Falling behind

Context: The International Monetary Fund (IMF), in its World Economic Outlook, has projected that gross domestic product (GDP) in India will fall further than in any other major global economy during the pandemic, other than Spain and Italy. 

Reasons for the fall in GDP

• Difficult to recover after severe lock down: It is difficult to restart economic activity in a large and diverse country following the severe lockdown 

• Due to the growth path of India

Case Study by International Monetary Fund (IMF): Comparing growth of India and Bangladesh

• Per capita Income (PCI) : PCI of India will fall by over 10 % (at $1877) while that of Bangladesh will grow by 4% (at $1888), surpassing India.

• Compound annual growth rate: It has been 6 percentage points higher for Bangladesh than India’s for the past five years
• Bangladesh’s growth is export oriented- and Its export oriented units are more efficient than its equivalent units in India due to better labour and other regulations

Reason to believe that Bangladesh’s growth may not be sustainable

• High dependence on Single sector:  I.e., textiles, and within that on specific low value-add sections of the sector

• They may lose the preferential treatment as a result of high growth: may lose various special dispensations from importing countries that it has received as a consequence of low-income status. 

Conclusion: India should learn right lessons from neighbouring countries like Bangladesh.