 Hello and let's talk about the latest India Bangladesh match and this time it's not in cricket but in the economy. The latest news comes out to IMF numbers which showed that in terms of per capita income Bangladesh may be doing better than India. Now per capita income is the country's GDP divided by its population and according to the IMF that number for Bangladesh is $1,888 while for India it will be $1,876. Now these numbers led to a huge debate with the opposition piling on the government and the latter saying that it was not a fair comparison and bringing up its own numbers to support its claim. The question here however is not whether it's a fair comparison or not, although it is useful to understand these numbers. The larger question is about how bad a state our economy is in and fact after fact report after report proves that you can quibble over the details, you can shift the goalposts, question the sincerity of the sources but there's too much information flowing in from everywhere to term it some kind of conspiracy anymore. Clearly, we are in deep trouble as far as the economy is concerned. To understand some of the numbers around the Bangladesh controversy and the larger issues within the Indian economy, we spoke to senior journalist Anandriya Chakravarty. This is what he had to say. Anandriya, thank you so much for joining us. So we've been getting a lot of bad news over the past few weeks, the past few months on the economy, unemployment, the industry, all these and we talked about this. Now this week's latest news has been regarding India falling behind Bangladesh. Now there is a bit of condescension around such comparisons of it but nonetheless it's important to consider the fact that India is of course a massive country, a young population, a very diverse economy, Bangladesh is of course a much smaller country and so when we look at these two countries being more or less placed on the same level, there is a question about what maybe the Indian government is doing wrong. So we've come to that but first of all, could you talk about the metrics under which these comparisons happen and maybe explain it to our viewers also. Before that, I just want to ask you a question and I know that you are an expert on international affairs so maybe your view is different from most other people but think of the average Indian. What do they think when they think of a Bangladesh? So I would say they are considering especially the past year or so, maybe the kind of talk about Bangladesh that has come up is largely to do with them being some kind of people who were sneakily entering into the country and taking over land. This has really become a very commonplace narrative among a lot of people and our families and our WhatsApp groups and every discussions so that kind of a narrative is definitely being set among a lot of people as far as I can see. And also an issue of national security that they're a threat. But at the same time that even those who have a certain empathy, we all whether it's a person who sees the Bangladesh as a threat or someone who sees the Bangladesh as a fellow citizen of the world, we all think that Bangladesh is utterly poor, they're starving and they come here because they have no money, the poorest country, even internationally, I mean, you could correct me if I'm wrong. I think whenever one talks about the West talks of the poor, they either talk about Sub-Saharan Africa or they talk of Bangladesh, they're the deserving of our charity. Now, so obviously when IMF says that Bangladesh is per capita income in 2020 is going to be $1,888 and India's is going to be $1,877, it really shocks us. We think, oh my goodness, does that mean that we are poorer than Bangladesh and a lot of middle-class people, they don't really care about things except as to what foreigners will think. They'll say that this will be terrible, people are going to, the West is going to laugh at us. When we go on our holidays, people are going to say you're poorer than Bangladesh. So that really affects them badly. So in this context, of course, we used per capita GDP as the metric to sort of measure this comparison. But obviously across the world, there's often a lot of questions about whether that's really a good metric, whether it really reflects the nature of how society works. And I think certain government sources have been raising the same argument to kind of say that it's a contemporary thing. Of course, now the same government sources are definitely happy to use GDP when it comes to other calculations. But I'll leave that aside. But nonetheless, there has been a lot of pushback on this by saying that this is just a temporary phenomenon. So could you maybe take us through some of the arguments which the pro-government sources are also making? Well, what the sources are saying, because these are always never directly announced by the government. But they think that sources tell the media is valid, which is that even though it is still within the per capita GDP metrics, as you said, and which is questionable. But it is still valid because essentially the government is saying, look at real GDP. When you compare dollars, that dollar comparison is actually just a nominal GDP in rupee terms. It does not in current income terms, and it does not take into account inflation. Bangladesh has had a higher inflation rate than us. So therefore in real terms, it's not the same. So the IMF itself gives us data. If you go to the report and download it, our viewers can do that. You'll find that they give us data in terms of PPP dollars. Now, PPP dollars or purchasing power parity dollars is essentially something essentially if one dollar can buy you, let's say, a burger and a coke in the US, right? How much would that same burger and coke cost in India? And how much will it cost in Bangladesh? Now, in India, that same amount, same thing that a dollar can buy in America would cost you 22 rupees. The same thing would cost 33 Bangladeshi taka in Bangladesh. Now, obviously Prashant, we know that there's a difference between going to a bank and you want to go to travel abroad or you want to import something. You'll have to buy real dollars, not PPP dollars. In India, you'll have to pay about 75 rupees to buy a dollar. In Bangladesh, you'll have to pay 85 Bangladeshi taka to buy a dollar. But when we compare lifestyle, living standards, we have to look at what basket of goods and commodities can be bought with local currency. If you compare the same basket of goods and commodities, then in India, it is 22 rupees to a dollar. In Bangladesh, it's 33 rupees taka to a dollar. Now, that is the comparison that we have to look at GDP per capita GDP, PPP dollar term. And when we come to that, then we see that in India, in 2020, the PPP dollar terms, in PPP dollar terms, our per capita income will be something about $6,284 and Bangladeshis will be $5,139, which is about 20-22% lower than what we have even after the COVID impact. So therefore, in real terms, it is true that what the government is saying is correct when it comes to just per capita GDP. But there are definitely, there are some other numbers to this picture also, which again get missed out. For instance, if you look at, say, what is the kind of average wealth that we're talking about? Or even for that matter, growth, I think, is something you talked about also as a metric. So could you talk a bit about that? So let's take the same argument that the government is using, PPP GDP per capita GDP, PPP average income in Bangladesh and India. And we use that same thing to look at growth. And we take the Modi period for the first five years, which is 1450 to 1920, we're going to take that because we are removing this year, the COVID period. We know because COVID has affected India much more than most other countries. So let's give the government that and take a comparison there. And then we'll see that the average, that the growth between 2014 to 2019 in Bangladesh's per capita income in real terms in PPP dollars has been almost 50%. It's 49%, right? So, but in India, it's just 33%. So an average Indian's income in real terms went up by one third. An average Bangladesh's income went up by 50%, huh? So here, we're clearly saying a difference in growth rate. And the thing actually becomes worse when we look at the future. Bangla, when we look at what is being predicted for 2020, right? When we include the COVID year. Again, let's took a five year cycle. Then despite the COVID collapse, Bangladesh's income in PPP terms and average income goes up by 38%. And in India, it's just 15%. So that's the growth part. And of course, you've also raised issues about, if you could just tell me again exactly what you wanted to know about the numbers related to wealth distribution. I'd probably be able to give a- Yeah, so the key question, of course, one of the issues that you often talk about in India's context is the inequality. Yes, of course. So there is a considerable amount of wealth generation that has happened over the past two decades, especially. But how much of this is kind of being enjoyed by everyone or being equitably distributed versus. So you've seen numbers about how, for instance, Ambani and Adhani's fortunes have really increased since the lockdown, for example. And this is something that's generally part of the pattern. So when we look at this aspect, for instance, how do the two countries compare? So let's look at two things. One is that Bangladesh is not an ideal place. By the way, Bangladesh has great growth since 2013. If you look at the Bangladesh's own economist's own assessment and Bangladesh's media, if you look at it, they're also complaining about growing inequality. So it seems that Bangladesh's growth or export-oriented growth pattern might have improved its per capita, average income, but it has increased inequality. It has increased unemployment and it has definitely made employment levels lower and more difficult, especially urban areas. So let us put that as a caveat here. And we know pictures, you remember when that factory collapsed. There was these terrible photographs of the conditions of Bangladeshi workers. Garment workers. Garment workers. And so someone is going to get up and say, we must follow the Bangladeshi method, but that is also not an ideal thing. All right? So now, but let's look at something like an average per capita income can always be skewed by very rich people. So if, let's say, a few people earn a lot and let's say that the total income of a country is 1 lakh and there are 1,000 people, then the per capita income will be 100 rupees. But it is possible that two people out of that 1 lakh actually earned 80,000. And the remaining 98 earned the remaining 20,000 rupees. So we know that the average of that remaining 98 is actually very, very low. It is no longer that 1,000 rupees. It's actually somewhere closer to 200 rupees. So here's the thing that is worth looking at. As to the average per capita gives us a particular sense of the average. But there's also something that is usually worth looking at, which is the median income. Median income means exactly at the midpoint. 50% are below us, 50% are above us. There's difficult data to get. So I'm going to use the Credit Suisse wealth reports to give a sense of it using wealth data, right? Now, wealth data tells us a sense that it gives us a sense that what has been the past income of people, how much could they save and convert into various forms of wealth? Whether it is financial, whether it is property, whatever, right? So it is an indicator of past wealth income as well. If we look at Credit Suisse's 2019 report, Prashant, that in India, the average wealth in US dollar terms, average wealth per adult in US dollar terms is about $14,600, right? Approximately, right? And in Bangladesh, it is just $6,600. In India, the median wealth, which is 50% of people are below that wealth level, is $3,000. In Bangladesh, it is $2,800. So now if I take the ratio between the average and the median, average can be pushed up by very rich people, and therefore we take the median, which gives us an idea about where the middle income people are clustered, right? There we see that in India, the ratio is 4.8 times. In Bangladesh, it is 2.4 times, right? The higher the ratio, obviously it tells us that very rich people are pushing up the average, right? The lower the ratio, it tells us that there is a higher clustering around that midpoint, right? These are obviously, there can be various other exceptions to this rule, but I'm just saying this is still a rule of the thumb indicator that we can use. It is clear then that more people in Bangladesh are clustered around their average wealth than in India. And if we take that same thing, extend that for income, then we can say that per capita income in Bangladesh is more representative than per capita income in India, which suggests that a larger proportion of Indians are worse off than a larger proportion of Bangladeshis, right? That itself is something that we should be worried about and perhaps even ashamed of. I mean, I'm saying we should be ashamed of because we had such a huge gap starting lead compared to Bangladesh. Absolutely, right? And finally, to sort of bring in maybe something more of a political question. Yeah, of course, if this is an issue, we have sort of looked at in the past as well. And I think like we discussed in the beginning, the comparison with Bangladesh is instructive, but it's probably not the best comparison in its own sense. Absolutely. Right? So as far as the Indian setup is concerned, especially over the past four to five years, what do you think are maybe say off the top of your head, two or three factors where we just completely went wrong or completely went off the rails? I think two very clear, demonetization and GST. Okay. Essentially removed money from the hands of a large section of people. It had an immediate demand impact, right? But I would still say that there is a significant number of people in India who had never probably seen a 500 or a thousand rupee note in 2016, November. So they were not affected, right? But those who buy things, we should also remember that those people don't buy anything. That is the state of India's economy. And for that, you cannot blame the Modi government. You have to blame the entire system since 1985 onwards, since when we've seen the higher level of inequality and lower level of employment growth. But GST to my mind is an even bigger factor. It is even a worse situation because what it did essentially is that it killed the unorganized sector because we know that Prashant that the lower income people or even small businesses, the only reason they had an advantage was because they didn't pay the full tax, right? So a small manufacturer of a mattress, right? Which you and I use, maybe a small workshop, makes a mattress and sells it to you in a small shop, did not pay full tax and therefore you got it for cheap and you bought it. They had that business. As soon as they have to pay GST or have to supply to another vendor with a registered GST number because otherwise that vendor is not going to take your thing because they'll not get input credit. They are going to be moved out of the market. So we're essentially seeing a consolidation of organized large companies, larger companies eating into the space. And this is I think the biggest reason why CMI's data which tells us how first demonetization and then GST ate into India's employment. So I would say that these are the two things. And the third point, I think politically, there is fiscal fundamentalism that this government has been following which by the way is even worse because it has a populist agenda where it does provide certain kinds of, certain aid to the poorest of the poor. I would say that the poorest of the poor which I've argued many times are probably better off today. The bottom 20 to 30% are better off, marginally better off today than they were under UP. And this is not something to be greatly powered off because essentially there's still be kept at subsistence level where their nose is just above water. They were sinking under water and therefore so many of them voted against the UP and kicked it out of power in 2014. But what that does is when you're diverting money to run these schemes for electoral gains, essentially you're not spending on anything else. So there's no spending on anything else to make for productive growth. And that is what we're seeing right now. So the section immediately about them has been the worst. Yeah, the section, the squeeze is right there but COVID-19 squeeze is also, once that squeeze takes place because that section is also a buying section. The poorest of the poor buy nothing. Whatever this government might say, whatever anyone might say, at best they'll buy some biscuits or maybe when they're slightly better off, they'll go and buy some hair oil. But all the anecdotal ethnography in terms of journalistic reports will tell you they buy nothing, right? So the squeeze is essentially those who are in danger of always falling below poverty line and also those who are just above that. They're also very badly off but sometimes they'll buy a phone, they'll go and buy hair oil, they'll buy a sachet shampoo, they'll buy some biscuits, they'll buy batteries. You know, these things happen. They might save and buy a cycle. So that is why that collapse is taking place. But when they stop buying, the companies which sell to them, they lose out. They are unable to earn as much as they do. And then they start sacking their managers. They start making pay cuts. They stop advertising when they stop advertising. The media doesn't get money, journalists are sacked. So it's a vicious cycle. So we are seeing that squeeze taking place where the top 1% is now going down is now, which used to be the richest is now becoming 0.5%, soon 0.2%. And then it will might be led to two, right? Adanya Namban, that is what will. So that is essentially the problem that India is facing today. A massive, massive demand crisis. Absolutely. Thank you so much, Arunji, for talking to us. Thanks a lot Prashant. That's all we have time for today. We'll be back on Monday with more news from the country and the world. Until then, keep watching NewsClick.