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Poverty and Inequality challenges of Bangladesh

Poverty reduction has been a priority objective of development of Bangladesh since its emergence as an independent nation in 1971. Starting from the First Five Year Plan (1973-1978) which emphasized poverty reduction through employment generation, all development plans as well as the two poverty reduction strategy papers recognized the importance of poverty reduction and developed policies and strategies for poverty reduction. Consequently, significant reduction in poverty has taken place in the last four decades – the incidence of poverty as measured by headcount rate declined from more than 80 percent in 1973-74 to 31.5 percent in 2010 (BBS, Report on the Household Income and Expenditure Survey 2010).
Other measures of poverty such as poverty gap and squared poverty gap showing the depth and severity of poverty respectively have shown long term trends similar to that observed for the headcount rate. Despite notable progress in poverty reduction Bangladesh faces the stark reality that about 45 million of its population still live in poverty. The other dimensions of poverty which make poverty reduction more challenging in the future are rural-urban divide in poverty, regional variations in poverty with the western region of the country having a higher incidence of poverty, and the fact that 17.6 percent the total population live in extreme poverty or chronic poverty. Higher dependency ratio, decline in the availability of natural and common property resources, limited access to financial and human resources and incidence of multiple shocks such as natural and health shocks are usual correlates of extreme poverty. Besides, people living in remote char areas and remote areas of the hill tracts region, indigenous people and people with disability are victims of extreme poverty.

The decline in poverty has been in large part an outcome of long term growth and employment generation in the economy. Various targeted programmes of the government and NGOs which improved access of the poor to education and health, water and sanitation, and micro credit and created employment also played an important role in the process. Acceleration in growth and employment generation will remain the primary foundation of poverty reduction in the NSDS period. The policies and strategies for growth and employment generation will have to be, however, complemented with other policies and strategies to address the spatial, regional, and gender dimensions of poverty and specific problems of under-privileged people and people with vulnerabilities.

Acceleration in growth will have a positive effect on poverty reduction, the effect depending on the growth elasticity of poverty. More importantly, growth acceleration will also have positive implications for sustainable development. The poor in Bangladesh depend heavily for their livelihoods on natural resources such as land, water, fisheries and forests. While growth-induced degradation of these resources can adversely affect livelihoods of poor people, the poor can themselves be partly responsible for overexploitation and degrade natural resources. Increased income of the poor should reduce the pressure on natural resources and stem their degradation.

The benefits of economic growth do not accrue to all individuals or households equally. Increasing inequality in the distribution of income implies a higher proportion of income accrues to the households in the higher income deciles at the cost of the households at the lower deciles. The households at the lower deciles thus miss the opportunity to reduce their income poverty taking full advantage of economic growth. Thus inequality in the distribution of income has adverse effects on poverty reduction.

Inequality has been rising in Bangladesh for a long time. Gini coefficient which provides a measure of income inequality increased from 0.36 in 1984 to 0.467 in 2005 thus reducing the effect of growth on poverty reduction. However, the latest HIES (2010) shows a marginal decline in Gini coefficient to 0.458 which resulted in stronger positive effect of growth on poverty reduction. Incidentally, this decline is an outcome of decline urban inequality while rural inequality continues to grow. Apart from its negative impact on poverty reduction inequality especially high inequality (Gini>0.50) can generate social instability. It should be noted the Gini coefficient in 2010 is still higher than in 2000. The challenge is to contain the increase in inequality in both rural and urban areas which will result in decline in national income inequality.

Percentage share of income of lower 5% and top 5% households and Gini coefficient
Income Groups
Lower 5%
Top 5%
Gini coefficient

Source: BBS, HIES 2010 and 2000

2.2 Unplanned Urbanization

Bangladesh has been experiencing rapid increase in urban population since its independence resulting in increase in the proportion of urban population to total population from 8 percent to 23 percent during the 1974-2001 period. It is estimated that 33 percent of the population will be living in the cities by 2021. (Perspective Plan of Bangladesh 2010 -2021). Population has increased in all urban centres such as metropolitan areas, district towns, upazila centres, growth centres and business centres though a large proportion of urban population in concentrated in Dhaka, Chittagong and Khulna metropolitan areas. Dhaka has the fastest population growth with about 10.712 million populations in 2001 and it is one of the most populous cities of the world.

A major cause of urbanization is the inability of the agriculture sector and the non-agriculture rural sector to provide employment to the growing population and sufficient income for the family. Another important factor is the increase in the level of education and skills of rural people who have to move to urban areas to find jobs commensurate to their education and skills.

Rapid urbanization has brought physical, structural and economic changes in urban areas and led to manifold increases in the demand for housing, transport, water, fuel, energy, security, recreation facilities and clean up services in the face of shortage of urban facilities and resources, skilled manpower and governance. This has greatly stressed the environment posing serious challenges for sustainability of urban environment. Deteriorating environmental conditions resulting from inadequate waste management, poor drainage, air pollution, lack of access to safe water and sanitation, exposure to excessive noise level, traffic congestion as well as inadequate health services reduce the quality of life. In Dhaka the quantity of solid waste is much beyond the disposal capacity of the city corporation and water supply is only 75 percent of requirement. Transport congestion not only pollutes environment but also involves enormous wastage of time in travelling. Apart from housing shortage, the majority of houses is structurally poor, lack services and utilities and built without proper planning. Extremely high prices relative to income prevents many households from buying any house and forces them to live in small houses; high rent relative to income also forces households to live smaller houses having adverse effect on the quality of life. High land prices have also led to land grabbing and destruction of open spaces and water bodies.

Slums have grown in large cities especially Dhaka to provide accommodation to very poor migrants. Slums usually grow in areas with extreme adverse environment with little access to utilities. Slum dwellers are victims of adverse environment but are also responsible for degrading environment