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Thursday | 16 January 2025 | Epaper

Increase of per capita income and income inequality in Bangladesh

Published : Saturday, 22 August, 2020 at 12:00 AM  Count : 991
Md Zillur Rahaman
Md Zillur Rahaman

Md Zillur Rahaman

Per capita GDP or income is a global measure for evaluating the prosperity of nations and is used by economists to analyze the prosperity of a country based on its economic growth.Recently Bangladesh Bureau of Statistics (BBS) unveiled the provisional data which shows that the per capita income of Bangladesh rose to $2,064 in FY20, up from $1,909 in 2018-19. The GDP size at constant prices was estimated at Tk 11.637 trillion and at the current price was Tk 27.963 trillion in FY2020.

There is a general perception among the people that per capita income means to increase the living standard of the consumers but it doesn't mean for all. It can be presumed for rich segment of people but not for the poor people who are living from hand to mouth.Although we achieved higher per capita income, the income equality is on the rise and the coronavirus situation has accelerated the disparity. Inequality rose significantly during this pandemic period and this is a big concern as many people lost their job and some of them have no income at all.

There are several ways to analyze a country's wealth and prosperity. Per capita GDP is the most universal because its components are regularly tracked on a global scale, providing for ease of calculation and usage. Income per capita is another measure for global prosperity analysis though it is less broadly used.But income inequality is an extreme disparity of income distributions with a high concentration of income usually in the hands of a small percentage of a population. There can be varying types of income disparity segregations and analysis used to understand income inequality.

Income inequality can be assessed in many different ways and sometimes the conclusions depend on the measure of Gini coefficient or index. Gini index measures the extent to which the distribution of income among individuals or households within an economy deviates from a perfectly equal distribution. Thus, a Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality.As per the latest Household Income and Expenditure Survey (HIES) of BBS, the country's Gini coefficient, which is the economic measure of equality, stood at 0.482 in 2016, up from 0.458 in 2010, in a worrying scenario.
Bangladesh has secured the top position in the list of countries that saw the quickest growth in the number of rich people between 2010 and 2019, according to a report from New York-based research firm Wealth-X. The biggest problem in our country is the income of poor people is not increasing at all like that of rich people. As a result, inequality is rising among the country's population. To reduce the gap, the government should invest more in education and health sectors ensuring proper tax collection from the richer people. A country cannot ensure balanced development with wide inequality in income.

A country's GDP shows the market value of goods and services it produces. Per capita GDP is often analyzed alongside GDP. Economists use this metric for insight on both their own country's domestic productivity as well as productivity of other countries. Per capita GDP considers both a country's GDP and its population. Therefore, it can be important to understand how each factor contributes to the overall result and how each factor is affecting per capita GDP growth.

Governments can use per capita GDP to understand how the economy is growing with its population. GDP per capita analysis on a national level can provide insights on a country's domestic population influence. Overall, it is important to look at each variable's contribution to understand how an economy is growing or contracting in terms of its people. There can be several numerical relationships that affect per capita GDP.

If a country's per capita GDP is growing with a stable population level, it can potentially be the result of technological progressions that are producing more with same population level. Some countries may have high per capita GDP but a small population which usually means they have built up a self-sufficient economy based on an abundance of special resources.But Income distribution is extremely important for development, since it influences the cohesion of society, determines the extent of poverty for any given average per capita income and the poverty-reducing effects of growth, and even affects people's health.

A nation may have consistent economic growth but if its population is growing faster than its GDP, per capita GDP growth will be negative. This is not a problem for most established economies, as even a tepid pace of economic growth can still outpace their population growth rates.

Sustained poverty reduction will require coordinated actions in three areas that are also good for economic growth.

Firstly, Bangladesh will need to maintain growth in income, which continues to be one of the two key drivers of poverty reduction. This will require public investments to help increase agricultural productivity and to promote growth in the demand for salaried work in manufacturing and services.

Secondly, Bangladesh should cater more aggressively to the skills development of its growing youth population to fully harness the "demographic opportunity" resulting from the falling fertility rates- the other key driver of poverty reduction.

Thirdly, Bangladesh can make better use of its vast social safety net expenditures through improvements in program design so as to emphasize human capital accumulation (such as child nutrition and cognitive development, education, and skills) and productive employment.

Global analysis of per capita GDP helps provide comparable insight on economic prosperity and economic developments across the globe. Both GDP and population are factors in the per capita equation. This means countries with the highest GDP may or may not have the highest per capita GDP.  Countries may also see a significant increase in per capita GDP as they become more advanced through technological progressions. Technology can be a revolutionary factor that helps countries increase their per capita ranking with a stable population level. Corruption is a big challenge to reduce the income inequality and our government should focus on this issue to reduce the income inequality.

(Disclaimer: The views of the write-up is solely writer's personal.)

The writer is a First Assistant Vice President (FAVP) of Islami Bank Bangladesh Ltd (IBBL)











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