india and pakistan

any indians here? please read this report on our respective economies. it is from dawn which is supposed to be pakistans leading daily.-

Economy in decline




By S. Akbar Zaidi


There is a story which has gained the status of a folklore. It goes something like this. In the early 1960s, Pakistan was seen as a model of economic development around the world, and there was much praise for the way the economy was progressing.

It has been suggested by numerous economists and bureaucrats, that many countries sought to emulate Pakistan's economic planning strategy and one of them, South Korea, ended up copying Pakistan's Second Five Year Plan (1960-65).

Those who recount this story argue that in the early 1960s, Pakistan's and Korea's per capita incomes were more or less equal. On account of following that strategy, it is said, Korea ended up among the more developed of the developing countries, with a GDP per capita greater than $ 8,000 today; Pakistan's GDP per capita is still only $ 460.

Even if this story is not entirely true, it does reveal a great deal of truth in the fact that Pakistan has been left behind in terms of economic development, by numerous countries. Many bureaucrats, planners and economists who have always felt the need to be overly patriotic, have reluctantly accepted the fact that many of the East Asian countries - the newly industrialized countries, as they were once called - have advanced to near developed country status.

This they have argued is a recognized fact - the Asian Miracle - and Pakistan should learn its lessons but not feel too discouraged by this trend. After all, it has always been maintained, Pakistan is well ahead in South Asia, and is the most developed of the three most populous countries in the region.

These Pakistani patriots have been particularly pleased that our growth rate and per capita incomes are way ahead of India. Little do they know, this is no longer true, and India has not just overtaken Pakistan, but is set to increase the difference between the two. Pakistan has surely been left behind, a fact that has major repercussions on the political economy of Pakistan and of the region as a whole.

In 1990, both Pakistan and India had identical per capita incomes, at $ 390 each; in 2001 for which the latest figures are available, Pakistan's per capita income was $ 420, and India's $ 460. It is probable, given Pakistan's poor economic performance compared to India's these last two years, that the difference has widened further. What is more suggestive, and worrying for Pakistan, is the comparison between India and Pakistan in terms of per capita income when we use a far more useful measure called the Purchasing Power Parity (PPP) figures.

These PPP comparisons allow a far better assessment of standard of living in terms of what people can actually purchase equalising for differences in prices. Pakistan's per capita PPP income in 1990 was $ 1360, while India's was $ 1380. In 2001, Pakistan's per capita PPP had risen to $ 1860, a rise of $ 500 or 37 per cent. India's PPP per capita in this decade had more than doubled and rose to $ 2820 per capita. Indeed, a highly impressive achievement.

This critical indicator, that of the per capita income, is only the first of numerous social and economic indicators which show the growing difference between India and Pakistan during the 1990s, a trend which has increased further these last three years, and is going to continue to increase, for some considerable time to come into the future. Some additional figures will support this claim.

What is particularly interesting is, that in the decade 1980-90, Pakistan's economic performance measured in terms of growth rates in agriculture, industry, growth in merchandise exports, and even GDP growth, was better than that of India.

In the 1990s, however, following both Pakistan and India's economic reforms and liberalization - albeit done very differently, no doubt - India's growth rates for the decade in all of these sectors (except agriculture) were not just higher, but significantly higher (often twice as high) in every single category.

Perhaps the most extraordinary difference in comparative growth trends between India and Pakistan is in India's more than double export growth, and the four-times higher growth in new investment measured by Gross Capital Formation. Pakistan has had very little addition to Capital in the 1990s, a trend, which sadly, has been made even worse in the last two years following 9/11 and Pakistan's role in the War Against Terror.

Since 1993, India's growth rate has been higher than Pakistan's in every single year, and in four years in the last ten, India's growth rate has been double of Pakistan's. This is not all. If we look at all the seven Saarc countries, today even lowly Bangladesh and Nepal perform far better than Pakistan, and this is especially so if we compare the 1980s.

In the decade of the eighties, Pakistan's had the second highest GDP growth rate after the Maldives. In the 1990s, Pakistan's GDP growth rate was the lowest of the seven.

It is not just these 'hard' economic statistics which show how Pakistan has been left behind by other Saarc countries and particularly by India, but numerous other softer indicators also re-emphasize this trend. The UN Human Development Index (HDI) is a good indicator of broad social development in a country and includes social indicators as well as economic ones.

In the HDI ranking of 1991, Pakistan was placed higher than India and Bangladesh. In 2003, India is ranked far higher than Pakistan, as is Bangladesh. More importantly, Pakistan's rank fell from being at 138 to the 144th rank in just one year, 2002-03, and Nepal and Pakistan are the only two non-African countries to be classified in the low human development group. Clearly, a most ignoble achievement.

There are numerous other social and economic indicators which re-emphasize the fact that Pakistan has been left far behind. Poverty in India, for example, has fallen from 45 per cent of the population in 1983 to 26 per cent today; in Pakistan it increased from 17 per cent in 1987 to 33 per cent today.

Not only do the past trends show a worsening gap, but while we were just celebrating a mere five per cent growth in GDP for the first time since 1995, hoping to achieve the same rate this year, the Reserve Bank of India was increasing its earlier expectations to well above six per cent for the next three years for India.

The difference is clear: India's economic growth has by far overtaken Pakistan's, a trend which is unlikely to be reversed for some time to come. The implications of this should be obvious to all. It is high time that Pakistan's leadership realizes this fact and starts putting its economic, social, political and foreign policy houses in order.