Economic growth vs development, Bangladesh perspective
Economic development is a broader concept than the economic growth. Economic development is the sum of some economic indicators where economic growth is one of the main indicators of economic development.
Economic growth is the increase in goods and services produced in an economy. It is considered for a specific period of time, and it doesn't consider the informal economy. The rise in the country's output of goods and services is steady and constant and may be caused by an improvement in the quality of education, improvements in technology or in any way if there is a value addition in goods and services which is produced by every sector of the economy. It can be measured as a per cent wage increase in real gross domestic product. Where Gross Domestic Product (GDP) is adjusted by inflation. GDP is the market value of final goods and services which is produced in an economy or nation.
On the contrary, economic development is the process of focusing on both qualitative and quantitative growth of the economy. It measures all the aspects which include people in a country become wealthier, healthier, better educated, and have greater access to good quality housing. Economic development can create more opportunities in the sectors of education, healthcare, employment and the conservation of the environment. It indicates an increase in the per capita income of every citizen.
The standard of living includes various things like safe drinking water, improve sanitation systems, medical facilities, the spread of primary education to improve literacy rate, eradication of poverty, balanced transport networks, increase in employment opportunities etc. Quality of living standard is the major indicator of economic development. Therefore, an increase in economic development is more necessary for an economy to achieve the status of a Developed Nation.
Whereas economic development is a policy intervention endeavour aiming to improve the well-being of people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as economist Amartya Sen points out, "economic growth is one aspect of the process of economic development".
Economic development can be measured by the Human Development Index, which considers the life expectancy, education rate and per capita income which affect productivity and could lead to economic growth.
Balanced development is more necessary than to achieve high economic growth and our government should focus that in a pragmatic policy adaptation.
The development of a country has been associated with different concepts but generally encompasses economic growth through higher productivity, political systems that represent as accurately as possible the preferences of its citizens, the extension of rights to all social groups and the opportunities to get them and the proper functionality of institutions and organizations that are able to attend more technically and logistically complex tasks. These processes describe the State's capabilities to manage its economy, polity, society and public administration.
With this in mind, economic development is typically associated with improvements in a variety of areas or indicators (such as literacy rates, life expectancy, and poverty rates), that may be causes of economic development rather than consequences of specific economic development programs. For example, health and education improvements have been closely related to economic growth, but the causality with economic development may not be obvious. In any case, it is important to not expect that particular economic development programs be able to fix many problems at once as that would be establishing insurmountable goals for them that are highly unlikely they can achieve. Any development policy should set limited goals and a gradual approach to avoid falling victim to something.
European development economists have argued that the existence of modern transportation networks- such as high-speed rail infrastructure constitutes a significant indicator of a country's economic advancement.
Bangladesh has emerged as one of the fastest growing economies in the world. It has made great strides in social and economic transformation. Since 2005, Bangladesh's growth is at an average rate of 6-plus per cent annually. Bangladesh is no longer the 'test-case' of development; it has already "managed to place its foot on the first rung of the ladder of development." In 2015, the country graduated from the World Bank-defined low-income group to the lower-middle-income group.
The major factor for such a development is Bangladesh's remarkable progress in poverty reduction. In 2000, almost half of the population lived in poverty. In 2016, the per cent age declined to about 25. Bangladesh has also made significant strides in health and education. The improvements exceeded those of its South Asian neighbours India and Pakistan.
Robust economic growth of 6-plus per cent annually for two decades has been driven by a rapid increase in private consumption and fixed investment. Nevertheless, Bangladesh still grapples with poor infrastructure, endemic corruption, insufficient power supplies, and slow implementation of economic reforms. The fragile rule of law continues to undermine economic development. Corruption and weak enforcement of property rights force workers and small businesses into the informal economy. Entrepreneurial activity is also hampered by an uncertain regulatory environment.
Driven by strong private consumption, public investment and remittance inflows, Bangladesh's economy expanded by a remarkable 7.86 per cent to USD 275.8 billion in 2018, recording the highest growth rate in the country's history. The year 2018 marked a 5-year run of continuous increase in the country's GDP growth rate, a trend that is also forecasted to continue. One of the most densely populated economies in the world, Bangladesh has continued making impressive strides in achieving social development goals for its 167 million citizens. The resilience of the country's economy is commendable. However, sound economic policy must be implemented to mitigate under performance of the financial sector, diversify exports and create better employment opportunities by increasing private investment.
Given the country's sustained economic growth and the evolving dynamics of global trade, Bangladesh must make a diligent attempt to expand its export profile beyond RMG products. Since Bangladesh is on the track to graduate from Least Development Country (LDC) status in 2024 and till 2027, it will get the Everything But Arms benefits in the EU markets. After 2027, the Duty Free-Quota Free market access and the relaxed rules of origin benefits for LDCs are likely to end, adding to the global trade challenges Bangladesh might face soon. Rising cost of labour and strict enforcement of safety standards in RMG manufacturing will increase cost of production, threatening the price competitiveness of the country's RMG exports in the global market.
Therefore, Bangladesh must devote resources to the development and production of non-RMG products, such as leather, software technology, freelancing business, foreign bound skill workforce etc which may have a promising future in the global market. However, Bangladesh needs to form a stable macro-economic framework by addressing the problematic areas of exchange-rate volatility, poor banking and fiscal management.
Bangladesh has been forecasted to continue its impressive economic performance and social development in the short run. As the country continues its remarkable progress, policymakers should focus on a few key areas of improvement including a stable macroeconomic structure, an efficient financial sector and a dynamic electricity market. Employment opportunities for the young population should be taken into consideration while making investment policies. These measures will ensure fairer distribution of the benefits of robust growth and sound sustainable economic development.
The writer is banker and