The Indian capital, which just weeks ago suffered the devastating force of the coronavirus, with tens of thousands of new infections daily and funeral pyres that burned day and night, is taking its first steps back toward normalcy.
Officials on Monday reopened manufacturing and construction activity, allowing workers in those industries to return to their jobs after six weeks of staying at home to avoid infection. The move came after a sharp drop in new infections, at least by the official numbers, and as hospital wards emptied and the strain on medicine and supplies has eased.
Life on the streets of Delhi is not expected to return to normal immediately. Schools and most businesses are still closed. The Delhi Metro system, which reopened after last year’s nationwide lockdown, has suspended service again.
But everyone has to focus on the future. So what’s going on? How’s Modi’s going to supercharge the economy? I’m not Indian, I’m American. A strong India is good for America. An economically vibrant India is good for humanity.
In the comments below there is some mention of the problems that Bangladesh will face due to increases in global sea level. The hypothesis is that there will be a mass migration to India as Bangladeshis flee low-level zones which are going to be inundated. I don’t think this is capturing the real issue: if millions of Bangladeshis are still subsistence farmers on marginal maritime zones then there has been a massive development failure.
Even extreme sea-level scenarios by 2100 posit a 2.5-meter rise, which means only a small proportion of the territory of Bangladesh would be inundated. If by 2100 Bangladesh is not a predominantly urban society after 80 years of economic development from 2020, there are much deeper structural problems to deal with than climate change.
Development and wealth change the downsides of risk a great deal. The 1970 Bhola cyclone caused hundreds of thousands of deaths. Something that is unlikely to be replicated in the region for various reasons (e.g., information technology and coordination are far better!).
I’ve been paying attention to climate change since the late 1980s. As someone whose family is from Bangladesh I have been very worried…my image in 1990 was of peasants fleeing inundated paddies. But things have changed a great deal. In 2020 nearly 40 percent of Bangladeshis live in cities. By 2100 a substantial majority should…
Bangladesh’s per capita gross domestic product (GDP) is now higher than most Indian states in eastern and northeastern India, with the exception of small hill states such as Mizoram and Sikkim. According to the data from the International Monetary Fund (IMF), Bangladesh’s per capita GDP was $1,905 in 2019, against West Bengal’s $1,566 in 2018-19 (FY19) — economically the most developed state in eastern India.
Bangladesh is not really comparable to India, which is a diversified economy that is more than an order of magnitude larger. But, it is comparable to West Bengal. On economic matters, I am broadly sympathetic to right-liberal economics, so I’ll spare you my interpretation of what’s going on.
Do state capacity and policy really matter when it comes to wealth among regions in South Asia ? Or is prosperity today determined largely by a mixture of geographical and historical factors ? South Asia as a unit is a reasonable region to study because the introduction to modernity in this entire region was mediated by the British Empire.
Seen in the two figures below are GDP per capita ($ PPP) figures for smaller (< 20 million population) and larger (> 20 million population) regions. The entities include the nations of Bhutan, Nepal, Bangladesh and Sri Lanka, states and union territories of India, and provinces of Pakistan. Some notes about the two figures:
Green bars denote plains regions, red mountain regions and blue coastal regions.
Bold x-axis labels indicate entities with major metro areas.
Bold borders around bars indicate non-Indian entities.
There are roughly five bands of wealth we can identify:
Rich smaller entities of India: Goa, Delhi, Sikkim and Chandigarh. These have GDPs of around $20-25000.
Richer large entities consisting of Indian states and Sri Lanka. GDPs are around $10-12000, and these are predominantly coastal regions.
Succesful agrarian states of India (Punjab and Andhra), mountainous states of India (HP, UT, MZ), Pakistan’s capital Islamabad, and country of Bhutan. GDPs between $8-10000.
Interior Indian states and Odisha, along with all Pakistani provinces. This is the South Asian mean performance of around 4-6000$.
Poor regions: Indian states of UP, Bihar, countries of Bangladesh, Nepal, Pakistan’s remote area of FATA and India’s remote state of Manipur.
Clearly being on the coast and having a major city help in a major way. In this context, there are three regions which are major disappointments, India’s West Bengal, Bangladesh and Pakistan’s Sindh. All three are on the coast, have major metropolitan areas and even have rich agricultural lands. But their economic performance is significantly below potential.
On the other hand, the economic star of the subcontinent is the Indian state of Haryana. It defies every convention, its not on the coast, lacks a huge metro region and lacks abundant rainfall. But it excels in every aspect of economic activity, its agricultural productivity is second only to Indian Punjab, its industries are varied and well developed and its service sector is a leader in India along with Karnataka. Gurugram hosts genuinely innovative startups, home to at least 7 of India’s 30 unicorns.
An interesting comparison is that between the state of Punjab and the Pakistani province of the same name. Indian Punjab is richer despite lacking a metro area. But there is a convergence in certain aspects. These are rich agricultural areas, with strong remittance networks but they both might lack industrial entrepreneurs.
Bihar, Nepal and Eastern UP together continue to be home to the largest concentration of poor people on planet Earth. This is an isolated region, with no major cities, neglected by every Indian political entity for many centuries now. The Modi government’s national waterway one has already connected the region upto Varanasi to the ocean, upstream will be a technological challenge. Nepal, can look to Indian states like Uttarakand and Himachal for an effective growth strategy.
Although geography and history play a major role, the example of Haryana shows that those factors can be overcome. Market access, aggregation effects and the presence of mercantile communities are the key variables that determine economic performance.
8% vs. 3%. From a geopolitical perspective at current rates of relative stagnation India’s Pakistani problem will “solve” itself as the Islamic Republic is turning into a macroeconomic midget. All of the geopolitical posturing will be irrelevant if the Pakistani polity doesn’t get its structural house in order (e.g., shift away from the oligarchy).
…a recent article, “East overtakes West,” in The Economist has thrown a spanner in the works. The east is the erstwhile East Pakistan and the west is today’s Pakistan. It shows that the GDP per capita of Bangladesh is $1,538 and that of Pakistan lags behind at $1,470. This is the result of a GDP growth rate of over six per cent per annum in the past 12 years. One-third of the GDP is contributed by industry and the value-added garments exports are larger than India and Pakistan put together.
The truth is that Bangladesh’s better statistics in some measures are due to demographics. Per capita values will change in opposite directions if nation underestimated its population (as Bangladesh did), and another nation overestimated its population (as Pakistan did). Using PPP corrections and such Pakistan is still a more prosperous land per person. But it’s getting close. The trendline is definitely pointing in one direction. A piece at Brookings asks “Why is Bangladesh booming?” The author notes:
Once one of the poorest regions of Pakistan, Bangladesh remained an economic basket case—wracked by poverty and famine—for many years after independence in 1971. In fact, by 2006, conditions seemed so hopeless that when Bangladesh registered faster growth than Pakistan, it was dismissed as a fluke.
But I’ve always thought that the infant mortality and life expectancy statistics in Bangladesh were things that were more important to be proud of (and on this score Bangladesh does indisputably better than Pakistan). And curiously, on this measure, Bangladesh does even better than India! But to a great extent, that’s not a fair comparison, as India is a coalition of regions, while Bangladesh would just be a very populous Indian state.
More comparable is West Bengal. Bangladesh and West Bengal look to be at parity in terms of life expectancy and per capita GDP. And metropolitan Dhaka and Kolkotta now have about the same population, at ~15,000,000.
It has long been asserted that South Asia may make average strides economically, but it is still in absolute terms the locus of most of the world’s grinding poverty. This may not be true much longer. In particular, some estimates now suggest that India is no longer the world’s “leader” in extreme poverty in absolute terms. From Brookings, The start of a new poverty narrative:
According to our projections, Nigeria has already overtaken India as the country with the largest number of extreme poor in early 2018, and the Democratic Republic of the Congo could soon take over the number 2 spot (Figure 1 below). At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million. What is more, extreme poverty in Nigeria is growing by six people every minute, while poverty in India continues to fall. In fact, by the end of 2018 in Africa as a whole, there will probably be about 3.2 million more people living in extreme poverty than there are today.
Bangladesh has been making progress as well, from the World Bank:
Bangladesh has made remarkable progress in reducing poverty, supported by sustained economic growth. Based on the international poverty line of $1.90 per person per day, it reduced poverty from 44.2 percent in 1991 to 13.8 percent in 2016/17. In parallel, life expectancy, literacy rates and per capita food production have increased significantly. Progress was underpinned by 6 percent plus growth over the decade and reaching to 7.3 percent in 2016/2017, according to official estimates. Rapid growth enabled Bangladesh to reach the lower middle-income country status in 2015. In 2018, Bangladesh fulfilled all three eligibility criteria for graduation from the UN’s Least Developed Countries (LDC) list for the first time and is on track for graduation in 2024.
Here’s GDP for South Asian countries in 2005 dollars:
I left Bangladesh in 1980. Not too long after I was born. I went back to visit in 1989 and 2004. In relation to 1980, per capita GDP was 1.15x. in 2004 it was 1.6x. In 2016 it was 2.9x. So over the past 14 years there’s been a 2x increase in GDP per capita in Bangladesh! The equivalent figure in the United States is 1.1x.