Populous Asia: A 40-year retrospect

In 1980, Indonesia was the most prosperous. Today, China is streets ahead of the rest

Sometimes it is instructive to step away from the hurly burly of current economic and financial issues in India and glance back at the long-term development record of countries. This column puts together some basic numbers and associated commentary for the five most populous nations of Asia. They (and their respective 2018 populations in millions) are: China (1,395), India (1,334), Indonesia (264), Pakistan (201) and Bangladesh (165). Together these countries comprise 45 per cent of the world’s total population of 7.46 trillion in 2018, with China and India singly accounting for 18.7 per cent and 17.8 per cent, respectively.

The first two columns of the table show the per capita GDP, in current US$, of these countries in 1980 and 2018. It is interesting to note that, by this yardstick, in 1980, Indonesia was most prosperous (or least poor), with Pakistan second, China third and India and Bangladesh bringing up the rear. By 2018, the picture had changed dramatically. China’s extraordinary 35 years of sustained 8 per cent plus per capita real GDP growth (together with changes in prices and currency valuations) increased her per capita GDP (in current US$) by over 30 times to nearly $10,000 by 2018, two and half times higher than the runner-up, Indonesia, and six times more than bottom-of-class Pakistan. It’s not that the other four countries had stagnated; over the period, their per capita GDP (in current $) rose four to eight times their levels in 1980. It’s simply that China’s explosive growth was historically extraordinary and unprecedented for a large, populous nation.

Illustration by Binay Sinha

Columns three and four show how Asia’s populous nations have greatly improved their share in the world economy over these 38 years, from a pathetic 5.8 per cent in 1980 to a much more respectable 21 per cent in 2018 (it would be an even more pleasing 30 per cent, if computations were done in terms of purchasing power parities). But here again, the story is dominated by China, whose 2018 share of 16 per cent in the world economy was five times higher than the next largest country’s, notably India’s. Indeed, if China is omitted, the share of the other four populous Asian countries in global GDP increased from a measly 3.1 per cent in 1980 to an unimpressive 5.1 per cent by 2018.

For much of these 38 years (at least till 2008 and some would argue longer) the world economy and its constituent nations were benefitting from the very substantial (and broadly, rule-based) liberalisation of international trade and capital flows that occurred after 1950. Columns five and six bring out the large increase (approximate tripling) in the share of exports (of goods and services) in the GDP of China, India and Bangladesh, the three poorest countries in 1980. Export shares declined in Indonesia and Pakistan, in the first mainly because of declining oil exports and in the second mostly due to poor policies. As a consequence, China, India and Bangladesh also increased their share of global merchandise exports, with China increasing her share from below 1 per cent in 1980 to nearly 13 per cent in 2017 as she became the world’s largest exporter. Over the same period, although India’s share of world merchandise exports quadrupled from 0.4 per cent to 1.7 per cent, that was still only one-eighth of China’s share in 2018.

Turning to employment conditions and human development, columns seven and eight report cross-country data from the World Bank on female labour force participation rates (FLFPR) in 1990 and 2018. This indicator sheds light on general employment conditions, especially for the usually disadvantaged female half of national labour forces. In 1990, China’s FLFPR was a strikingly high 73 per cent, almost two and half times India’s. Although the FLFPR declined in both countries over the next 28 years, in ratio terms, the gap widened in China’s favour. Indeed, despite the decline, China’s FLPFR remained easily the highest among these five nations in 2018. Unfortunately, the decline in India brought her FLFPR down to the lowest of the five countries by 2018, well below Bangladesh’s and marginally lower than Pakistan’s.

The last three columns report on trends in the well-known Human Development Index published in the UNDP’s annual Human Development Report since 1990, when the first one was launched by Mahbub ul Haq and Amartya Sen. Columns nine and 10 show the computed values of each country’s human development index (HDI) in 1990 and 2017, while the last column gives the rank for each nation in 2017. (The ranking in 1990 is not shown as it is not comparable with that in 2017, since the number of countries for which the HDI was computed had swelled to 189 by 2017, compared to only 142 in 1990). 

Several interesting facts emerge. First, and most significantly, all five populous countries showed substantial increases in their HDI values over the 27 years. Second, in percentage terms the biggest increase was in Bangladesh (56 per cent), followed by China (50 per cent) and India (48 per cent). Third, because of the combination of a high base value in 1990 and a strong percentage increase over the next 27 years, China is far ahead in the most recent (2017) ranking at 86, followed by Indonesia at 116 and India at 130, with Pakistan at the bottom with its rank of 150.

So what are some takeaways from this brief 40-year retrospect of key development indicators on Asia’s five most populous nations? First, it’s really a story of China and the rest. Whether one looks at changes in per capita income, engagement with the world economy or human development, China is streets ahead of the other four countries. This should come as no surprise since only China has become an economic super power. Second, three of the other nations, India, Indonesia and Bangladesh have done reasonably well on most of the indicators. From where matters stood in the late 1970s, in the wake of the second “oil shock”, it is possible to argue that both Bangladesh and India have probably done better in the ensuing 40 years than most analysts would have expected. Third, somewhat surprisingly, Pakistan has clearly slipped down the league tables with respect to all indicators and now is firmly at the bottom of the class.

The writer is Honorary Professor in ICRIER and former Chief Economic Adviser to the Government of India. Views are personal