How India's Economy Has Outpaced Pakistan’s
India and Pakistan, both born from the partition of British India, have taken different paths with regards to their economic development. From 1947 to 1995, the economic trajectories of both nations were relatively parallel, although there were times when Pakistan outperformed India. However, the years since 1995 have seen a dramatic turnaround in India's economic prospects, fundamentally transforming its status in the global economy.
From Parallel Trajectories to India's Ascendancy
Up until 1995, the salaries of government employees in India were generally sufficient for domestic food consumption, reflecting a societal balance where basic needs were met. This was a period where both economies experienced similar growth trajectories. However, all of this changed as a result of a series of pivotal socio-economic reforms initiated by India under the leadership of Prime Minister PV Narsimha Rao and Dr. Manmohan Singh as Finance Minister. These reforms marked the beginning of India's economic liberalization, which has since propelled the country to its current status as the fifth largest economy by nominal GDP.
The opening up of the economy did not occur without challenges, and it saw several ups and downs. The period of growth under the National Democratic Alliance (NDA) and Bharatiya Janata Party (BJP) rule, particularly the reforms initiated by Prime Minister V. P. Singh and the further liberalization during the tenure of Atal Bihari Vajpayee, contributed significantly to India's economic rise. Conversely, during the Congress Party and United Progressive Alliance (UPA) rule, economic growth was more subdued, yet the general trajectory remained positive.
Internal Consumption and Export-Import Dynamics
The growth in India's economy was due to a combination of internal consumption and robust export-import trade. The Indian market, with its huge consumer base, became a stronghold for Indian businesses, while international trade provided a platform for exporting goods and services. This economic diversification played a crucial role in India's ascent and has solidified its position in global markets.
A Pakistan Hampered by Army Interference
On the other hand, Pakistan has faced significant challenges due to its economic policy being heavily influenced by the military. The country often relied on foreign aid, particularly from the United States, to support its economy. However, this reliance on foreign funds, especially following the US's withdrawal from various regions, has left Pakistan in a vulnerable position.
Furthermore, Pakistan's economy lacks a strong export sector, which means it heavily relies on importing goods and services. The country's economy is also affected by its geographical and political positioning. Pakistan's neighbors, including India, Iran, and Afghanistan, have not traditionally driven significant trade with Pakistan, with only limited trade relationships. In the case of Afghanistan, Pakistan's relationship has been severely strained due to its militant movements.
Institutional and Military Influence
The core issue with Pakistan's economy lies in its governance. The military's influence extends from direct control to indirect, semi-direct, and in between. This military-centric governance model hinders economic growth by creating a rent-seeking outlook among the state actors. As a result, Pakistan has become a rentseeking nation, focusing less on generating its own revenue and more on dependency on foreign funds and services.
The Pakistani army's control over crucial sectors, including media and energy, exacerbates this problem, leaving the civilian economy to suffer. This cyclic dependency on foreign aid and neglect of economic development has made Pakistan increasingly reliant on financial assistance from agencies such as the International Monetary Fund (IMF) in recent years. A consistent failure to manage its own economic challenges and generate sufficient revenue has left Pakistan in a perpetual state of economic struggle.
Limitations and Future Prospects
India, on the other hand, has shown remarkable resilience and economic dynamism. The country has invested in human capital development, infrastructure, and digital connectivity, which has helped bolster its economic standing. With ongoing reforms and a robust middle class, India stands as a shining example of economic transformation in the global arena.
The comparison between India and Pakistan highlights the importance of sound economic policies and civilian governance in fostering sustainable economic development. As India continues to grow, it serves as a beacon of hope for transformative economic change, while Pakistan faces the challenges of military-centric governance and economic dependency.
Conclusion
India and Pakistan started with similar economic conditions post-independence. However, the different paths chosen by the two nations have led to a stark contrast in their economic fortunes. India's economic success can be attributed to strategic reforms, robust internal and external markets, and a focus on economic diversification. In contrast, Pakistan's economy is beleaguered by military influence, rent-seeking behavior, and a lack of self-reliance in generating its revenue. As the world continues to evolve, the trajectory of these two nations will remain a critical focus for economists and policymakers alike.