Business Today

There is a real problem in calculating per capita income at current prices

After this news was published, political tension started in India and Bangladesh. Opposition parties in India have slammed Indian Prime Minister Narendra Modi over his country’s predicament. The Government of Bangladesh, as usual, spoke of this success. But economist Syed Moinul Ahsan says it is not right to compare per capita income to the current value of the dollar, not even to a fixed price. Because, a lot changes happen subject to change of base year. For that, PPP or purchasing power parity index should be used to calculate the per capita income of two or more countries. As a PPP, India is far ahead of Bangladesh. Despite Indian government officials talking about it, the media in the two countries have remained silent.
These were discussed at a seminar held at the conference room of Bangladesh Institute of Development Studies (BIDS) at Agargaon in the capital yesterday.
Syed Moinul Ahsan spoke. The program was conducted by BIDS Director General Binayak Sen

India is lagging behind Bangladesh – Indian economists like Kaushik Basu have been swept away by this political tension. Kaushik Basu tweeted, “Five years ago, India was 25 per cent ahead of India in per capita GDP, but now they are lagging behind – a real shock.”

Syed Moinul Ahsan said there are some real problems in comparing the per capita income of the two countries at the current value of the dollar. Those are, firstly, the difference in inflation between the two countries; Second, the difference in the exchange rate of the currency; Third, the extreme and relative value gap between the two countries and the incomparability of the comparison between them.

Syed Moinul opined that only Gross National Income (GNI) is somewhat credible when calculating current prices. In this index, Bangladesh’s per capita GNI surpassed that of India in the 1990s.