

By Avinash Paliwal

But her real challenge doesn't
come from known opponents.
It comes from opaque factions
within a securitised State (and
the party) that has made so
much illicit profit that being
out of power is not an option
for them. This leaves Hasina
with an unenviable dilemma.
Either she allows free elections
and risks being ousted or
manipulates them and invites
international opprobrium that
could unleash mass protests
and violence. Bereft of a clear
succession plan, both these
scenarios could tempt oppor-
tunistic adversaries to force a
regime change, of which there
is an unfortunately rich his-
tory in Bangladesh.
Hasina's internal problems are
linked to external dependen-
cies. Politically reliant on New
Delhi, she is finding it increas-
ingly difficult to manage the
ramifications of India's turn
towards Hindu nationalism
that misuses migration from
Bangladesh and the Rohingya
crisis for domestic electoral
gain. Similarly, accepting of
Chinese finance that may not
translate into political sup-
port, Dhaka is struggling to
keep targeted US sanctions
against the Rapid Action Bat-
talion, an anticrime and anti-
terrorism unit of the
Bangladesh Police, for serious
human rights violations, at
bay. Dhaka's replacement of
its ambassador in Washington
DC after a visit by a team of AL
parliamentarians from the
standing committee on foreign
affairs will make little differ-
ence in how the US deals with
Add to this, an uptick in
demand for repatriating
Rohingya migrants - some of
whom have been silently
resettled in the Chittagong Hill
Tracts to the locals' displeas-
ure - to Myanmar, including
within Bangladesh's military
establishment, and the situ-
ation becomes even more
volatile. Hasina requires a
political off-ramp to prevent a
foreseeable crisis that can turn
violent. The last thing the sub-
continent needs is turmoil in

Riaz Haq said...

BD to become a trillion dollar economy: BCG

Bangladesh is on course to become a $1 trillion economy by 2040, driven by consumer optimism, innovation in emerging economic sectors and a young engaged workforce, according to Boston Consulting Group.

With average annual growth of 6.4% between 2016 and 2021, the South Asian nation has outpaced peers such as India, Indonesia, Vietnam, the Philippines and Thailand, BCG wrote in a report released on Friday.

Bangladesh’s domestic consumer market is set to become the ninth-largest in the world. And a rapidly expanding middle and affluent class is projected to rise substantially between 2020 and 2025, the report said, with a robust gig economy propping up a workforce where the median age is just 28.

“The country could have easily been overshadowed by its neighbor to the northeast -- China -- or its continental cousin to the west -- India -- but in this region of economic powerhouses, Bangladesh stands tall,” BCG wrote.

Bangladesh progressed from a low-income to lower-middle-income country in 2015. Though that’s five years later than India, Bangladesh’s GDP per capita is already higher than its neighbor. The nation aims to become an upper-middle-income country by 2031.

Some challenges remain. Recent issues with liquidity, as well as foreign exchange and inflationary pressures, may slow growth in the short term, according to BCG. But Bangladesh has taken measures to position its $416 billion economy for a lucrative few decades, so long as it maintains an average growth rate of about 5%.

In a BCG survey analysis, 57% of respondents “continue to believe the next generation would have better lives than themselves, especially as the country transitions to a skill-based economy.”

“Though the economy faces some near-term volatility, we are confident that this highly resilient economy will continue to demonstrate robust growth in the long term,” the report said.

Riaz Haq said...

Informal Savings in Pakistan

According to research by Oraan, around 41pc Pakistanis saved via committees (or Rosca), whereas Karandaaz puts that figure at 34pc. Assuming the informal economy accounts for roughly 30pc, as suggested by research from the Pakistan Institute of Developing Economics, it translates into annual committees of Rs4 trillion at base prices, using conservative inputs.

While this back-of-the-envelope calculation is far from scientific, it helps contextualise how big the informal savings market really is. Everyone from a widow looking to save up for her children’s education to young adults trying to save up for their marriage, committees are what they turn to.

This phenomenon is not exclusive to Pakistan. According to a note by Middle East Venture Partners (one of the investors in Bykea), “the global market is largely untapped and ripe for disruption with 2.4 billion people using money circles through traditional channels.”

They recently participated in the Egyptian digital committees’ startup MoneyFellows’ $31m Series B.

Apart from the traditional financial institutions’ general apathy towards the customer, committees appeal to an average Pakistani for several reasons: they are a community-based instrument with some level of flexibility and there is no interest involved.

Most importantly, it helps them manage cash flow better due to habitual change. For women, the product enjoys particular popularity since the former financial services are largely inaccessible.

However, since committees are primarily cash-based with virtually no money trail involved, it poses massive risks, as we saw recently when a girl, Sidra Humaid, who ran a network of committees through social media, defaulted on Rs420m of payments.


Even beyond this, committees have flaws by design, only amplified by Pakistan’s macros. For instance, the person receiving the first lump sum amount will always be at an advantage since their instalments in the subsequent months would be worth less due to both inflation and rupee depreciation. The recipient of the last payment would see the amount’s purchasing power eroded substantially by the time they get it.

Moreover, due to the community-based nature of the product, the risk of network defaulting is higher as people of usually similar risk profiles would be pooling in their money.

For example, if employees from an organisation have running office committees, delayed salaries or layoffs within the organisation would lead to a bad equilibrium, creating losses for the rest of the group, often resulting in default.

However, there are ways to address some of those challenges. First of all, to (partially) protect your lump sum from depreciation or devaluation, you can enter a committee with a duration of up to 10 months. Given Pakistan’s macros of late, you’d still lose money in real terms but to be fair, that’d most likely be the case in any other instrument as well, including the risk-free government papers.

In fact, contrary to popular perception, there are certain ways to further alleviate the inflation problem. Digital committees have an option of gamifying the experience by rewarding good payment behaviour through loyalty programs and/or brand partnerships to provide discounts on utilities-based services and products.

Secondly, digital committees help create a trail of money which, coupled with a centralised authority (the platform itself), brings in accountability and recourse in the event of a default. The receipt and/or ledger helps with basic accounting in committees creating transparency for people within the group.

The third benefit of digital committees is the security factor. The participant has to go through a know-your-customer and credit check process to make sure there is no fraudulent behaviour that could negatively impact the group, along with the participant’s ability and willingness to pay to create an overall environment for responsible finance.

Riaz Haq said...

Dependency ratio is the ratio of children (under 15) and retirees (65 and above)) to working age (15-64 years) people in a population. Countries with high dependency ratios tend to perform poorly relative to countries with low dependency ratios in terms of economic growth.

A recent NY Times article by Lauren Leatherby titled "How a Vast Demographic Shift Will Reshape the World" uses charts and graphics to show how the world economic landscape will change during the rest of the century.

It shows that Pakistan will join the top 10 countries with highest share of working age population and lowest dependency ratios.

Pakistan will join top 10 countries in working age population in 2050

Bangladesh is already in the top 10 working age population countries today.

Countries are categorized as having large working-age populations if people between the ages of 15 and 64, an age group commonly used by demographers, make up at least 65 percent of the total population.

Countries where at least a quarter of the population is under age 15 and where less than 65 percent of the population is working age are categorized as having a large young population. Countries are categorized as having a large old population if those age 65 and older make up more than a quarter of the population.

Unless noted otherwise, graphics include all countries with a population of at least 50,000 people.

The world’s demographics have already been transformed. Europe is shrinking. China is shrinking, with India, a much younger country, overtaking it this year as the world’s most populous nation.

But what we’ve seen so far is just the beginning.

The projections are reliable, and stark: By 2050, people age 65 and older will make up nearly 40 percent of the population in some parts of East Asia and Europe. That’s almost twice the share of older adults in Florida, America’s retirement capital. Extraordinary numbers of retirees will be dependent on a shrinking number of working-age people to support them.

In all of recorded history, no country has ever been as old as these nations are expected to get.

As a result, experts predict, things many wealthier countries take for granted — like pensions, retirement ages and strict immigration policies — will need overhauls to be sustainable. And today’s wealthier countries will almost inevitably make up a smaller share of global G.D.P., economists say.

This is a sea change for Europe, the United States, China and other top economies, which have had some of the most working-age people in the world, adjusted for their populations. Their large work forces have helped to drive their economic growth.

Those countries are already aging off the list. Soon, the best-balanced work forces will mostly be in South and Southeast Asia, Africa and the Middle East, according to U.N. projections. The shift could reshape economic growth and geopolitical power balances, experts say.