Income inequality widens in Bangladesh amid Covid crisis

$163 per capita income increase hardly reflects actual situation, say economists

Shakhawat Hossain  | Published: 23:34, May 20,2021 | Updated: 05:30, May 21,2021

 
 

The per capita income in Bangladesh has increased by $163 in the outgoing fiscal year amid the Covid pandemic, further aggravating the country’s income inequality.

According to economists, the income inequality that was at an alarming level in the pre-Covid period has further intensified due to the virus outbreak, affecting mostly the overwhelming poor and middle-class population.   

Many have become new poor, they said while doubting the per capita income as an indicator of a country’s socio-economic condition.

The country’s vast poor and middle-class population is badly suffering because of unemployment, income losses and disruption in economic activities, they observed.

The country’s per capita income has gone up to $2,227 in the current fiscal year, 2020–21, from $2,064 in 2019–20, planning minister MA Mannan informed the weekly cabinet meeting on Monday.

Commenting on the increased per capita income figure, former central bank governor Salehuddin Ahmed told New Age on Thursday that the affluent section of the society might not have faced any major negative economic consequences due to the covid outbreak.

Available Bangladesh Bank data shows that the number of bank accounts with over Tk 1 crore in deposit continued to grow even in the first year of the virus outbreak.

In 2020 the banks tallied 10,051 such new accounts, with the overall figure rising to 93,890 from 83,839 in 2019.      

The massive poor and middle-class population has mainly bore the Covid pandemic brunt, said Salehuddin. 

According to a joint study by Power and Participation Research Centre and Brac Institute of Governance and Development released in the past month, the economic shock from the pandemic has turned 2.45 crore people into new poor in one year.

With the emergence of the new poor, the number of poor living on less than a $2 daily income rose to 6.45 crore who account for more than one third of the country’s population, the study mentioned.     

The pandemic has caused reduction in the income of a significant number of households and forced a large segment of the population to leave the cities back to their villages, the study further noted.

Their situation has worsened due to the rise in living cost, dwindled savings and mounting debt, added the study.

Policy Research Institute executive director Ahsan H Mansur said that increases in the per capita income had not helped the majority people even in the pre-pandemic periods because of the high income inequality.

The Gini coefficient, which measures the income inequality of a country, rose to 0.48 in 2016 from 0.46 in 2010.

With smaller Gini coefficient values indicating lower income inequalities, Mansur said, there are plenty of signs that the income inequality in the country has worsened since the virus outbreak.

Former World Bank Dhaka Office lead economist Zahid Hussain said that a record amount of remittance — over $20.67 billion in the first 10 months of the current fiscal year — might have slightly raised the per capita income.

But over a 9 per cent growth in the per capita income in the outgoing fiscal year is doubtable, he said.

The country needed a high growth in its real GDP to achieve this feat, he commented.

But, the economist noted, the signs of such high GDP growth were absent.

The economists also observed that the stimulus packages worth over Tk 1.24 lakh crore, announced by the government since April 2020 to overcome the economic fallout from the Covid pandemic, had barely helped the affected informal and small entrepreneurs.

Only 60 per cent of the Tk 20,000 crore package targeted for small and cottage industries was disbursed until January 2021.

On the contrary, the Tk 30,000 crore stimulus package meant for big industrialists was exhausted by December 2020 showing an unequal distribution of the government assistance.

Besides, export-oriented readymade garment businesses have absorbed Tk 10,500 crore in loan from the package although the government initially announced a Tk 5,000 crore loan package for them.

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