The process of 'rebasing' the country's gross domestic product, whereby an old base year is replaced with a more recent one to keep up with evolution in prices, has bumped Bangladesh into the category of a $400 billion-economy ($409 billion, to be more precise) for the first time, up by nearly 15% on the old calculation.
Keeping the population figure unchanged, that would push up per capita income aby the same proportion, to $2554 from $2227. That might not go down so well in regional behemoth India, where the news media in particular were overcome with angst at the news last year from the IMF that Bangladeshis - based on per capita income - had grown richer than the average Indian.
Never mind that these are all based on nominal figures, and once you take into account the critically important economics concept of purchasing power parity - essentially, how much you can buy with a fixed amount of money from one country to the next, the Indians still outshine us. Nevertheless, the outcome of the rebasing exercise completed by the Bangladesh Bureau of Statistics recently snuffs out any possibility for the time being, of the old order being swiftly restored - something that had been forecast prior to the Second Wave of the pandemic.
The marked increase in the size of the GDP itself and attendant changes in per capita income will accrue mainly due to the inclusion of some new sectors in the calculation and price changes between the two periods (the new base year being 2015-16, whereas previously it was 2005-6). While this is all good news, we would do well to guard against the 'tyranny of GDP', that can often blind policymakers to other important issues that play a greater role in the real economy. A number of economists in Bangladesh have contended in recent times that increased economic growth and per capita income are not translating to a balanced distribution of national income among the people. This has led to increased inequality in the framework of a crony capitalist system, where the benefits of growth are reaped by the few, not the many. The dangers of this must be acknowledged.
At the same time, there should be no scope for questioning the legitimacy of the exercise, or bringing charges of 'voodoo accounting'. Rebasing is important in emerging economies with large informal sectors such as Bangladesh to bring a greater share of the informal economy under the ambit of formal national income reporting. It also helps capture the new or budding sectors that are growing fast here. As such, our new calculation of GDP comprises 21 broad sectors instead of the previous 15. Similarly within sectors, more activity can be recorded. For example the new base year uses data on about 144 crops in computing the contribution of the agriculture sector to the GDP, whereas the old one only counted 124.
India last rebased its GDP in 2015, a change that had bumped up the figure substantially. Nigeria's last rebasing in 2012 increased the size of its economy (GDP) by nearly 90 percent. Rather than get defensive about the legitimate accounting exercise they have carried out, the BBS should make it routine to rebase their accounts every five years, or even ten - instead of doing so randomly. That would go a long way towards addressing some of the issues raised by those who work with time-series data, and hopefully, silence the naysayers.
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