Analysis of Economic Growth and Per ca pita GDP of South Asian countries

 Introduction:-

Amid lockdown, due to COVID-19, there are lots of talks of its impacts on economic growth. The economic growth and per capita GDP are two important indicators in the economy. It is vital to understand them as they can be confusing concerning other indicators. The most common confusion is the GDP and % growth of GDP which are two different indicators. Gross domestic product is defined as the total production within the boundary of the nation. Which is different than the GNP which deals with the ownership(Factors affecting GDP of India, n.d.). And The %growth in this GDP yearly is known as economic growth. The importance of economic growth is to understand the actual direction on which the country’s economy is going. Sometimes the country’s growth can be stagnant but if we look at only GDP it will not be so evident directly. In the older times, the physical sources were considered as the marks of growth as per the materialistic and ownership about with the development and more technical buildings now the % increase in GDP is termed as the GDP growth. Per capita GDP is another indicator that is more reliable than GDP as it is repeatedly measured.

India, Sri Lanka, and Bangladesh are neighboring countries and share demographic and socio-economical similarities(Ghosh, 2018). Bangladesh was part of Pakistan before it got independence in 1971(Bashar & Khan, 2012).

Bangladesh shares similarities with India as it is a neighbor to the West Bengal state of the country. Sri Lanka has the similarity with the south Indian states and but the the way these 3 countries have decided to deal with their economic decisions, is different and will further describe in the analysis results.

Methodology:

The data here used has been taken from the World bank site the most popular indicators and were filtered through the % of economic growth and Per capita income in the excel sheet. Data from 2000 to 2015 has been taken under doing the time series analysis in chart form by using excel and results have been concluded from the various articles and books of academic importance.

Time-series Analysis:

The first chart is of the GDP per capita of all the three countries which is in US$ as per the standardization. Grossly all three countries have the trend of increasing the per capita for 15 years but the proportion is different. Sri Lanka is showing higher growth at the same time when compared to India and Bangladesh but during 2008 and 2010 the income has been unstable and changing frequently. India has relatively slow and steady growth with higher income in 2007 and between 2010 and 2011. Bangladesh has the lowest per capita income even though it started as same as India from 2000 to 2002 but after that India’s income has increase but Bangladesh has been lower and consistent.

2) Comparison of economic growth:

When we see the per capita income side by side with the Comparison of GDP the patterns are way different even though the Per capita Income has been arriving from the GDP. That is because of the % growth in GDP which is different than the GDP itself. As it is mentioned in the Introduction that % of economic growth can below and high and still not have any impact on per capita income as it is derived from GDP itself.

The graph is showing various trends in all 3 countries. Shri Lanka is showing a downfall in 2001 and rising sharply in 2002 and the graph is almost stabilizing between 4 to 8%  before once again falling in 2009. India and Sri Lanka is following a similar trend from 2008 to 2013 but it is happening in different years. But Bangladesh is not following the drastic changes and it is consistently between 4% to 6% throughout 15 years.

 

Discussion:

As the % growth of GDP per year is directly depends on the factor which affects the GDP(Jain et al., 2015). There are several factors that are concerned while looking at economic growth. In India, factors affecting economic growth are mainly goods and services which are higher in the demand which can raise the GDP(The Great Recession and India’s trade collapse | VOX, CEPR Policy Portal, n.d.). That includes leisure preference, Non marketed activities, underground economy, quality of life, environmental quality, and market condition(6 Main Factors Affecting GDP, n.d.). The economic growth of India can be explained by the influx of the companies which started the manufacturing units in India and deploy the workers from the country after the recession has been a boost to the country’s economy(Jain et al., 2015). The similar pattern between 2008 and 2014 is the result of the economic recession which was faced globally by all the countries(Global financial crisis: Lessons for India from the 2008 crisis and beyond | Business Standard News, n.d.). The curious case is of Bangladesh as it has not faced much of the downward side which might be the result of the aids and NGO sectors which are working there.

Also in India as well as the Bangladesh and Sri Lanka imbalance between poverty and economy is the common factor in the economic growth as well as the per capita income. As it was mentioned in the introduction per capita income is more sufficient but if the country is suffering from the rich and poor ratio which is skewed it can be misleading in terms of outlier effects of the rich’s total income. Increase the level of per capita consumption the demand for better quality and more processed agriculture has also increased and including on the rise. Also in India, most of the transactions happened by the cash and not bank which are not registered as the daily wagers. So big chunk goes under this as well as the black market. With GST the contribution to GDP has increased which is showing the increase in economic growth too.

Bangladesh has an interesting story as that it is dominated by foreign aid and its effects on economic growth has always been questioned(Anoruo & Ramchander, 1998). As it is proven the domestic resources are exerting more impact on growth than international aid(Ahamad et al., n.d.). The traditional Pro aid view suggests that Loans and food aid is more effective in terms of donations in other sectors(Razzaque et al., 2003). Economic growth will result in the consequent reduction in poverty as well. Also, Bangladesh has made progress in the health Indicators which have helped in stabilizing its economic outputs.

Sri Lanka has the story connected with the being an interesting case of the developing country which has quite high social progress in comparison to their per capita income level(Sri Lanka Per Capita Income Higher Than India But GDP Growth Rate Lower: World Bank, n.d.). And have a more story and detailed research interest too. The ethnic conflict between Tamilian tigers and the native Sri Lankan ended in 2009 which slowed the progress reform initiatives. It has been stated as the classic example of twin deficit which means that the country’s national expenditure is higher than the national income and its production of tradable goods and services is not sufficient(Weerakoon et al., 2019).

To understand 2001’s negative GDP growth is that the private investment which was anyways declining since the mid-1990s contracted sharply the first time in 2001.  The fall of the collation government after 2000 was responsible for reform orientation and business-friendly government in 2001 which helped in rising growth till 2006. After that the overall fiscal deficit ratio reduced from 9.9% GDP to 5.5% of GDP by 2017 which cannot be seen in the graph as the data is only showing till 2015(Weerakoon et al., 2019).

This analysis helps understand the various factors and conditions which do not seem economically valuable but can have a big impact on the same.

 

References:

6 Main Factors Affecting GDP. (n.d.). Retrieved March 31, 2020, from http://www.economicsdiscussion.net/gdp/6-main-factors-affecting-gdp/15344

Ahamad, M., policy, A. I.-E., & 2011, undefined. (n.d.). Electricity consumption and economic growth nexus in Bangladesh: Revisited evidences. Elsevier. Retrieved April 2, 2020, from https://www.sciencedirect.com/science/article/pii/S0301421511005374

Anoruo, E., & Ramchander, S. (1998). Current account and fiscal deficits: Evidence from five developing economies of Asia. Journal of Asian Economics, 9(3), 487–501. https://doi.org/10.1016/S1049-0078(99)80099-2

Bashar, O. K. M. R., & Khan, H. (2012). Liberalization and Growth: An Econometric Study of Bangladesh. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1601609

Factors affecting GDP of India. (n.d.). Retrieved March 31, 2020, from http://www.educationjournal.org/archives/2018/vol3/issue2/3-2-25

Ghosh, S. (2018). India: nutrition intake and economic growth, a causality analysis. Development Studies Research, 5(1), 69–82. https://doi.org/10.1080/21665095.2018.1468791

Global financial crisis: Lessons for India from the 2008 crisis and beyond | Business Standard News. (n.d.). Retrieved April 2, 2020, from https://www.business-standard.com/article/markets/global-financial-crisis-lessons-for-india-from-the-2008-crisis-and-beyond-118091001256_1.html

Jain, D., Sanal Nair, K., & Jain, V. (2015). Factors Affecting GDP (Manufacturing, Services, Industry): An Indian Perspective. Pune Annual Research Journal of Symbiosis Centre for Management Studies, Pune, 3, 39.

Razzaque, A., Khondker, B. H., Ahmed, N., & Mujeri, M. K. (2003). MIMAP-Bangladesh Micro Impacts of Macroeconomic and Adjustment Policies in Bangladesh Trade Liberalisation and Economic Growth: Empirical Evidence on Bangladesh Trade Liberalization and Economic Growth: Empirical Evidence on Bangladesh. In idl-bnc-idrc.dspacedirect.org. https://idl-bnc-idrc.dspacedirect.org/bitstream/handle/10625/31979/118892.pdf

Sri Lanka Per Capita Income Higher Than India But GDP Growth Rate Lower: World Bank. (n.d.). Retrieved April 1, 2020, from https://www.bloombergquint.com/economy-finance/india-sri-lanka-gdp-growth-rate-per-capita-income-economy-world-bank

The Great Recession and India’s trade collapse | VOX, CEPR Policy Portal. (n.d.). Retrieved April 2, 2020, from https://voxeu.org/article/great-recession-and-india-s-trade-collapse

Weerakoon, D., Kumar, U., & Dime, R. (2019). Sri Lanka’s Macroeconomic Challenges: A Tale of Two Deficits (SWP No. 63). 63. https://doi.org/10.22617/WPS190024-2