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The Financial Express

Growing income inequality in Bangladesh causes concern

| Updated: August 04, 2021 22:22:27


Growing income inequality in Bangladesh causes concern

Bangladesh has attained an impressive economic growth but growing income inequality in the country remains a matter of concern. Bangladesh is set to be among the top three fastest-growing economies in the world by 2022, but such disparity in income distribution among people also peaks.

Never since 1972 has income inequality been seen so glaring in this country. Studies show that people from low-income groups are struggling to make two ends meet or have three square meals a day.  The benefits of economic growth have trickled up rather than trickled down, show studies on income distribution.  Economists are getting increasingly concerned over such gaping gaps in incomes.  The latest Human Development Index ranked Bangladesh 133rd out of 189 countries.

The income share of the bottom 40 per cent of people is 21 per cent, and in a sharp contrast, for the richest 10 per cent it is 27 per cent. Bangladesh Bank noted with concern that the second wave of the pandemic and the consequent lockdowns could slow down the pace of economic development.  Travel restrictions imposed by many countries could affect migration, remittances and exports, fears the central bank.

 Bangladesh seems to be headed on the path of contrasts, feel economists, though the country has achieved a remarkable economic development in last 50 years and is on track to get the lower-middle-income tag.

 Despite the pandemic disruptions, the GDP growth of Bangladesh was 3.8 per cent in 2020, according to the International Monetary Fund, and the growth is expected to clock 4.4 per cent in 2021 and 7.9 per cent in 2022.

A study, jointly  done by Brac, New York University's  Centre on International Cooperation and UN Women Bangladesh, shows  that 36 per cent of children below five suffer from moderate stunting and underweight due to malnutrition, and youth unemployment stands at 12 per cent.

The state of the country's economy calls for reality check.  According to the findings, the rate of child marriage increased during the coronavirus pandemic, which has slowed life and income-generating activities.

Hardship together with shutdown of schools compelled families to get their under- age girls married off, though it is illegal in Bangladesh.  Over 77 per cent of the brides were below 18, while 61 per cent were below 16 at the time of their marriage, shows the study.

The pandemic's worst casualty is education, and the authorities simply don't know how to make a recovery. Borrowing from informal lenders to face the economic crunch created by the scourge made many low-income families indebted, shows a study done by Brac University's Centre for Peace and Justice.

For the study, researchers interviewed 1,056 respondents, 425 of them RMG workers, 425 non-RMG workers and 206 migrant returnees in November and December 2020.  The migrant returnee respondents were  from two city corporation areas in the capital as well as from Savar  and Nawabganj in Dhaka district and from Manikganj and Madaripur.

In Bangladesh, income inequality seems to be growing at an alarming rate. A small section of society enjoys most of the country's wealth, depriving the larger sections. Income share held by the highest 10 per cent increased from 21 per cent in 1984 to 27 per cent in 2010. Income share held by the lowest 10 per cent declined from 4.13 per cent to 3.99 per cent.

Amidst many positive achievements, an important area of concern for Bangladesh economy is the rise in inequality in income distribution. After all, the dream of economic emancipation through alleviation of economic inequality was one of the driving forces of our liberation war. Regrettably, though, there has been an increase in the degree of inequality in income distribution since the mid-1980s. As per the latest Household Income and Expenditure Survey (HIES) by Bangladesh Bureau of Statistics (BBS), the country's Gini coefficient, which is the economic measure of inequality, stood at 0.482 in 2016, up from 0.458 in 2010, in a worrying development. Historically the Gini index stood at 33.12 in 2010 from 33.22 in 2005. It was 25.88 in 1984 and went up to 33.46 in 1996.

From over 90 per cent of Bangladeshis living in the villages in 1971, now nearly 70 per cent of them live there. More and more people are expected to flock to the cities.

The capital city is now home to 10 per cent of the population, up from 2 per cent in 1980. Lack of decentralisation has caused the growing spatial inequality in income earnings. People living in Dhaka and Chottogram earn more than those living elsewhere.

Though macroeconomic growth contributed to higher national income, the country's growing income inequality needs to be addressed. Geographically centralised industrialisation has contributed to a higher flow of domestic migration.

The trend raises questions about the quality of Bangladesh's much-lauded GDP growth as the economic growth in recent years has been far from inclusive.

Official statistics show that the country has experienced accelerated GDP growth since 2013, the highest mark in the country's history.  But inequalities also rose rapidly during this period.

Though figures show that GDP growth has accelerated in recent years, job growth has slowed and real wage growth has been sluggish as the high growth couldn't create sufficient jobs. The country is witnessing a phase of what is termed jobless growth as poor people are not getting income-generating work.

This has resulted in slow progress in poverty reduction amid rising inequalities. The public expenditure on education and health as a share of GDP has declined in recent years. Such low spending does not help improve productivity of workers and is not consistent with the effort to reduce poverty and inequalities. There is also an increasing inequality of opportunities, particularly to access healthcare, education, financial services and social protection.

The poor cannot access privileges that the government gives to particular businesses and interest groups in the form of bailouts, loan rescheduling, tax exemptions, subsidies, licences and so on. The social protection programmes are too inadequate to dent poverty and regional disparities.

Due to what seems to be unstoppable leakages and pilferages, expenditures for the poor seldom benefit them as much as the authorities claim. Sustainable growth and social stability require social and economic equity, if not equality.

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