Bangladesh set to overtake India again in per capita GDP, IMF forecasts

Bangladesh is projected to surpass India again in per capita gross domestic product (GDP) by 2026, according to forecasts from the International Monetary Fund (IMF). However, it is important to note that per capita GDP alone does not fully capture the financial realities of individuals within a country, as it does not account for income and wealth disparities. Additionally, fluctuations in exchange rates can influence these GDP figures.

The IMF's estimates indicate that Bangladesh's per capita GDP could reach approximately $2,886 this year, while India's is expected to be around $2,749. These figures were released in the IMF's World Economic Outlook report on October 13. Bangladesh previously outpaced India in per capita GDP in 2020, though India later reclaimed the lead.

Per capita GDP is derived by dividing a country’s total economic output by its population. Notably, this calculation excludes remittances and export earnings generated from outside the country, although these sources are included in a broader measure of national income.

When considering overall economic size, India’s economy remains significantly larger than Bangladesh's, with projections estimating India’s GDP to reach $4.15 trillion in 2026, compared to Bangladesh's expected $506 billion. Despite this considerable difference in total GDP, the IMF forecasts that Bangladesh will maintain a lead in per capita GDP, although India excels in purchasing power parity (PPP). The PPP metric reflects local living costs and price levels, indicating that even with a lower per capita GDP, Indians generally enjoy greater purchasing power than their Bangladeshi counterparts.

The IMF's projections suggest that by 2026, India’s per capita GDP on a PPP basis could be about $12,998, while Bangladesh's would likely be around $10,884. There is also a notable disparity in inflation rates, with Bangladesh expected to experience higher inflation this year, leading to increased cost-of-living pressures for its citizens.

India's economy benefits from diversification, encompassing a robust manufacturing sector, agriculture, and a significant services industry, which bolsters its economic resilience. In contrast, Bangladesh's economic growth has been driven largely by the garment industry, remittances, and an increasing participation of women in the workforce. However, Bangladesh is currently facing challenges from high inflation and a slowdown in economic growth.

Looking ahead, the IMF anticipates that Bangladesh will likely continue to lead India in per capita GDP through 2027, with projections of $3,219 for Bangladesh compared to $3,036 for India. Bangladesh may also retain a slight advantage in 2028. Nevertheless, forecasts indicate that India could surpass Bangladesh in 2029, with projected per capita GDP figures of $3,661 for India and $3,334 for Bangladesh.

Indian economist Santosh Mehrotra noted that Bangladesh has consistently achieved an annual growth rate of around six percent, alongside a declining population growth rate. He pointed out that the manufacturing sector's contribution to Bangladesh's economy has risen significantly, from 16.6 percent of total value added in 2014 to an anticipated 22 percent in 2025. In contrast, India's manufacturing value added as a share of GDP has decreased from 15.1 percent in 2014 to an expected 13.5 percent in 2024.

Bangladesh’s economy is currently under additional strain due to a global energy crisis exacerbated by geopolitical tensions involving Iran, the United States, and Israel. Disruptions in shipping through the Strait of Hormuz have resulted in instability in energy supplies, and Bangladesh relies heavily on imports for its oil and liquefied natural gas (LNG), sourcing about 95 percent of its needs from abroad, primarily from the Middle East. The ready-made garment sector, which constitutes over 80 percent of Bangladesh's export earnings, is also facing challenges due to logistical disruptions in the region.

In summary, while Bangladesh is poised to overtake India in per capita GDP, the broader economic context reveals significant disparities in overall economic capacity, purchasing power, and the resilience of each country's economy.