Removing income inequality in Bangladesh

The new World Bank report on addressing inequality in South Asia duly takes note of the broad success of South Asian governments in not letting inequality widen beyond moderate levels, with their various anti-poverty interventions supplementing the gains from sustained GDP growth. Among the heartening findings of the report for South Asia are:  the relatively low consumption inequality, the relatively fairer consumption shares of the poorest 40 percent households, and the better than expected occupational mobility.  
The report also duly points out some crucial shortcomings in the efforts of reducing inequality of advancement opportunities, interalia  in access to basic services in health, education, and infrastructure; and to life-cycle focused social protection for people in need. The report quite appropriately mentions widespread tax evasion and tax avoidance as resource constraint for the interventions needed to narrow down inequality of opportunities, compounded further by fiscal burden of regressive energy subsidies benefitting the middle and higher income groups more than the poorer ones.
The issues raised in the WB report are all very topical ones in thoughts and actions of our policy planners, policy practitioners, think tanks and civil society activists; the report presents these in a consistent, holistic framework, bringing up useful insights on action agenda for the way forward.     
Narrowing down inequality of advancement opportunities will remain crucially important for social cohesion and social stability on Bangladesh's progress path out of poverty onto equitable broad-based prosperity; and our government's development strategies and plans are appropriately committed to pursuing pro-poor inclusive, equitable socio-economic growth. Both income and consumption inequality in Bangladesh were narrowed down during 2005 to 2010. During the period, the Gini coefficient of income inequality fell from 0.467 to 0.458 and that of consumption inequality decreased from 0.332 to 0.321. In this context we would like to cite from an IFPRI study by Thomas et al. (2013), which shows that 246 out of 252 landless sample households, i.e. almost 97 percent landless households were cultivating either through sharecropping or renting or temporary holding user right. Furthermore, in a recent study published in the World Development journal it appears that the purchasing power of rural daily wages in 2001 was equivalent to 6 kg of rice, which almost doubled in 2012 equivalent of about 11 kg of rice.
Thanks to Bangladesh Bank (BB)'s multifaceted financial inclusion drives inter alia the exponential spawning of microcredit activities to iron out liquidity constraints among the lowest quintile of rural households reaching financial services to their door steps that helped consumption disparity to remain broadly stable over tome.  
 Another study by S.R. Osmani and Binayak Sen shows, in 2010 the annual per capita income growth of the highest quintile of rural households rose 9.72 times that of the lowest quintile and for the second quintile it was only 1.72 times compared to the magnitudes of respectively 6.28 and 1.62 in 2000. Remittance from the expatriates and income accrued from farm and non-farm played a significant role to uplift the top quintile of rural households and hence widening the income inequality in rural Bangladesh. During Rural and urban labour markets have tightened significantly in consequence, with sharp rise in real wages, contributing to the attainment of headcount poverty decline MDG well ahead of timeline.
The BB for quite some years now is proactively playing a support role, with monetary and financial policies designed to promote socioeconomic empowerment of the poor; with inclusive financing of farm and non-farm SMEs, and with financial sector CSR initiatives promoting healthcare, education, disaster relief, and social enablement in other respects for the disadvantaged and distressed. BB-led initiatives like collateral free loans for  the landless sharecroppers from a BB funded window at BRAC and no-frills bank account opening for landless peasants, itinerant wage labourers and other individuals of meagre means, for street children, for school children are steadily bringing these groups of people beneath the financial inclusion umbrella including hassle free remittance transfer through mobile banking.
According to Global Findex (2012), 33 per cent of poorest quintile of Bangladesh have an account at a financial institution, much higher than her regional neighbours (e.g. India 21 per cent and Pakistan 5 per cent) except Sri Lanka (52 per cent). There has been a significant increase in both financial deepening and inclusion indicators in Bangladesh over the period of end 2009 to end 2013. For example, financial deepening indicators such as M2/GDP increased from 0.48 to 0.59, total credit/GDP increased from 0.46 to 0.55  while private sector credit/GDP rose from  0.36 to 0.44 .
On the other hand, financial inclusion indicators such as bank branch/1000 sqk increased from 48.1 to 58.9, ATM/1000 sqk increased from 8.0 to 35.55, deposit accounts/1000 population increased from 267 to 412 and there was a quantum jump in banking sector asset as percent of GDP from 59.0 (end June 2009) to 80.0 (end December 2013).
The pro-poor social expenditure remains quite high at one-fourth of total budgetary allocations. However, we need not to be complacent at all. This portion of budgetary allocation should continuously rise. Fortunately, BB's inclusive initiatives are complementing pro-poor public expenditures. Findings of the new WB report echo the urgency of restoring pro-poor fiscal expenditure allocations to adequate levels. Resources for higher pro-poor social sector expenditure need to be mobilized not with new regressive indirect taxes and levies hurting the poor, but with effective plugging of the tax evasion and tax avoidance loopholes for the better off. Energy subsidies need careful restructuring, away from benefitting the middle and higher income classes towards precise targeting of beneficiary groups in actual need.
The text of speech by the Bangladesh Bank Governor at workshop on 'Addressing inequality in South
Asia', organized by the Planning Commission, Ministry of
Planning, Bangladesh