Tag: Economy

  • Then & Now: A Reflective Study of Development Initiatives in Bangladesh

    Then & Now: A Reflective Study of Development Initiatives in Bangladesh

        Yamuna Matheswaran                                                                               March 31, 2019/Analysis

    Towards the end of 2010, I travelled to Bangladesh with the rest of my graduate school cohort to study various developmental approaches within the country’s healthcare, garment, banking, and agricultural sectors. It was an enlightening trip–one that allowed me to understand not only the intricacies of international development but to also gain a more nuanced perspective of the country as a whole.

     

    “To understand Bangladesh, you have to understand the war.”

    – Omar Rahman, Professor, Independent University, Bangladesh

     

    Scores of Bangladeshis lost their lives in the struggle for independence in 1971 in what was then known as East Pakistan, and nearly 10 million crossed the border into India as the war waged on. They had no army, minimal weaponry and, realistically speaking, not much of a chance for survival against the genocidal tactics employed by the Pakistani Army–actions that its allies, the United States and China, refused to condemn. They fought back, however, and in doing so displayed the same extraordinary resilience that was demonstrated by its students during the Bengali Language Movement of 1952. On 16 December 1971, the new nation of Bangladesh was born.

    A street in Dhaka ©YamunaMatheswaran

    Taking a bus ride through the cacophonic streets of Dhaka, thoughts raced through my mind: how simultaneously similar and different Bangladesh was from my own home country of India, how accommodating its people were, and how–despite growing up in congested Indian cities–Dhaka’s traffic was the craziest thing I’d ever seen. It still is. After all, Dhaka has a density of 47,400 people per sq. km, and around 37,000 cars are said to be added to its roads every year.

    In 2017, Bangladesh’s population stood at approx. 164 million compared to 152 million in 2010. But the population growth rate has been in steady decline since 1986, and the implementation of various developmental approaches have contributed significantly to that decline. (Population Data from World Bank)

    An Overview of the Facts

    Bangladesh has its share of problems, and then some. For starters, there is the tangible dilemma of overpopulation. But unlike India, which is well on its way to becoming the most populated country on the planet, the total fertility rate in Bangladesh has been successfully lowered from nearly 7 births per woman in the late 60s to 2.104 in 2016. Even so, Dhaka remains one of the world’s most densely populated cities. And with increased longevity, concerns have arisen over the lack of facilities and infrastructure required to care for the country’s growing elderly population.

    All around Dhaka, construction sites are aplenty, and dust from these sites worsens the already noxious city air. It’s no surprise then that Bangladesh experiences issues of environmental degradation, while also being susceptible to the devastating impacts of climate change. Scores of people, including millions whose livelihoods depend upon agriculture, have been affected by the frequent cyclones, floods and droughts.

    Illustration ©YamunaMatheswaran

    The drainage systems aren’t too different from the ones in Indian cities, and heavy rains even for brief periods can disrupt normal life and cause flooding and waterlogging. Setbacks with the electricity supply, cases of arsenic poisoning in groundwater and ineffective methods of trash disposal are some of the issues that constitute the miscellany of Bangladesh’s woes. Political tensions, attacks on journalists and widespread problems of corruption hinder effective governance of the nation.

    In spite of these modern-day problems, Bangladesh is on the right track to eliminating extreme poverty by 2030. According to data from the World Bank, the percentage of the population living in extreme poverty ($1.90, 2011 PPP) fell below 14% in recent years, compared to over 40% in 1991-92. And while it still ranks among the poorest highly populated countries in the world, the GDP growth rate of Bangladesh hit an astounding 7.86% in 2018.

    In its less-than-fifty-years of existence, Bangladesh has pioneered breakthroughs in the fields of public health and microfinance, passed noteworthy drug policies, significantly improved aspects of agricultural production, and achieved unprecedented growth in its GDP largely attributed to the development of its garment industry. Notably, it has attained these goals by incorporating its women into the national economy by means of several women-centric initiatives. Institutions such as icddr,b, BRAC, and Proshika are models of the kind of development that is directed by the locals and is, hence, ultimately more sustainable.

    The Microfinance Revolution

    After Mohammad Yunus founded Grameen Bank in 1982, microfinance became a phenomenon in the developing world, providing small loans free of collateral, lifting thousands of people out of poverty and making businesspersons out of the extremely poor.

    women in rice fields
    Women working in rice fields ©pixabay

    Over the years, however, the field has been tainted by reports of corruption and mismanagement. Criticism has focused on the fact that loans are frequently issued to the poor with the sole purpose of reaping profits, thus overlooking the necessary supplementary steps. Does the borrower have a plan for increasing income generation with the help of the loan? Do they have the necessary qualities/resources for said business plan? Is the money in actuality utilised in income generating projects or elsewhere? Often borrowers, who are ill-educated about the various facets of microcredit loans, make use of the newly acquired capital to purchase goods, pay school fees, etc. With no increment in revenues, they inevitably enter into a vicious cycle of debt, and are forced to undertake another loan in order to repay the previous one. MFI collection agents and their coercion tactics have also been listed as a reason for an increase in suicides among borrowers.

    In contrast, Gonoshasthaya Kendra’s seasonal loans, which require the borrowers to start making repayments after the harvest, seem more logical. Nonetheless, researchers have pointed out that although microfinance might not have a transformative effect on the lives of people, it does have a positive impact. For one, increasing reliability of and access to credit leads to an increased sense of agency and freedom in one’s life.

    Pioneering Healthcare Initiatives

    From facilitating the local manufacture of drugs to offering affordable health insurance to poorer sections of society, Bangladesh has made extraordinary advancements in the public health sector.

    Set up in 1972, Gonoshasthaya Kendra (GK) was the first health centre in newly independent Bangladesh. It was established by Dr Zafrullah Chowdhury with the aim of making basic healthcare accessible to the rural population. Dr Chowdhury was also instrumental in the conceptualisation of the breakthrough National Drug Policy of 1982, which ensured the safety, availability and affordability of essential drugs. GK’s services have since expanded beyond affordable primary healthcare to include work education, nutrition, agricultural cooperatives, disaster management, rehabilitation and women’s empowerment. Hygiene and sanitation in many of GK’s wards has been a persistent issue however, and poses high threats of nosocomial infections.

    Routine checkup at a village health camp in Savar ©YamunaMatheswaran

    The International Centre for Diarrhoeal Disease Research, Bangladesh (icddr,b) originated in 1960 as the Cholera Research Laboratory in the sub-district of Matlab and was officially named icddr,b in 1978. Primarily a research institute, it has been credited with playing a key role in the discovery of oral rehydration therapy (ORS) to combat cholera and diarrhoea, the latter being a leading cause of infant mortality. The institute also focuses on neonatal care, treatments for tuberculosis, malaria and HIV/AIDS, and carries out meticulous demographic surveillance. At the time working on rotavirus vaccine trials, icddr,b’s clinical studies have since contributed to the development of affordable rotavirus vaccines. The institute relies on the funding it receives from several donors, since government expenditure on healthcare (as percentage of total GDP and budget) has reduced to a point where it is the lowest among 21 Asian countries, according to a 2018 United Nations survey.

    Cleanliness and technological resources of icddr,b’s hospital in Dhaka appeared to be far better than that of the GK hospital in Savar. However, doctors at icddr,b were quick to commend GK on its effective performance. It’s a matter of concern for GK, though, that a number of its students that graduate from its university, Gono Bishwabidyalay, choose to work for other institutions/hospitals, either for economic reasons or to pursue further specialization or be able to contribute to the research arena, leading to a shortage of doctors.

    The Façade of the Fashion Industry

    Bangladesh is the world’s second largest exporter of readymade apparel, second only to China. Garments constitute 80% of the nation’s earnings from exports, and in 2015, Bangladesh exported clothing worth over $26 billion, mainly to Europe and the United States.

    The garment industry has revolutionised Bangladesh’s economy and significantly impacted its society. A large majority of its workers are female; increased economic freedom has led to women bearing fewer children, thus contributing to declining fertility rates and tackling the dilemma of overpopulation. From the looks of it, it seemed like a win-win situation: the garment industry employed numerous people in developing countries, increased foreign investment and was responsible for an increase in the annual GDP growth rate. International brands now paid a fraction of the production costs that they used to, while oblivious buyers continued shopping at Zara, Forever 21, Russell Europe and Walmart, unaware that they were paying starkly different prices for clothes that had all been manufactured under the roof of the same factory.

    garment industry
    A garment factory in Bangladesh ©YamunaMatheswaran

    But the entire world got a reality check with the tragic Rana Plaza building collapse in 2013, which claimed 1,134 lives and was termed a “mass industrial homicide”. But long before that horrifying incident, workers had already been calling for liveable wages and safer work environments, and other deadly incidents had led to periodic loss of lives.

    On 12 December 2010, on our way to the airport, we drove past one of Bangladesh’s export processing zones and caught a glimpse of what appeared to be a peaceful protest against delays in the implementation of a wage hike. We later came to learn that the protest had turned violent, claiming at least three lives and leaving dozens of people injured.

    The factory we visited at the time, Knit Asia Ltd., boasted good working conditions and facilities including a free childcare centre and regular fire drills. It was one of Bangladesh’s leading garment manufacturers, and also owned the largest biological effluent treatment plant in the country.  However, that is more the exception than the norm.

    In 2010, Bangladesh’s garment workers received the lowest wages in the world – as little as $45 per month. That amounted to a measly $0.25 an hour, when compared to the hourly wages of $0.48 and $0.57 earned by workers in China and India at the time, respectively. From what I garnered, it cost Russell Europe $3 to manufacture a polo shirt in 2010, which was then sold for approximately $7.

    The profit made from the sale of a single piece of the polo shirt exceeded the factory worker’s daily wage.

    In 2019, minimum wage for garment workers in Bangladesh is approximately $95 (or 8,000Tk) a month. It was not enough to make a decent living then, and it still isn’t today, and workers are still fighting to be paid a living wage. Since consumer demand dictates how the garment industry functions, we as buyers have a responsibility to utilise this power to generate awareness and take a stand against inhumane practices by choosing ethical brands over fast fashion.

    The Role of Women in Development

    “Bangladesh shows what happens if you take women seriously as agents of development. It not only halved the rate of fertility within a generation, but also increased women’s influence within their own households. For the first time, wives controlled the size of families.” – Out of the Basket, The Economist (3 Nov 2012)

    women in sarees
    A village microfinance meeting ©YamunaMatheswaran

    The role of women in mainstream Bangladeshi society is a contradiction of sorts. Women are the principal participants in the microfinance sector, a majority of the paramedics that work in villages are female, and they constitute 80% of the workers in garment factories. Nearly every institution that we came into contact with – BRAC, GK, icddr,b, Proshika – had a project that focussed on empowering rural women. However, like in other countries rooted in patriarchy, sexual harassment is rampant, female enrolment rate in universities is low, and women do not enjoy the same freedom and social stature as men.

    Regardless, the empowerment of women is crucial to development. It has been demonstrated that women are more likely than men to spend their incomes/loans on the welfare of the entire family as opposed to squandering it on nonessential goods. Increasing women’s access to education and economic security also results in reduced birth rates, which ultimately alleviates myriad issues associated with overpopulation.

    To Harbour a Dream

    Upon the conclusion of our study tour, what stood out to me most was the hospitality of the people who went out of their way to ensure that we were comfortable and well-fed at all times, with plenty of tea and biscuits between meals. To this day, I remember my experience of travelling around Bangladesh fondly. The lessons that it has taught me in the field of development – about what works as well as what doesn’t – remain invaluable. Considering the number of NGOs that are at work in Bangladesh – reportedly over 2,500 – I wonder if collaboration might render them more effective.

    En route ©YamunaMatheswaran

    Nevertheless, this land that has been twice occupied and weathered innumerable floods and famines is a prime example of what locally pioneered methods of just and sustainable development can achieve.

    Working with iDE during the last few days of our tour provided the most tangible example of how something as simple and affordable as a treadle pump can truly empower families. How I’d love to hear that the bottle gourd-growing couple eventually realized their dream of travelling abroad! But the essential part is the fact that one is prepared to harbour a dream.

    Yamuna Matheswaran is a freelance writer, artist, and technical editor at TPF. She has a Master’s degree in International Studies from the University of Denver and is currently based in New Delhi.

  • The state of Bihar!?

    The state of Bihar!?

    The Prime Minister in the run up to the Bihar assembly elections announced a Rs.50,000 crores package for the state. Just as he announced a Rs.100,000 crores package for Jammu and Kashmir that July. Bihar has a population of over 103 million and J&K has a population of 12.5 million.

    This is not a new story. Bihar has been systematically exploited by denying it its rightful and deserved share of central funds from the First Plan.

    That Bihar is India’s poorest and most backward state is undeniable. The facts speak for themselves. But what makes its situation truly unique is that Bihar is the only state in India where the incidence of poverty is uniformly at the highest level (46-70%) in all the sub-regions. The annual real per capita income of Bihar of Rs. 3650 is about a third of the national average of Rs.11, 625. Bihar is also the only Indian state where the majority of the population – 52.47% – is illiterate.

    But Bihar has its bright spots also. Its infant mortality rate is 62 per 1000, which is below the national average of 66 per 1000. But what is interesting is that it is better than not just states like UP (83) and Orissa (91), but better than even states like Andhra Pradesh and Haryana (both 66).

    Even in terms of life expectancy, the average Bihari male lives a year longer (63.6 yrs.) than the average Indian male (62.4 yrs) and the state’s performance in increasing life spans has been better than most during the past three years.

    Bihar has 7.04 mn. hectares under agriculture and its yield of 1679 kgs. per hectare, while less than the national average of 1739 kgs. per hectare is better than that of six other states, which include some big agricultural states like Karnataka and Maharashtra.

    Despite this, in overall socio-economic terms, Bihar is quite clearly in a terrible shape.

    As opposed to an All-India per capita developmental expenditure during the last three years of Rs.7935.00, Bihar’s is less than half at Rs.3633.00. While development expenditure depends on a bunch of factors including a state’s contribution to the national exchequer, no logic can explain away the per capita Tenth Plan size, which at Rs. 2533.80 is less than a third of that of states like Gujarat (Rs.9289.10), Karnataka (Rs.8260.00) and Punjab (Rs.7681.20).

    Simple but sound economic logic tells us that when a region is falling behind, not just behind but well behind, it calls for a greater degree of investment in its progress and development. It is analogous to giving a weak or sick child in the family better nutrition and greater attention. Only in the animal kingdom do we see survival of the fittest with the weak and infirm neglected, deprived and even killed.

    But instead of this we see that Bihar is being systematically denied, let alone the additional assistance its economic and social condition deserves, but also what is its rightful due.

    From the pitiful per capita investment in Bihar, it is obvious that the Central Government has been systematically starving Bihar out of funds. Quite obviously Bihar has also paid the price for being politically out of sync with the central government for long periods. The last one was for a dozen years from 1992 to 2004. For the last one year Bihar had a government in New Delhi that was supposed to be favorably disposed to the regime in Patna.

    Quite clearly states that are in political sync do much better in terms of central assistance. Lets take a look at how Andhra Pradesh, a state that has stayed largely in political sync with New Delhi, has fared in the past few years. In terms of grants from the Central Government (2000 to 2005), Bihar fared poorly receiving only Rs. 10833.00 crores while AP got Rs. 15542.00 crores.

    Bihar has also been neglected as far as net loans from the center are concerned. It received just Rs.2849.60 as against Rs.6902.20 received by AP from 2000-02. It’s only in terms of per capita share of central taxes do we see Bihar getting its due. This gross neglect by the central government is reflected in the low per capita central assistance (additional assistance, grants and net loans from the center) received by Bihar in 2001. While AP received Rs.625.60 per capita, Bihar got a paltry Rs.276.70.

    The results of the economic strangulation of Bihar can be seen in the abysmally low investments possible in the state government’s four major development thrusts. Bihar’s per capita spending on Roads is Rs.44.60, which is just 38% of the national average, which is Rs.117.80. Similarly for Irrigation and Flood Control Bihar spends just Rs.104.40 on a per capita basis as opposed to the national average of Rs.199.20.

    Now the question of how much did Bihar “forego”? If Bihar got just the All-India per capita average, it would have got Rs. 48,216.66 crores for the 10th Five Year Plan instead of the Rs.21,000.00 crores it has been allocated.

    This trend was established in the very first five-year plan and the cumulative shortfall now would be in excess of Rs. 80,000.00 crores. That’s a huge handicap now to surmount. Then it would have got Rs. 44,830 crores as credit from banks instead of the Rs. 5635.76 crores it actually got, if it were to get the benefit of the prevalent national credit/deposit ratio.

    Similarly Bihar received a pittance from the financial institutions, a mere Rs.551.60 per capita, as opposed to the national average of Rs.4828.80 per capita. This could presumably be explained away by the fact that Bihar now witnesses hardly any industrial activity. But no excuses can be made for the low investment by NABARD. On a cumulative per capita basis (2000 to 2002) Bihar received just Rs.119.00 from NABARD as against Rs.164.80 by AP and Rs.306.30 by Punjab. It can be nobody’s argument that there is no farming in Bihar.

    If the financial institutions were to invest in Bihar at the national per capita average, the state would have got Rs.40, 020.51 crores as investment instead of just Rs.4571.59 crores that it actually received.

    Quite clearly Bihar is not only being denied its due share, but there is a flight of capital from Bihar, India’s poorest and most backward state. This is a cruel paradox indeed. The cycle then becomes vicious. This capital finances economic activity in other regions, leading to a higher cycle of taxation and consequent injection of greater central government assistance there. If one used harsher language one can even say that Bihar is being systematically exploited, and destroyed by denying it its rightful share of central funds.

    To even make a dent on the abysmal state that Bihar is now in, Bihar will need at least twice what it gets from the Centre, as of yesterday.

     

    Mohan Guruswamy is a prolific commentator on politics, economics, development and governance. He is a trustee of TPF. The views expressed are the author’s own.

  • Foreign Reserves beyond a point are Pointless

    Foreign Reserves beyond a point are Pointless

    Mohan Guruswamy  October 07, 2017

    Clearly the Indian economy is not at a place where it wants to be. The Modi government is finds itself in a chakravyuh that it is unable to fight its way out. The government is just unable to make or attract the investment needed to make the economy buoyant again. India enjoyed a decade of unprecedented growth from 2004-14 that seemed to have lost steam in the last year. It was largely caused by a huge decline in the proportion of capital investment expenditure. Despite the growth of the private and foreign investment, the Indian economy is still largely dependent on government investment to lead the investment and growth cycle.

    The promise of Modi was that he was expected to set right this trend and once again begin a new cycle with government led investment. He promised us a hundred new cities, a nationwide grid of high-speed rail networks, a national river-linking program and so many other major transformational projects. A hundred new cities have now become a hundred smart cities, which means little more than free wi-fi networks. The nationwide grid of fast trains has now become an exorbitant and apparently uneconomical single bullet train joining Ahmedabad and Bombay. Similarly all other feasible and exciting promises made are now mere caricatures of what were promised. It is simply that the Modi government has been unable to free the economy from its high subsidy burden and PSU black hole, where only the oil and power companies earn a profit due to administered pricing.

    Consequently the picture continues to be bleak. Output of capital goods contracted 1% in July against growth of 8.8% a year ago. Production of consumer durable goods shrank 1.3% against a nominal increase of 0.2% a year earlier.

    Then came the twin black swan events. Demonetization came as a body blow to the cash-dependent unorganized sector that makes up 40% of India’s GDP. The unorganized sector also accounts for 90% of the total employment of around 450 million. The loss of jobs due to the two events – demonetization and hasty implementation of GST- is still not empirically confirmed. Estimates vary. The construction and vegetable and fruit retail sectors seem to have taken a massive hit and the ballpark estimation of loss of jobs is at about 25-30 million. These sectors mostly employ rural landless labour with few skills and hence forced into taking up daily wage and earnings sustenance. They don’t shout much and few notice their pain. Unlike the loss of even a few thousand jobs in the IT sector.

    The implementation of GST forced companies to reduce production in the run-up to its 1 July implementation as dealers reduced inventory. The inadequate training and preparation was abundantly evident. The announcement of rates was hasty and the many mismatches between input and output rates compounded the confusion. Of the Rs.95000 crores collected in the first month, as much as Rs.65000 is due to be refunded. The problem is that the government doesn’t seem to have the cash to do so.

    In a belated effort to reverse these trends the government is planning to loosen its fiscal deficit target of 3.2% of GDP to enable it to spend up to Rs. 50,000 crore. This is piddly sum for an economy whose GDP is over Rs.150 lakh crores now. Right now we have a net outflow of foreign investment. What we need is a huge dollop of cash infusion to boost investment. Loosening fiscal deficit norms will help. But meaningfully slashing subsidies when Modi’s term is on the slope to elections is not politically feasible.

    There is that old saying that when the going gets tough, the tough get going.  Modi should now show toughness and imagination that is tempered with realism.  He needs to revive the national mood and generate optimism over the economy. He now needs a plan to drive investment. He doesn’t have to go far to find the money to fund this plan.

    The government is sitting with reserves of nearly $400 billion with about $135 billion alone sitting in US banks earning next to nothing. These reserves are equal to about 80% of our foreign debt. Even after providing a quarter of the reserves to cover short-term hot money of NRI investors each taking a pound of flesh for mostly foreign bank financed investment in their mother country, we will still have $300 billion in hand.  How much money can be freed from the other $300 billion for investment is the big question now? Kaushik Basu has said that India’s foreign reserves need not be more than the current account deficit (CAD) or about $80 billion. Others are more cautious.

    This will certainly raise many eyebrows. One is surprised over the number of people who think holding huge reserves abroad in ridiculously low yield securities is a sign of our wealth. No. It is a sign of our stupidity.

    Just holding enough reserves to cover the CAD or exports for a few months would be about enough. This nonsense of holding reserves to at least cover six months imports is just plain arbitrary and concocted by the people who made the Washington Consensus. This “consensus” assures New York banks plenty of cheap money to finance American domestic consumption and extravagances. The Chinese have now realized the stupidity of financing the US cheaply with their reserves which not long ago almost touched $4trillion. They have run it down by about $1trillion since.

    Now how much do you think the US foreign reserves amount to? Hold your seat. It is now $65 billion or about a fifth of India’s. What a travesty.

    Clearly running them down by $100-120 billion or Rs.6.5L- 8L crores can be contemplated. The government could establish an India Infrastructure Investment Fund and start shifting meaningful fractions from the foreign reserves into this fund. A board of well-regarded experts, who can allocate investments on merits to prevent the usual leakages and political misuse, could administer the fund. The fund must also mandate the minimum level of local procurement and investment to boost Make in India.

    Slow growth and no new jobs are Narendra Modi’s twin Achilles heels. He is vulnerable on both counts. He must seize the moment with both hands and start running with both legs.

    Shri Mohan Guruswamy is a former Rajya Sabha MP and a political commentator. He is a Trustee of TPF.
    This article was earlier published in ‘The Economic Times’.