Bangladesh’s economic conversation has become preoccupied with the rate of growth. The more consequential question is what that growth is doing to the economic lives of ordinary households.
For a considerable period, the answer was reasonably clear. Growth generated jobs, jobs generated incomes and rising incomes helped reduce poverty. The process was neither automatic nor flawless, but it had a recognisable direction for years.
Growth’s ability to translate into jobs weakened a decade ago. The direction is now less certain.
The problem is not the absence of economic activity. It is the weakening link between economic activity and broad-based economic security. Employment is increasingly marked by underemployment and low returns. Investment has lost dynamism. Education has expanded without a corresponding improvement in employability. Households have less room to absorb shocks.
The slowdown therefore needs to be understood as a structural problem in the growth process. The accumulated weaknesses are now showing up in employment, household incomes, enterprise formation and investment.
The evidence from households is difficult to ignore. PPRC’s 2025 State of the Real Economy survey, based on 8,067 households nationwide, estimates the upper poverty rate at 27.93 per cent, against 18.7 per cent in 2022. Extreme poverty rose from 5.6 per cent to 9.35 per cent, while another 18 per cent of households remained vulnerable to falling into poverty.
The rural-urban divide is stark: poverty stood at 31.58 per cent in rural areas, compared with 19.66 per cent in urban areas. Inequality also widened sharply, with the national Gini coefficient rising from 0.334 in 2022 to 0.436 in 2025.
Household finances reveal the fragility behind these numbers. Average monthly income was Tk32,685 against expenditure of Tk32,615. Food alone accounted for about 55 per cent of household expenditure. For the bottom 40 per cent, debt was at least twice savings.
A household living on a Tk70 monthly margin is not necessarily poor at every moment. But it is economically fragile. An illness, fewer working days, a lost job or another rise in living costs can quickly turn a narrow surplus into debt.
This distinction matters. Poverty reduction is not simply about moving people above a statistical poverty line. It is about whether households acquire enough earning capacity and resilience to remain there.
That brings us to the growth model.
Bangladesh’s earlier growth drew heavily on a large pool of relatively inexpensive labour. The garments industry was the most visible expression of this advantage, while remittances, smallholder agriculture, informal enterprise and expanding domestic demand also mattered.
Low-cost labour was an entry point into global markets. It cannot be the destination.
The next stage requires higher productivity. Yet the labour market exposes a persistent contradiction: employers report shortages of technicians, skilled operators and capable middle-level managers while educated young people struggle to find suitable work.
The latest BBS Labour Force Survey shows that unemployment among tertiary-educated people reached 13.54 per cent in 2024, leaving nearly 8.85 lakh graduates unemployed. One in three graduates may remain jobless for up to two years after completing their studies. The problem is not simply unemployment. It is the mismatch between what the education system produces and what the economy can productively use.
The demographic dividend, therefore, cannot be treated as a demographic fact. A large working-age population becomes an economic advantage only when people acquire capabilities that firms can productively employ.
This makes education an economic policy issue, not simply a social one.
Bangladesh has expanded access to education, but enrolment and credentials have not been matched by sufficient attention to learning outcomes, practical competence and labour-market relevance. The question is no longer whether more young people are receiving certificates. It is whether those certificates correspond to capabilities that someone is willing to employ.
Technical and vocational education needs to move out of its second-tier status. Apprenticeships and industry-linked training should become normal routes into work, with employers and educational institutions engaged continuously rather than episodically.
But better skills alone cannot solve the employment problem. Even a well-trained young person needs an economy capable of creating productive positions.
That makes the structure of enterprise critical.
Bangladesh has millions of micro and small businesses alongside a relatively limited number of large corporations. What remains weak is the middle layer: enterprises that can move beyond survival, employ substantially more people, enter formal supply chains, adopt technology and become productive at scale.
This is the missing middle of the economy — manufacturing clusters, agro-processing networks, small and medium enterprises and service businesses that sit between household activity and large corporations.
The issue is not simply whether entrepreneurship exists. It is whether entrepreneurship can scale.
The 2024 Economic Census provides a warning. Industry accounted for only 9.98 per cent of economic units, down from 11.54 per cent in 2013, while its share of persons engaged rose only marginally, from 30.06 per cent to 30.60 per cent. More strikingly, the average size of an economic unit fell from 3.13 persons in 2013 to 2.62 in 2024.
An economy can add businesses without becoming more productive. Fragmentation is not diversification.
Scaling remains difficult for reasons extending well beyond finance. energy, technology, infrastructure, market access, taxation, licensing and regulatory uncertainty all affect the decision to expand.
Bureaucratic hassle, unclear service processes, delays and unequal enforcement remain significant sources of everyday economic friction.
These costs alter behaviour. They can make informality safer than formal expansion and rent-seeking more attractive than innovation.
The state therefore has a more useful role than picking winners: make productive enterprise easier to start, easier to expand and less vulnerable to discretionary intervention.
This also changes how public investment should be judged.
The question is not whether Bangladesh needs more projects or fewer projects. It is what each project adds to productive capacity after construction is complete.
A road that lowers logistics costs, reliable energy that reduces factory downtime or a training system that raises worker productivity can generate returns well beyond the initial expenditure.
A low-return project does the opposite. It creates an asset whose maintenance must be financed and, where borrowing is involved, a liability that future budgets must service.
Debt is therefore not inherently good or bad. Its value depends on the return generated by what it finances.
The relevant test of public investment should consequently be additional productive capacity, not expenditure realised. Project selection, implementation and maintenance deserve far greater discipline.
The same principle should govern tax incentives, subsidies and preferential facilities. The question is not whether an individual beneficiary can demonstrate success. It is what the economy receives in exchange for the revenue forgone.
More jobs? Higher productivity? Technology transfer? Greater exports? Additional investment? Development of a region or supply chain?
Without such tests, incentives can become arrangements for particular interests rather than instruments of structural transformation.
The private sector cannot stand outside this discussion. Business has a legitimate interest in demanding a better operating environment, but that voice is less credible when reduced to individual requests for concessions.
Business associations need stronger independent research and a greater capacity to articulate economy-wide constraints. They should also help finance and participate in research that provides a more timely picture of investment, employment, productivity and business conditions.
Better information is essential because policy is still too often designed with delayed or incomplete evidence.
A rapidly changing economy cannot be governed adequately through data that arrives after the problem has changed. We need more timely information on jobs, wages, business closures, investment, credit, household stress and regional economic activity.
The geography of opportunity also needs attention.
Dhaka has become the country’s overwhelming economic magnet. This is often treated as an inevitable consequence of urbanisation. It is also evidence of underdeveloped regional economic systems.
Secondary cities need more than physical infrastructure. They need skills, finance, reliable utilities, industrial clusters, market connections and local institutions capable of supporting enterprise.
Otherwise, migration to Dhaka or overseas will continue to serve as an individual response to a national failure to distribute opportunity.
The same applies to the newer sectors Bangladesh hopes will drive diversification. Digital services, pharmaceuticals, light engineering and agro-processing can widen the production base, but only if firms in these sectors can attract investment, raise productivity and create jobs.
What is required, then, is not another sectoral promise or another headline growth target. It is a more effective transmission mechanism from investment to productivity, from productivity to employment and from employment to household income and resilience.
That requires better skills, enterprises capable of scaling, more productive public investment, stronger regional economies and institutions that reduce rather than add to the cost of doing business.
Bangladesh does not lack entrepreneurial energy or human potential. The challenge is converting those assets into sustained productive opportunities. The challenge is more one of political economy than simply economics.
For too long, success has been measured by how much the economy produces. The harder question now is whether that production expands the capacity of people to earn, enterprises to grow and households to withstand the next shock.
Author is the Executive Chairman, PPRC. The views expressed in this article are solely those of the author.
