Brics Economies

7/26/2019 Brics Economies

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Development Comparison in India, China and

Bangladesh

Assignment Submitted In the Partial Fulfillment of the Requirements for the

Fourth Semester

In

M.Sc. Economics

(2014 - 2015)

By: Mrunal Dubey (13060242024)

Sagar Jagdale (13060242032)

Rajlaxmi Bhat (13060242030)

Under guidance of:

Dr. Savita Kulkarni


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Introduction

Economic growth is about the changes in aggregate or average incomes. This is a

good measure of countrys development, but it is far from being only the one.

Economic growth that spreads its benefits equitably among the population is always

welcome; growth that is distributed unequally needs to be evaluated not simply on the

basis of overall change, but on the grounds of equity.

There are two reasons to be interested in the inequality of income. First, there is no

reason why individuals should be treated differently in terms of their access to

lifetime economic resources. Second, even if we are uninterested about the problems

of inequality at the intrinsic level, there is still good reason to worry about it.

Ultimately, economic inequality is the fundamental disparity that permits one

individual certain material choices, while denying another individual those very same

choices.

Poverty strikes not only at the core of ongoing existence, but by effectively taking

away the rights of a human being to live in good health, to obtain education, and to

enjoy adequate nutrition, poverty destroys aspirations, hopes and enjoyment of future

as well. Just as in the case of inequality, poverty is both intrinsic and functional

significance. Removal of poverty is the fundamental goal of the economic

development. Hence the patterns of poverty depict the approach of economy to

eradicate poverty from the grass roots level.

In this paper, we have tried to show cross country comparison fro inequality and

poverty patterns, covering one country from the highest income level, one country

from upper middle level, one country from the lower middle level and one country

from the lower income level.

High economic inequality might retard economic growth by setting up the political

demands for redistribution. A policy might aim to redistribute existing wealth among

the broader population. Social welfare programmes can improve the work benefits.

Direct benefit transfers may be well suited to reduce inequality. Addressing inequality

in terms of education is also of paramount importance as it can infuse human capital

and drive the countrys growth.


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The paper furnishes the trends in poverty and inequality in the recent years (1990-

2010)

Trends in Inequality and Poverty

India

The country is developing into a free-market economy. The country has taken various

liberalization measures such as privatization of public enterprises, industrial

deregulation and relaxed control on international trade. These measures have helped

India to accelerate its growth rate.

The countrys diverse economy has modern industries, wide range of service

industries, modern agriculture and prevalent rural agriculture. Though the service

sector is growing rapidly in the country and contributes around two-third of the

output, nearly half of Indias labor force is still in traditional agriculture.

Manufacturing sector in India has not picked as much as the Service sector. The

countrys high growth rate due to the liberalization measures had been affected by the

low investments due to high interest rates and high inflation in the country. But the

Government bought in additional reforms like deficit reduction policies and attracting

the Foreign Direct Investment.

The situation in the current year (2014) has improved but still the country faces many

socio-economic challenges. The country has low education ratio, high level of

poverty, inequality, corruption, violence, and discrimination against women. The

measures taken to eradicate the problems are either inadequate or poorly targeted.

The following statistics give us a picture about the poverty in India


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The above graph represents the income held by various income groups. The share of

higher income group has increased from 41.27 percent to 42.58 percent in late 2000s.

The bottom level income groups share of income has decreased from 8.71 to 8.59

percent. The share of middle income group has also decreased from 16.21 to 15.75

percent. This points out to increase in inequality in the late 2000s.

Poverty Head-count Ratio

The poverty headcount ratio at the national poverty line defines the percentage of

population living under the nationally defined poverty line. The graph shows a sharp

decline in the headcount from 45 percent in 1996 to around 22 percent in 2010. The


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various schemes by the Government such as such as the Jawahar Rozgar Yojana in

1990s, Jawahar Gram Samriddhi Yojana in 2000s, Pension schemes and employment

guarantee schemes like NREGA (2006) have helped the country to reduce the

poverty.


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Poverty Gap at $2 a day PPP (%population) measured in 2005 prices.

The poverty gap measures the average shortfall of the total population from the

poverty line. It signifies the intensity of poverty in a country. The above graph shows

that the poverty gap has been decreasing gradually since 1990s.

GINI coefficient

The inequality in the country is represented using the GINI coefficient, which is the

most commonly used inequality measure. The lower values of the coefficient

represent lower inequality. The following statistics suggest that there is high level of

inequality in India. Though the inequality sharply 1990s, it again has increased after

2005.


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Bangladesh

Bangladesh has experienced a 6% economic growth rate in spite of political

instability, very low infrastructure, corruption and low slow implementation of

economic reforms. More than half of Bangladeshis are employed in the agriculture

sector. Garment sector is the most important industry in Bangladesh. The sector

contributes 80% to the total exports and 18% to the countrys GDP. The country has

high levels of poverty and equally high inequality.

The statistics for the poverty and inequality are provided below:

Income Share

The income share data shows that the share of high income group has increased from

40.63 percent to around 42 percent in the late 2000s whereas for both middle and low

level groups the share has decreased. This shows that the inequality has increased in

the country.


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Poverty headcount Ratio

The poverty headcount ration measured by the national poverty line shows that there

is gradual decrease in the poverty. The percentage of population living under the

nationally defined poverty line was around 57 percent in 1990, which in 2010 came

down to 31 percent.

Poverty Gap at $2 a day PPP (%population) measured in 2005 prices.

The poverty shows us the intensity of the poverty. The Poverty Gap ratio in 2010

stands at 30.35 % down from 44% in 1990.


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GINI Index

The GINI coefficient shows the inequality in the country. In Bangladesh the

inequality has remained at the same level i.e around 33%, throughout 1990s and

2000s.

Life Expectancy at Birth

The graph shows gradual increase in Life expectancy. The statistics are better than

India (66.4) but lesser than China (73.7). The primary reason for this success is the

availability of affordable healthcare in most villages. The widespread availability of

nutritious food at an affordable price, changes in food habits and the expansion of the

social safety net have largely benefited the poorer segment of the population.


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Human Development Index

Bangladesh is among few countries globally who has shown extraordinary progress in

terms of HDI. Bangladesh has risen in ranking to 142 (among 187 countries),

graduating from last years position of 143, thanks to its better performance in the

health, education and gender issues. Bangladesh outshines India, Pakistan and Nepal

in terms of inequality-adjusted HDI.


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China

China has moved from a closed, centrally planned system to a more market-oriented

one. China became the world's largest exporter in the year 2010. Reforms began with

the phasing out of collectivized agriculture, and expanded to include the gradual

liberalization of prices, fiscal decentralization, increased autonomy for stateenterprises, growth of the private sector, development of stock markets and a modern

banking system, and opening to foreign trade and investment.

The country has the highest population and it has taken vast measures to utilize its

man power. China has set a good example in poverty alleviation. The following

statistics prove that the country has managed to bring down the poverty. But the

inequality has increased in the recent years.

Income Share

The income share data suggests that the inequality in the country has risen in recent

years. The income share of the high income group has increased from around 40

percent to 48 percent in the late 2000s. The share of middle income group has not

decreased much but the share of low income group in the national income has

decreased highly, it has come down from 8 percent to around 5 percent in the late

2000s.


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Poverty headcount ratio

The above graph shows that the poverty headcount has increased drastically from

around 85 percent to just 27 percent (though still large figure for a country with

worlds highest population)

Poverty Gap Ratio at PPP

The poverty gap ratio also shows a drastic decreased. The shortfall from the poverty

line in the year 1990 was 41 percent but it has come down to just 9 percent in 2010.


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GINI Coefficient

Even though the country shows decrease in the poverty level, the inequality has

actually risen in recent years. The GINI ratio or coefficient was around 32 percent in

the year 1990. It reached at its highest in recent years i.e. 43 in the year 2005. In 2010

it came down to 42.

Life Expectancy at Birth

China has comparatively better life expectancy than both India and Bangladesh. The

Governments targeted policies towards bettering the Human development indicators

have helped the country to achieve it.


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Human Development Index

China's 0.699 on the HDI represents a remarkable increase of 72 percent from the

0.407 it registered on this scale in 1980, or an average year-on-year growth of 1.7

percent. China's achievement can be attributed to investment in agriculture,

establishing special economic zones, creating access to high-quality education,

promoting social cohesion, enhancing equity and providing access to high-quality

healthcare.

Conclusion

The problems of poverty and inequality are affecting many countries in the world.Many countries have managed to reduce poverty. But the inequality in most of the

countries has remained constant or has increased in some cases. At Indias present

rate of progress on human development, it may take some 15 years for India to get to

where China is today. China, in other words, already led India on these fronts when it

commenced economic liberalization in the late 70s. And because China has boomed

alongside India and at a faster clip, in some cases Chinas lead has widened over the

past two decades.

In case of the countries mentioned in the report, Only China has efficiently managed

to reduce the poverty level. India has reduced the poverty but not inequality. The

inequality has increased steeply in recent years. On other hand Bangladesh has not

succeeded much in reducing poverty and inequality. The poverty has been reduced

only a little whereas the inequality has remained at the same level.

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