Per Capita Income of Pakistan, India, and Bangladesh: A Comparative Analysis

Per capita income, or GDP per capita, is a measure of the economic output of a country divided by its population. It is often used as an indicator of the standard of living and the level of development of a country. In this blog post, we will compare the per capita income of Pakistan, India, and Bangladesh, three South Asian countries that share a common history and face similar challenges and opportunities.

Historical Trends.

According to the World Bank data¹, the per capita income of Pakistan, India, and Bangladesh in 2020 were $1,588.9, $2,410.9, and $2,688.3 respectively. However, this was not always the case. In 1971, when Bangladesh gained independence from Pakistan, its per capita income was only $129.7, much lower than Pakistan's $280.6 and India's $198.9. Since then, Bangladesh has achieved remarkable economic growth and social development, surpassing both Pakistan and India in terms of per capita income. The following graph shows the historical trends of per capita income of the three countries from 2000 to 2023.

Figure 1. Per Capita Income of Pakistan, India, and Bangladesh (2000-2023) (Source World Bank, 2024)

As the graph shows, Pakistan had the highest per capita income among the three countries until the late 1980s, when India overtook it. Bangladesh, on the other hand, had the lowest per capita income until the mid-2010s, when it surpassed Pakistan. Since then, Bangladesh has maintained a higher per capita income than both Pakistan and India, and is expected to continue this trend in the near future.

Factors Affecting Economic Growth.

What are the factors that explain the different economic performance of Pakistan, India, and Bangladesh? There is no simple answer to this question, as economic growth is influenced by a complex interplay of various factors, such as political stability, institutional quality, human capital, financial development, trade openness, industrial production, agricultural productivity, and so on. However, based on some recent studies, we can highlight some of the major factors that have contributed to the economic success of Bangladesh and India, and the economic stagnation of Pakistan.

Political Stability and Institutional Quality.

One of the most important factors that affect economic growth is political stability and institutional quality. Political stability refers to the degree of certainty and predictability in the political system, the absence of violence and conflict, and the respect for the rule of law and human rights. Institutional quality refers to the effectiveness and efficiency of the public institutions, such as the judiciary, the bureaucracy, the central bank, the regulatory agencies, and the electoral system, in delivering public goods and services, enforcing contracts and property rights, and ensuring accountability and transparency.

Political stability and institutional quality are essential for creating a conducive environment for economic activity, attracting investment, fostering innovation, and promoting social cohesion and trust. Conversely, political instability and institutional weakness can undermine economic growth, by creating uncertainty and risk, discouraging investment, hampering innovation, and generating social unrest and conflict.

Pakistan, unfortunately, has suffered from chronic political instability and institutional weakness since its inception. The country has experienced four military coups, several constitutional crises, frequent changes of governments, and prolonged periods of martial law and emergency rule. The country has also faced various internal and external security threats, such as terrorism, sectarian violence, ethnic strife, and border disputes. The country's institutions have been plagued by corruption, inefficiency, politicization, and interference. The country's judiciary, for instance, has been accused of being biased, inconsistent, and subservient to the military and the executive. The country's bureaucracy, likewise, has been criticized for being incompetent, unresponsive, and rent-seeking. The country's central bank, similarly, has been alleged to be lacking independence, credibility, and transparency. The country's regulatory agencies, moreover, have been ineffective in ensuring fair competition, consumer protection, and environmental sustainability. All these factors have contributed to the low and volatile economic growth of Pakistan, which has lagged behind its neighbors in terms of per capita income¹.

India, on the other hand, has maintained a relatively stable and democratic political system since its independence, despite facing some challenges such as communal violence, regional separatism, and corruption scandals. The country has also developed a robust and independent judiciary, a professional and merit-based bureaucracy, a credible and transparent central bank, and a competitive and diverse electoral system. The country's institutions have been able to deliver public goods and services, enforce contracts and property rights, and ensure accountability and transparency, albeit with some variations across states and sectors. The country's institutions have also been able to adapt and reform in response to changing economic and social conditions, such as the liberalization of the economy in the 1990s, the introduction of the goods and services tax in 2017, and the digitalization of public services and payments. These factors have enabled India to achieve a high and sustained economic growth, which has lifted millions of people out of poverty and made India the world's fifth largest economy².

Bangladesh, similarly, has achieved remarkable political stability and institutional quality, especially since the restoration of democracy in 1991, after a period of military rule and political turmoil. The country has also faced some challenges, such as political polarization, corruption, and human rights violations, but has managed to overcome them through dialogue, compromise, and reform. The country has also established a strong and independent judiciary, a competent and accountable bureaucracy, a stable and prudent central bank, and a vibrant and inclusive electoral system. The country's institutions have been successful in providing public goods and services, such as education, health, and social protection, enforcing contracts and property rights, and ensuring accountability and transparency, with the support of civil society and the media. The country's institutions have also been innovative and responsive in addressing emerging economic and social issues, such as the diversification of the economy, the empowerment of women, and the adaptation to climate change. These factors have contributed to the impressive economic growth of Bangladesh, which has surpassed both Pakistan and India in terms of per capita income³.

Policy Implications and Recommendations.

The economic growth of Bangladesh and India, and the economic stagnation of Pakistan, have important policy implications and recommendations for the three countries and the region as a whole. Some of the key points are:

Bangladesh and India should continue to invest in human capital development, especially in education, health, and skills, to enhance the productivity and employability of their large and young populations. They should also promote gender equality and women’s empowerment, as these are crucial for social and economic development.

Bangladesh and India should diversify their economies and exports, and reduce their dependence on low-value-added sectors, such as textiles and agriculture. They should foster innovation and entrepreneurship, and support the growth of high-value-added sectors, such as information technology, biotechnology, and renewable energy. They should also improve their infrastructure and connectivity, and enhance their integration with regional and global markets.

Pakistan should address its political and institutional challenges, and restore stability and confidence in its governance system. It should combat corruption, improve transparency and accountability, and strengthen the rule of law and human rights. It should also resolve its security issues, and foster peace and cooperation with its neighbors and the international community.

Pakistan should revitalize its economic reforms, and pursue a more inclusive and sustainable growth model. It should increase its public spending on education, health, and social protection, and improve the quality and access of these services. It should also stimulate private investment, and create a more conducive business environment. It should also diversify its economy and exports, and enhance its competitiveness and productivity.

The three countries should enhance their regional cooperation and integration, and leverage their complementarities and synergies. They should promote trade and investment, and reduce tariff and non-tariff barriers. They should also collaborate on common issues, such as climate change, energy security, and poverty reduction. They should also foster cultural and people-to-people exchanges, and build mutual trust and understanding.

By implementing these policy measures, the three countries can achieve higher and more inclusive economic growth, and contribute to the prosperity and stability of South Asia and the world.

Sources:

(1) Comparative analysis: India, Pakistan and Bangladesh - The Express Tribune. https://tribune.com.pk/story/2384212/comparative-analysis-india-pakistan-and-bangladesh.

(2) Pakistan and Bangladesh: Comparative Economic Analysis (1971-2020) - SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3920349.

(3) Factors Affecting Economic Growth: A Comparative Analysis of. https://ideas.repec.org/a/ani/irdjoe/v2y2020i2p61-71.html.

(4) Exploring the Factors Affecting Economic Growth in Pakistan. https://www.researchgate.net/publication/357276920_Exploring_the_Factors_Affecting_Economic_Growth_in_Pakistan/fulltext/61c4d4e9e2ad0b4ce761f080/Exploring-the-Factors-Affecting-Economic-Growth-in-Pakistan.pdf.

(5) The effects of Agriculture Productivity, Land Intensification, on .... https://link.springer.com/article/10.1007/s11356-021-18471-6.

(6) Data for India, Pakistan, Bangladesh, Sri Lanka | Data. https://data.worldbank.org/?locations=IN-PK-BD-LK.

(7) List of countries by GDP (nominal) per capita - Wikipedia. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita.

(8) Data for Pakistan, India, Bangladesh, Sri Lanka, Nepal, Afghanistan. https://data.worldbank.org/?locations=PK-IN-BD-LK-NP-AF.

(9) Bangladesh edges Pakistan, India in per capita GDP. https://en.prothomalo.com/business/gsuqrsp6i0.

(10) World Economic Outlook (October 2023) - GDP per capita, current prices. https://www.imf.org/external/datamapper/NGDPDPC@WEO/IND/BGD.

(11) https://ssrn.com/abstract=3920349.

(12) http://dx.doi.org/10.2139/ssrn.3920349.