Part-A

1. What are the causes of poverty reduction in rural areas (pre-pandemic periods)?
What is the relation between economic growth and inequality of income?

Bangladesh has a solid history of poverty reduction. As income has grown, poverty has
fallen. However, with a quarter of the population of 160 million still living below the
poverty line, a strategy of poverty reduction is central to any medium-term development
plan in Bangladesh. Because growth alone cannot overcome poverty, though growth is a
necessary condition for attacking poverty. Bangladesh has done pretty well in cutting
income poverty. The role of the government in reducing poverty can hardly be
overemphasized. Gains in educational attainment, lower fertility rates, agricultural
growth, and international migration will continue to be important to reduce poverty in
rural areas.

The rapid growth in income and a substantial reduction in poverty, income inequality is
not a healthy sign for social stability and progress. Accordingly, the Sixth Plan sought to
tackle income inequality through a number of strategies and policies including increase in
employment, labor productivity and wages, the development of human capital with better
access to poor, the expansion of micro-credits and loans for SMEs, increase in spending
on social protection and improving its effectiveness, reform of public spending with
greater emphasis on health, education, agriculture, rural development, and reform of
taxes with emphasis on progressive personal income taxation. Economic growth reduces
poverty because growth has little impact on income inequality. In the data set income
inequality rises on average less than 1.0 percent a year. Since income distributions are
relatively stable over time, economic growth tends to raise incomes for all members of
society, including the poor.

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 2. Cite the structural changes in the services sector of Bangladesh. In what sense(s)
SMEs are important for the economy?
Service sector or tertiary sector includes all service activities. Total output of the service
sector consists of the collective outputs of the wholesale and retail trade, transport,
storage and communication, financial intermediations, real estate, renting and business
activities, public administration and defense, education, health and social work and
community, social and personal service activities. The sectoral share of the service sector
is 58.92% of total GDP at current prices where it was 30.1% in 1974.

The Structural change in the Services Sector (% of GDP)

Activities 1974 2020

Trade 9.3(%) 5.02(%)

Transport 4.2 6.19

Telecoms 0.2 6.16

Financial Service 1.3 4.46

Real Estate 5.6 4.85

Public Administration 2.2 6.02

Education 1.6 6.19

Health 1.2 9.96

Hotel & Restaurants 0.3 6.46

Personal & community Services 4.2 3.61

Total 30.1 58.92

Note: 2019-20 statics from- National Accounts Statistics

SMEs provide many people, including unskilled labor, with employment opportunities,

thereby distributing income from a macroeconomic perspective. ... Small and medium-
scale local manufacturing is an indispensable industry offering non- agricultural
employment opportunities in such areas.

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 First, SMEs represent a large weight of the economic activity of a country. SMEs in
many countries account for an overwhelming number of business establishments and
employees and are a major player in economic activity.
Second, the SME labor market performs a stabilizing function in society. SMEs provide
many people, including unskilled labor, with employment opportunities, thereby
distributing income from a macroeconomic perspective.
Third, SMEs are considered as a source of dynamism in market-oriented economic since
the rate of entry and exit of small firms is high. Economic development including the
upgrading of industrial structure is achieved through a dynamic process of replacing
inefficient enterprises with highly efficient enterprises.
Fourth, SMEs provide outsourced products and services. By supplying parts and
components required by export-oriented assemblers, for example, SMEs help to increase
economic efficiency since assemblers do not need to provide everything.
Fifth, SMEs are key players in the regional economy. Small and medium-scale local
manufacturing is an indispensable industry offering nonagricultural employment
opportunities in such areas.

3. Private investment in Bangladesh has almost stagnated in recent years. What are
the
possible reasons?
Private investment regime depends on many factors. Firstly, talk about determinants of
investment.

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 1. The first one is the cost of capital because no one invests from his own savings or
assets. And for that we have to borrow money from the bank. But we have to pay
interest for that which is called cost of capital.
There are two rates of interest, one is lending rate and the other is borrowing rate.
Except for the last 2 few years the lending interest rate was always high up to 10%.
And this high cost of capital discourages investment.

2. Investment depends not only on cost of capital but also overall infrastructure that
include physical capital, human capital, quality of labor etc. Bangladesh did good
investment previously but to increase that investment for future Bangladesh needs
many mega projects like Metro rail, bridges etc. But it is not possible by applying
previous infrastructure.

3. The cost of doing business in Bangladesh is very high. An investor facing the first
problem in Bangladesh is getting permission from the investment Board. It takes
too much time; that discourages investors.

4. The one more thing that increases investment is quality of labor. Labor is available
in Bangladesh; that’s why we are doing fine in the RMG sector because we have
cheap labor. But cheap labor always gives us comparative advantage, that's not the
fact. In Bangladesh today cheap labor means low productivity labor. So, we produce
low productivity as our labor is doing well in that but in case the demand for high
productivity increases then we have nothing to do. So, what we need is quality of
labor which depends on human capital.

5. Private investment also depends on the political environment. If the environment is

not stable, no investor will agree to invest here.

6. Another determining factor is corruption that mostly discourages the investors to

invest here.
7. Last but not least another determining factor is reforms.

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 These are the main reasons that private investment has fallen in recent years.

4. Give a comparative account of the population age-structure. What are the possible
options to get more ‘demographic dividend’?
The age structure of a population is the distribution of people of various ages. It is a
useful tool for social scientists, public health and health care experts, policy analysts, and
policy-makers because it illustrates population trends like rates of births and deaths.

Here is an account of the population age-structure of Bangladesh-

0-14 years: 26.48% (male 21,918,651/female 21,158,574)
15-24 years: 18.56% (male 15,186,470/female 15,001,950)
25-54 years: 40.72% (male 31,694,267/female 34,535,643)
55-64 years: 7.41% (male 5,941,825/female 6,115,856)
65 years and over: 6.82% (male 5,218,206/female 5,879,411) (2020 est.)

Bangladesh has recently reached the regime of demographic dividend wherein the share
of working labor force is swelling. If appropriately approached to utilize this population,
nothing could deter its development. there has been a rise in the ratio of 61 plus
population - thanks to improved life expectancy following improved healthcare. The most
important good news relates to a fall in total dependence that seemingly enables
households to divert resources to productive pursuits.  Finally, the rise in working age
population from 49 to 58 per cent during the comparable periods points to the above-
mentioned demographic dividend that Bangladesh is facing. The working age group had
been constantly entering into the labor market to strengthen the economic base. 
Demographic dividend is economic growth brought on by a change in the structure of a
country's population, usually a result of a fall in fertility and mortality rates. The

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 demographic dividend comes as there's an increase in the working population's
productivity, which boosts per capita income.

Part-B

a. 1265 per Km2

b. Of nation’s growth
c. Investment in human capital.
d.
e. Incentive base.
f. 2030.
g. True
h. True
i. Informal
j. Poverty threshold

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