SHONAR BANGLA - LESSONS FOR INDIA - Sarthak Desai

 

Well, you’re in for a surprise for this week’s article. Do you know that Bangladesh now has a higher per capita income than India’s? I believe most of you wouldn’t know this as our politicians have been vehemently clamoring about Bangladeshi immigrants, calling them termites who are trying to crossover to India for jobs. Well, who is having the last laugh now? It’s been a hell of a ride for Bangladesh through multiple natural disasters, political assassinations, and military rule. Yet, it has come out of it very bravely. As Bangladesh just completed its 50 years of independence from Pakistan, we look through some interesting facts and see what lessons do those provide to India.

Once termed as a “basket case” by US Secretary of State, Henry Kissinger, Bangladesh has come a long way to emerge as a role model for South Asian countries in the domain of social development. It now is ahead of India, Pakistan, and Nepal on most of the social indicators. Its Infant Mortality Rate (26) is less than both India’s (28) and Pakistan’s (56). Focusing on the better health of its citizens by having good and efficient Mohalla clinics every 3 villages has given good dividends to Bangladesh. This has resulted in its average life expectancy (73) rising over many years and now it is more than both India’s (70) and Pakistan’s (67). Compare this to India’s public health system in villages where many doctors and nurses are not present on duty when required. Despite having a very dense population compared to India’s, its Covid cases per million (9461) is less than India’s (24818).

One of the striking differences is that it has a very high female participation rate in the labour force close to 40 % as compared to India (22%). One can see throngs of women in sarees walking early in the morning with tiffin boxes to garment and agro-processing factories. Its well-managed public health system, high literacy rate, and higher female labour force participation have helped it to keep its population at a replacement level (Total Fertility rate of 2.1) for the last 5 years. Compare this to Pakistan which has a very high TFR of 3.5 that can lead to future agro-economic crisis as it is already short on foreign exchange. India has been 5 years late than Bangladesh as it has just reached the TFR of 2.1 this year as per the National Family Health Survey – 5. There is one more shocking fact for you and me to take note of. Bangladesh’s rank of 65 among 156 countries in the World Economic Forum’s Global Gender Gap Report (2021) is well ahead of India’s pathetic rank of 140. Bangladesh is ranked much higher (76) even on Global Hunger Index (2021) than India (101) and Pakistan (94). It is quite possible that in the next release of United Nations’ Human Development Index figures, Bangladesh would be ranked higher than India as currently, it is just two ranks behind.
It is an irony that 40 years of socialistic governance couldn’t deliver much on social indicators for India as the last 30 years of semi-capitalistic governance have been able to. Corruption and consistent lack of focus of government towards social development are to blame for this mess. In the last two decades, by enacting the Right to Education Act and providing mid-day meals to children it has been able to deliver some justice to the downtrodden children. However, the government has to focus more on the efficient delivery of education through public schools as many teachers are found to be absent in villages. On the health side, it has to increase its budget spending on health to 6% of GDP. Grass-root level governance and accountability should be the key to executing well on this mega spending.

Till now you were able to see Bangladesh’s progress on social measures. Now we will see how well it has been doing on the economic side for the last 15 years which has led to its per-capita income more than India’s. One might shrug off this cross-over as a one-off event due to the Covid crisis that has led to India’s economy contracting by 8% and Bangladesh’s rising by 2.4%. Well, this argument is wrong as in the latter half of this decade its economy, Bangladesh has been consistently growing above 8% on account of rising exports of textile, apparel, and footwear. On the other hand, India’s economy was not rising at a healthy rate because of demonetization, inefficient execution of the GST regime, and rising NPA levels in banks. So, what has Bangladesh done to emerge as the next industrial powerhouse of the world? Let’s uncover this.

Bangladesh’s story reminds me of the strategy followed by the Asian Tigers (Taiwan, South Korea, Hong Kong, Singapore) for their rapid economic development (consistent growth rates of 7%) during the 1960s – 1990s. These countries specifically focused on industrial production of low-value goods like clothing, footwear, toys, etc by private enterprises using cheap labour. These countries were able to employ large groups of people as the industries they focused on required a lot of labour and less capital. A lot of people were able to earn and thus this strategy was able to deliver social dividends as well. Bangladesh currently focuses on export-oriented industrial policy by producing cheap goods like apparel, textile, footwear, etc. What’s the result? It’s currently the second-largest exporter of garments, just after China, exporting double that of India. It has Free Trade Agreements with the European Union and ASEAN which helps it to export garments to these regions.

Now let’s take a look at what India did in its initial years after Independence. It went opposite to this strategy by following communist ideologies which ironically didn’t even give good results on social measures. It focused on industrial production of heavy machinery, steel, power, etc using government enterprises. These industries required less labour and high capital investment which eventually resulted in India staying an agrarian economy for many years. Because of less accountability and widespread corruption in these public sector units, India couldn’t perform well even in the production of high-value goods. These firms bled a lot of money from the Indian government and the latter had to continuously borrow more and more money resulting in a foreign exchange crisis in 1991 that led the government at that time to open up to the world. For the production of low-value goods, it allowed private enterprises to produce within their quotas through the controversial “License Raj” system. This resulted in very little competition. Thus, there were no incentives for private players to improve their quality of goods and cost of production to be comparable to foreign goods. What’s the eventual result we got to see in our first 50 years? India crippled its industrial sector at its birth and now we have after 30 years of semi-capitalistic governance a half-baked industrial revolution. Because of this many people could not be employed and social development couldn’t take off.

Well, not everything is gloomy on the Indian side. The world is moving rapidly to a knowledge-based economy. To the delight of India, it already has the right ingredients to embark on a knowledge-based revolution. The Indian government provides the right incentives for entrepreneurship. India has huge swathes of skilled labour ready to be employed in the service sector. People in India have good access to information and communication technology infrastructure. It has a vibrant innovation landscape involving academia and the private sector. We can already see some results. In 2021, the Indian startup ecosystem created 42 unicorns. These firms and many others waiting for capital are ready to employ a large number of people.

The best thing that the Indian government can do is to not venture into these knowledge-based sectors as it did with the industrial sector and provide a free market environment to the firms in these sectors. Talking about the half-baked industrial sector, the government should go ahead bravely in executing already enacted labour codes (Did you know that medium and large-sized industries earlier weren’t able to fire a worker on the basis of inefficient performance without the permission of the government). For the agrarian sector, it shouldn’t have withdrawn the farm laws at first which allowed farmers the freedom to sell their products anywhere in the country. But let bygones be bygones. It should introspect whether its fertilizer subsidies are doing any good to the farmer or not as it has been found that excessive use of fertilizers degrades soil quality. It should introspect about the free power given to farmers in North India that are leading to excessive use of tube wells resulting in reduced water tables. The indirect loss of this free electricity freebie is to the banks who have lent heavy sums of money to government power distribution companies that are reeling with financial inefficiency due to this system. Rather the government should try to reduce these freebies gradually and accordingly allocate the same amount saved for need-based subsidies in any sector.

Well, Bangladesh isn’t going to remain ahead of India for a long time as India is going to recover soon enough from Covid stress. As per the International Monetary Fund, both countries are going to face tough economic competition on a per capita basis for the next decade as they embark on a high growth path. However, this crossover of per capita income by Bangladesh should be an eye-opener for our government and policymakers. They shouldn’t be thumping their chest whenever some good results are announced. They should be humble in their proceedings and learn from the economic success of other countries and at least from the neighbour with which they have the friendliest relations in the subcontinent.