In India this month, a funny thing happened. The International Monetary Fund (IMF) issued its twice-a-year “World Economic Outlook,” and the fund’s projections showed that India’s per-capita gross domestic product for calendar 2020 is expected to dip by about 10 per cent, hitting US$1,877 ($2,465). This is the kind of news that almost literally everybody has had to absorb under the economic conditions of the pandemic.
But in this case it came with a symbolically significant blow. The IMF estimate for Bangladesh, India’s neighbour and historic stepchild whose name is still synonymous with poverty in the West, came to US$1,888, a four per cent gain over 2019.
No one in India failed to notice that the second figure was higher than the first, and consternation was universal. There are, of course, caveats. The economic impact of the coronavirus on India was especially deep precisely because the country’s manufacturing and tech sectors retooled to provide pandemic goods, notably personal protective equipment and drugs, to the world. The rebound is expected to be strong, as the flexible Indian economy, or the flexible urbanized part of it, cashes in.
Also, the IMF figures are nominal, not adjusted for the purchasing power of the local currency. Bangladesh’s taka is neither widely traded nor totally free-floating, and its GDP figures are inflated by this measure. Indian economists, their patriotism aroused by the IMF, insist that their country is still about 20 per cent ahead on a basis of purchasing-power parity. Moreover, the IMF figures are so close that slightly different estimates of the national populations of the two countries could still leave India ahead. Neither country’s head count is known with any confidence to the nearest million.
Still, Bangladesh nipping ahead of India in nominal per-capita GDP is a sign of remarkable success for the junior member of the pair, which was typically 40 per cent poorer until recently. It’s a little like a one-off upset in a sporting competition that exposes the weaknesses of the stronger club.
What’s happening is that as China grows richer, its textile and garment jobs are flowing south to Bangladesh, where labour is still much cheaper. The Bangladeshi government saw this coming and was prepared for it, creating special development zones where Western traders and fashion firms could recruit vast armies of poor Bangladeshi women from the country’s interior. These companies don’t pay much in taxes or tariffs, but the sheer volume of labour income is enough to buoy the economy.
Textiles and clothing are about 80 per cent of Bangladesh’s exports, so the country, at the moment, has all of its eggs in one basket. (That’s nothing new for Bengal, which was already a globally dominant producer of fabrics in the time of Marco Polo.) No one likes a sweatshop, or at least no one likes thinking about a sweatshop from a distance, but Bangladesh is now characterized by low unemployment, impressive progress on human-development indicators and, by United Nations standards, no extreme poverty.
Over the past quarter-century India has succeeded in creating a very diverse economy, but with the peasantry in the deep Indian interior largely left out of the bonanza so far. Bangladesh doubled down on the one line of business that was already its cash cow — and it’s working, in the short term.
This might really be a China story at heart, although it set off an artillery duel in Indian politics, with the Congress party opposition criticizing the nationalist regime and the governing BJP asking how far behind India would be without the economic reforms for which it is largely responsible. The Western dread of China is basically that its high post-Deng Xiaoping rates of economic growth are bound to continue forever, but, then, nothing ever does.
We fixate on China’s 1.4 billion people and forget that the Indian subcontinent has 1.8 billion. Over to the east, Vietnam and other Asian countries are positioned to snatch low-hanging fruit from an increasingly bourgeois China in the same way Bangladesh has. One senses a frontier closing for the Chinese — and this can be encouraged by the West, given intelligent, concerted action.
Copyright Postmedia Network Inc., 2020