Bangladesh, one of the densely populated countries in the world, is often featured by its vulnerability to the natural calamities including floods, droughts, and tsunami. Despite these natural adversaries the country has managed to materialize laudable economic growth over the last couple of decades. GDP growth rate averaged 5.15 percent in the 1990s which increased to 6.97percentin 2011-2016. Per capita GDP almost quadrupled in the two decades from US$319 in 1995 (current US$) to US$1210 in 2016. Total GDP increased more than six-fold from US$32.6 billion (current US$) in 1990 to US$221.24 billion in 2016.
The rise of per capita income has had a positive impact on peoples' savings. Gross domestic savings increased to 21 percent of GDP in 2016 from its earlier single digit rate in 1990.Similarly, gross capital formation has increased substantially in the recent period. Country's dependence on external debt has declined commensurably. It cost about one and half percent of the total GNI to service the debt in 2001 which declined to half in 2016. Export increased at an annual average rate of 24 percent between 2000 and 2015.
A country which was once featured by negative current account balance can count on positive balance about 1.5 percent of the GDP per year. Thanks to the economic and financial openness, almost half of the total GDP is involved with international trade.
Economic growth has accompanied positive changes of some social indicators. Infant mortality rate decreased from 80.8 (per thousand live birth) in 1995 to 29.7 in 2015 leading to the rise of life expectancy at birth from 58 years in 1990 to 72 years in 2015. Population growth rate, which has long been considered a national problem, plummeted from 2.47percent in 1990 to 1.14percent in 2016.
These social and economic improvements are considered remarkable progress in achieving the millennium development goals (MDGs). Moreover, the country has been recognized as one of the next-eleven (N-11) emerging countries after the BRICs (Brazil, Russia, India, and China). Thanks to the impressive economic progress over the last two decades or so, Bangladesh is preparing to upgrade its economic status from the least developed to developing country.
Has the current economic growth positively affected the living of the marginal population? Average inflation rate stays well above the GDP growth rate in the independent Bangladesh except the decade of 1990s. If we adjust GDP growth rate to its deflator, real GDP per capita turns out negative. Galloping rise of price of essential commodities, onion and rice to mention but a few, has turned most discomfort to the teeming billions. Moreover, a large number of total population lives in an abject poverty.
About a fifth of the total population is sustaining their lives with income less than US$1.90 a day (even at purchasing power parity), and 57 percent lives with income less than US$3.1 a day. Although attempts have been made to increase the living standard, human development index changed positively only by a tiny fraction from 0.42 in 1990 to 0.47 in 2010. In 2015, the index increased to 0.58 based on which the country was jointly ranked 139th with Ghana and Zambia out of 188 countries and fifth in South Asia, lagging behind Sri Lanka, the Maldives, India, and Bhutan.
GDP per capita is rising. However, the lion share of the augmented pie is gorged by the elites. According to the World Bank data, Gini co-efficient (a measure of inequality ranging between 0-1from perfect equality to perfect inequality) was 0.28 in 1992 which rose to 0.33 in 1996 before it finally settled in 0.35 in 2015. This data however, does not provide detail stratification. Research shows that the rise in inequality of the last decade was due to a sharp increase in the income of the richest quintile of the population.
Unemployment is a serious concern in the case of Bangladesh. As per the current estimation, five percent of the total workable labor force is unemployed. It is highly likely that such a figure has understated the real scenario because measuring unemployment is always a dilemma due to the methodological hiccups. In particular, it is impossible to segregate the underemployed or seasonally employed from those of really employed population. Especially, the trouble centers on the agriculture sector.
For instance, a majority of the active workforce is employed in the agriculture sector. In 1983, employed labor in this sector comprised of 59 percent of the total labor force which declined to 52 percent in 2003, and 43 percent in 2016.However, agriculture share to GDP declined by more than half from 31 percent in 1983 to 15 percent in 2016. In other words, labor force engagement over the years (1983-2016) declined by27 percent while the share of agriculture to GDP declined by 52 percent.
If we assume that the labor market in 1983 was in equilibrium, a declining share of agriculture to GDP in the subsequent period should have been associated with an equivalent level of labor force decline. Moreover, the use of advanced technology and farming instruments in the agriculture sector should require much less physical labor than it used to be.
However, this is not observed in reality. This implies that there is a huge accumulation of idle labor force (or hidden unemployment) in the agriculture sector who are not considered unemployed. But in real sense, they are unemployed.
Perhaps, this scenario is reflected in the sectoral value addition. Annual value addition per worker in the agriculture is only US$389 whereas the respective figures for industry and services are $1772 and $1389. Moreover, a recent study sponsored by the British Council on graduate unemployment in South Asia has created a huge public outcry in the country.
The report shows that graduate unemployment rate in Bangladesh is 47 percent which is higher than the rate of India, Pakistan, Sri Lanka and Nepal. Although there is a possibility that the estimation exaggerates the situation, the overall unemployment situation is indeed grave at all levels.
GDP growth is real and praiseworthy; but growth does not mean development unless it penetrates the livelihood of the marginal population. The current growth of Bangladesh has failed to stay up to that expectation. To spread the benefits accompanied by economic growth, some social obstacles should be contained. Soaring rate of inflation, rising inequality, and swelling unemployment should top the priority list. Otherwise, the growth is nothing but a number.
The writer is Associate Professor and Head, Department of Economics and Finance, University of Nizwa, Oman
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