Bangladesh has a developing market-oriented economy.
As the second-largest economy in South Asia, The economy is the 36th largest in the world in nominal terms, and 26th largest by purchasing power parity. Bangladesh is seen by various financial institutions as one of the Next Eleven. It has been transitioning from being a frontier market into an emerging market. Bangladesh is a member of the South Asian Free Trade Area and the World Trade Organization. In fiscal year 2024–2025, Bangladesh registered a GDP growth rate of 3.49%, the slowest in recent years. Bangladesh is set to graduate from the group of least developed countries and will join the group of developing countries in November 2026.
Industrialisation in Bangladesh received a strong impetus after the partition of India due to labour reforms and new industries. Between 1947 and 1971, East Bengal generated between 70% and 50% of Pakistan's exports. Modern Bangladesh embarked on economic reforms in the late 1970s which promoted free markets and foreign direct investment. By the 1990s, the country had a booming ready-made garments industry. As of 16 March 2024, Bangladesh has the highest number of green garment factories in the world. As of 2024, Bangladesh has a growing pharmaceutical industry with 12 percent average annual growth rate. Bangladesh is the only nation among the 48 least-developed countries that is almost self-sufficient when it comes to medicine production as local companies meet 98 percent of the domestic demand for pharmaceuticals. Remittances from the large Bangladeshi diaspora became a vital source of foreign exchange reserves. Agriculture in Bangladesh is supported by government subsidies and ensures self-sufficiency in food production. Bangladesh has pursued export-oriented industrialisation.
Bangladesh experienced robust growth after the pandemic with macroeconomic stability, improvements in infrastructure, a growing digital economy, and growing trade flows. Tax collection remains very low, with tax revenues accounting for only 7.7% of GDP. Bangladesh's banking sector has a large amount of non-performing loans or loan defaults, which have caused a lot of concern. The private sector makes up 80% of GDP. The Dhaka Stock Exchange and Chittagong Stock Exchange are the two stock markets of the country. Most Bangladeshi businesses are privately owned small and medium-sized enterprises (SME) which make up 90% of all businesses.
Economic history Precolonial period
Punch-marked coins are the earliest form of currency found in Bangladesh (Bengal region of Ancient India), dating back to the Iron Age and the first millennium BCE. 1st century Roman coins with images of Hercules have been excavated in Bangladesh and point to trade links with the Roman world. The Wari-Bateshwar ruins are believed to be the emporium (trading center) of Sounagoura mentioned by Roman geographer Claudius Ptolemy. The eastern segment of Bengal was a historically prosperous region.Lawrence B. Lesser. "Historical Perspective". A Country Study: Bangladesh (James Heitzman and Robert Worden, editors). Library of Congress, Federal Research Division (September 1988). This article incorporates text from this source, which is in the public domain.About the Country Studies / Area Handbooks Program: Country Studies – Federal Research Division, Library of Congress The Ganges Delta provided advantages of a mild, almost tropical climate, fertile soil, ample water, and an abundance of fish, wildlife, and fruit. Living standards for the elite were comparatively better than other parts of the Indian subcontinent. Trade routes like the Grand Trunk Road, Tea Horse Road and Silk Road connected the region to the wider neighborhood. Between 400 and 1200, the region had a well-developed economy in terms of land ownership, agriculture, livestock, shipping, trade, commerce, taxation, and banking. Muslim trade with Bengal increased after the fall of the Sasanian Empire and the Arab takeover of Persian trade routes. Much of this trade occurred east of the Meghna River in southeastern Bengal. After 1204, Muslim conquerors inherited the gold and silver reserves of pre-Islamic kingdoms.
The Bengal Sultanate presided over a mercantile empire of its own. Bengali ships were the largest ships in the Bay of Bengal and other parts of the Indian Ocean trade network. Ship-owning merchants often acted as royal envoys of the Sultan.María Dolores Elizalde; Wang Jianlang (6 November 2017). China's Development from a Global Perspective. Cambridge Scholars Publishing. p. 68. . A large number of wealthy Bengali merchants and shipowners lived in Malacca. A vessel from Bengal transported embassies from Brunei and Sumatra to China. Bengal and the Maldives operated the largest shell currency network in history. A Masai giraffe from Malindi in Africa was shipped to Bengal and later gifted to the Emperor of China as a gift from the Sultan of Bengal. The rulers of Arakan looked to Bengal for economic, political and cultural capital. The Sultan of Bengal financed projects in the Hejaz region of Arabia.
Under Mughal rule, Bengal operated as a centre of the worldwide muslin, silk and pearl trades. Domestically, much of India depended on Bengali products such as rice, silks and cotton textiles. Overseas, Europeans depended on Bengali products such as cotton textiles, silks and opium; Bengal accounted for 40% of Dutch imports from Asia, for example. Bengal shipped saltpeter to Europe, sold opium in Indonesia, exported raw silk to Japan and the Netherlands, and produced cotton and silk textiles for export to Europe, Indonesia and Japan. Real wages and living standards in 18th-century Bengal were comparable to Britain, which in turn had the highest living standards in Europe.
During the Mughal era, the most important centre of cotton production was Bengal, particularly around its capital city of Dhaka, leading to muslin being called "daka" in distant markets such as Central Asia. Bengali agriculturalists rapidly learned techniques of mulberry cultivation and sericulture, establishing Bengal as a major silk-producing region of the world. Bengal accounted for more than 50% of textiles and around 80% of silks imported by the Dutch from Asia, for example.
Bengal also had a large shipbuilding industry. The shipbuilding output of Bengal during the sixteenth and seventeenth centuries was 223,250tons annually, compared with 23,061tons produced in nineteen colonies in North America from 1769 to 1771. The region was also a center of ship-repairing. Bengali shipbuilding was advanced compared to European shipbuilding at the time. An important innovation in shipbuilding was the introduction of a flushed deck design in Bengal rice ships, resulting in hulls that were stronger and less prone to leak than the structurally weak hulls of traditional European ships built with a stepped deck design. The English East India Company later duplicated the flushed-deck and hull designs of Bengal rice ships in the 1760s, leading to significant improvements in seaworthiness and navigation for European ships during the Industrial Revolution. Among the oldest businesses from the pre-colonial and Mughal periods, the biryani restaurant Fakhruddin's traces its history to the era of the Nawabs of Bengal.
Colonial period
The British East India Company, that took complete control of Bengal in 1793 by abolishing Nizamat (local rule), chose to develop Calcutta, now the capital city of West Bengal, as their commercial and administrative center for the Company-held territories in South Asia. The development of East Bengal was thereafter limited to agriculture. The administrative infrastructure of the late eighteenth and nineteenth centuries focused on East Bengal's function as a primarily agricultural producer—chiefly of rice, tea, teak, cotton, sugar cane and jute — for processors and traders in the British Empire. British rule saw the introduction of railways. The Hardinge Bridge was built to carry trains across the Padma River. In the early 20th century, Eastern Bengal and Assam was established in the British Raj to promote jobs, education and investment in East Bengal. In 1928, the Port of Chittagong was declared to be a "Major Port" of British India. East Bengal extended its rice economy into Arakan Division in British Burma. The river and sea ports of East Bengal, including Goalundo Ghat, the Port of Dhaka, the Port of Narayanganj, and the Port of Chittagong became entrepots for trade between Bengal, Assam and Burma. Some of Bangladesh's venerable and oldest companies were born in British Bengal, including A K Khan & Company, M. M. Ispahani Limited, James Finlay Bangladesh, and Anwar Group of Industries.
Pakistan period
The partition of India changed the economic geography of the region. The Pakistani government in East Bengal prioritized industries based on local raw materials like jute, cotton, and leather. The Korean War drove up demand for jute products. Adamjee Jute Mills, the world's largest jute processing plant, was built in the Port of Narayanganj. The plant was a symbol of East Pakistan's industrialization. Living standards began to gradually improve. Labor reforms in 1958 eventually benefitted a future independent Bangladesh to develop industry. Free market principles were generally accepted. The government promoted an industrial policy which aimed to produce consumer goods as quickly as possible in order to avoid dependence on imports. Certain sectors, like public utilities, fell under state ownership. Natural gas in Sylhet was discovered by the Burmah Oil Company in 1955. By the late 1960s, East Pakistan's share of Pakistan's exports went down from 70% to 50%.
Pakistan's rulers launched a so-called "Decade of Development" that "resulted in numerous economic and social contradictions, which played themselves out, not just in the 1960s, but beyond, where Ayub Khan's rule created the social and economic conditions leading to the separation of East Pakistan". According to the World Bank, economic discrimination against East Pakistan included diverting foreign aid and other funds to West Pakistan, the use of East Pakistan's foreign-exchange surpluses to finance West Pakistani imports, and refusal by the central government to release funds allocated to East Pakistan. Rehman Sobhan paraphrased the Two-Nation Theory into the Two Economies Theory by arguing that East and West Pakistan diverged and became two different economies within one country.
Post-independence period Since independence, the Bangladesh economy has improved. Average incomes in Bangladesh reached the same level as Pakistan around 2016 before exceeded Pakistan's levels substantially.
Socialist era (1972–1975)