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

Bangladesh could move ahead of India in per capita gross domestic product (GDP) in 2026. However, India remains in a stronger position in terms of the size of its economy, purchasing power and growth rate. Meanwhile, Bangladesh is under pressure from high inflation and slowing economic growth. Al Jazeera has reported the development.

The International Monetary Fund’s (IMF) projections present a picture of the economic progress and limitations of the two countries. They show that although Bangladesh is forecast to lead in per capita GDP, a significant gap remains between the two countries in terms of economic capacity and people’s actual living standards.

According to the IMF’s projections, Bangladesh’s per capita GDP could reach US$2,886 this year, while India’s could stand at $2,749. The figures were published in the IMF’s World Economic Outlook report released on 13 October.

Bangladesh had previously overtaken India in per capita GDP in 2020. India subsequently regained the lead.

Per capita GDP is calculated by dividing the total value added through the production of goods and the provision of services within a country by its total population.

Remittances and export earnings are not included, as these earnings are generated from outside the country. When calculating a country’s per capita income, however, these two sources of income are added to its GDP.

India’s economy is nearly eight times the size of Bangladesh’s. India’s total GDP could reach $4.15 trillion (415,000 crore) in 2026, while Bangladesh’s GDP could stand at $506 billion (50,640 crore). Despite the difference in the overall size of their economies, the IMF forecasts that Bangladesh will remain ahead of India in per capita GDP.

Bangladesh’s economy has made significant progress over the past two decades. The garment industry, remittances and the growing participation of women in the labour market have been major drivers of this progress. However, high inflation and slowing economic growth are now putting these gains under pressure.

Although Bangladesh is forecast to lead in per capita GDP, India is ahead in terms of purchasing power parity (PPP). This measure takes into account differences in the cost of living and local price levels between the two countries. This means that despite having lower per capita GDP, people in India have greater purchasing power than people in Bangladesh.

According to the IMF’s projections, India’s per capita GDP on a PPP basis could reach $12,998 in 2026, compared with $10,884 for Bangladesh.

There is also a significant difference between the two countries in terms of inflation. The IMF forecasts that inflation will be higher in Bangladesh than in India this year. This means people in Bangladesh will face greater pressure from the cost of living.

However, per capita GDP does not provide a complete picture of people’s actual financial circumstances in a country. It does not show the extent of income and wealth inequality. Changes in the exchange rate of a country’s currency against the US dollar can also affect per capita GDP figures.

According to the IMF’s projections, Bangladesh is likely to remain ahead of India in per capita GDP in 2027. That year, Bangladesh’s per capita GDP could reach $3,219, compared with $3,036 for India. Bangladesh could retain a narrow lead in 2028 as well.

However, India could overtake Bangladesh in 2029. India’s per capita GDP could reach $3,661 that year, while Bangladesh’s could stand at $3,334.

Indian economist Santosh Mehrotra said that, over the long term, Bangladesh had consistently achieved annual growth of six per cent alongside a decline in its population growth rate.

He said the manufacturing sector had increased its contribution to Bangladesh’s economy. Manufacturing accounted for 16.6 per cent of total value added in 2014, rising to 22 per cent in 2025.

According to Santosh Mehrotra, World Bank data show that manufacturing value added as a share of India’s GDP stood at 15.1 per cent in 2014, falling to 13.5 per cent in 2024. Bangladesh has been able to make effective use of growth in export-oriented manufacturing, he said.

The energy crisis triggered worldwide by the war involving Iran, the United States and Israel has placed additional pressure on Bangladesh’s economy. Disruptions to shipping through the Strait of Hormuz have caused instability in international energy supplies.

The reality is that Bangladesh imports around 95 per cent of the oil and liquefied natural gas (LNG) it needs. A large share of these supplies comes from the Middle East.

Moreover, the ready-made garment industry accounts for more than 80 per cent of the country’s export earnings. The industry is being affected by disruptions to the transport of goods through the Red Sea and the Middle East.

India’s economy, by contrast, is relatively diversified. Alongside manufacturing and agriculture, its large domestic market, technology industry and services sector play important roles in the economy.

However, the two countries share one common challenge: rising inequality. The benefits of economic growth have not been distributed equally; instead, wealth has increasingly become concentrated in the hands of affluent families.

Overall, Bangladesh’s projected lead over India in per capita GDP marks an important aspect of its economic progress. However, tackling high inflation, slowing growth and the global energy crisis remains a major challenge for the country.