Income inequality in Bangladesh has seen a steep rise over the past 12 years till 2022, according to official data, as economists blame a singular focus on growth rather than sorting out income disparities.

The Gini coefficient, a measure of inequality, increased from 0.458 in 2010 to 0.48 in 2016. This upward trend continued, reaching 0.50 in 2022, according to the Bangladesh Bureau of Statistics (BBS). This places Bangladesh among the countries with the highest income disparities globally.

A number of proxies throughout 2024 suggested that income inequality might have widened in the outgoing year. For example,  consider the number of bank accounts holding Tk 1 crore or more.

In the April-June period of this year, this number increased by 2,894.

In contrast, high inflation over the past two years has pushed at least 78 lakh people into poverty, with 38 lakh of them falling into extreme poverty, according to the non-governmental think tank Research and Policy Integration for Development (RAPID).

According to the World Bank definition, people belonging to the extreme poverty group could not earn even Tk 256 per day over the past two years.

Amid this inflationary pressure, the Bangladesh Institute of Development Studies (BIDS) reported that the poorest rural residents were increasingly relying on rice to satiate their hunger, cutting back on protein-rich foods.

Paradoxically, the country in the past six months imported eight luxury Rolls-Royce cars, priced between Tk 3.5 crore and Tk 8 crore.

Drawing on his long experience as a bureaucrat, economist AB Mirza Azizul Islam said previous governments have shown little interest in reducing inequality.

"Their main focus has been on GDP growth," he said. To reduce inequality, Islam recommended generating more jobs.

"Private investment has remained stagnant for years," he noted. "Increased investment would lead to job growth and higher incomes, possibly reducing inequality."

WEALTH INEQUALITY A DEEPER PROBLEM

Compared to income inequality, wealth inequality is way worse in Bangladesh, which means a minuscule portion of the population owns a disproportionate amount of wealth compared to the majority.

The "White Paper on the State of the Bangladesh Economy", prepared by a panel of economists and experts and was submitted to the chief adviser of the interim government in December, says wealth inequality increased from 0.82 to 0.84 between 2016 and 2022.

Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (INM), said a lack of timely intervention has led to the historically high levels of income and wealth inequality.

He said that as economies grow, income opportunities increase, especially in urban areas. However, if governments fail to address these disparities, inequality can worsen.

"Corruption has also contributed to high inequality, as power, income and wealth are interconnected in Bangladesh," Mujeri added.

IS HIGHER TAXATION THE ANSWER?

To reduce income inequality, Mujeri, a former director general of the BIDS, suggested a progressive income tax system, where higher incomes are taxed at higher rates.

However, he acknowledged obstacles like the difficulty of accurately assessing the real income of high earners and the influence of wealthy individuals on policymaking.

Therefore, alongside tax policies, the government should prioritise creating opportunities for the less fortunate. This includes improving education for low-income families, enhancing healthcare access for marginalised groups and expanding social safety net programmes with minimal misuse of funds, he said.

Such measures are urgent to create a socio-economic structure that is more inclusive and equitable, he added.