The real record —real GDP per capita

In a previous post, I showed how the AL claim/promise of ‘doubling per capita income’ is problematic. That post foreshadowed a series comparing macroeconomic and development performances under successive governments — a more detailed and updated version of this exercise. This is the first part of that series, focussing on real GDP per capita — an oft-used proxy for economic and social welfare of a country.

In FY2013, Bangladesh’s real GDP per capita was 67,600 taka. This is measured in 2012-13 prices, but the estimated GDP is on the 1995-96 basis. As noted here, BBS is in the process of revising GDP estimates to be on 2005-06 basis. On that basis, the level of real GDP per capita is about 13% higher in FY2013 —that is, on that basis, per capita GDP in FY2013 was over 80,000 taka.

But the detailed time series of GDP estimates on the 2005-06 basis is not available yet, so the analysis that follows in this series is done on the 1995-96 based GDP.

So, in FY2013, average Bangladeshi produced / earned 67,600 taka. In FY2007 —the last year for which BNP government’s policies had immediate effect —real GDP per capita GDP was 51,600 taka. This might suggest that the average Bangladeshi is better off under the AL government. And in a simplistic way, it would be true. But it would also be almost as true as saying you are older under the AL government than you were under BNP.

You see, unless there is a natural disaster or political strife or severe recession, modern economies tend to grow every year, and thus at any point in time, real GDP per capita is expected to be higher than in the past. And as Chart 1 shows, real GDP per capita has been steadily increasing under successive governments over the past quarter century —the last year to record a fall in real GDP per capita was FY1988.

A better way to gauge performance is to look at the rate at which real GDP per capita —and since most measures of living standards are its correlates, most other data series we will encounter in this series — is changing over time.

Chart 2 compares annual average growth in real GDP per capita under various governments in the past three decades — Mujib and Zia/Sattar governments are excluded from comparison because the effects of the Liberation War and aftermath make them difficult to compare with the more recent governments. As the chart shows, under the second Khaleda government (six years to FY2007), real GDP per capita grew by 4.43 per cent a year, compared with 4.60 per cent a year under the second Hasina government (four years to FY2013). For the sake of completeness, under the 1/11 regime, real GDP per capita grew by 6.62 per cent.

At this point, let me stress that these numbers are estimates, which are regularly revised. Therefore, it is very important that we don’t get too hung up on second decimal point differences. The macroeconomic fact is, in the last decade, under all three governments, per capita GDP have grown by around 4½ per cent a year. At that rate, average real (that is, inflation-adjusted) income doubles in 16 years. That is, should this rate continue for another couple of years, by the middle of the next government’s term, average Bangladeshi will have a standard of living that is double what he or she experienced at the turn of the millennium.

This is impressive stuff, for which every recent government deserves some credit. Note the qualifier ‘some’ —could it be that the recent growth in GDP per capita has nothing to do with our governments? Maybe average incomes have grown despite the governments? Maybe we just have been extremely lucky in the past decade?

Well, we can perhaps knock out the luck factor —we saw natural disasters like floods as well as adverse economic shocks like global food price inflation or the great recession in the past decade, so it’s not clear to me that we have been lucky in recent years. And in fact, as argued here, reforms implemented by Saifur Rahman in the early 1990s, and sustained by SAMS Kibria in the late 1990s, have a lot to do with the more recent performance.

But exactly how much credit should accrue to which government would require much more detailed analysis. For now, the point to note is, when it comes to growth in average income, there isn’t much difference between the three latest governments.