A Pakistani bloom amid an Indian boom
Published on March 18, 2017

A Pakistani bloom amid an Indian boom

A Pakistani bloom amid an Indian boom

Pakistan needs a different approach. But, it won’t happen without peace-inside Pakistan, in Kashmir, and with India

I have often felt that there is much that Indians and Pakistanis do not know about each other. With deteriorating relations, mutual distrust, and rising jingoism on both sides of the border, there is limited space to learn about the other side. India-Pakistan relations matter greatly to me and to my fellow Kashmiris. But, even though I have a few relatives in Pakistan, as do many people in Jammu and Kashmir, there isn’t much that I know about life in Pakistan. I am sure ordinary Pakistanis too have very limited information on how life is in India. With all this playing in my head, I recently noticed a spate of articles on growing optimism about Pakistan’s economy. This seemed odd to me given that media in India typically present only negative news about Pakistan. Pakistani media probably are not that different in portraying India. In any event, my curiosity was piqued and, as I often do in such situations, I decided to write about it. But this is different. I am getting out of my comfort zone of writing about the Indian economy and taking on a rather unfamiliar topic — Pakistan’s economy, its recent positive performance, and what to make of it.

Pricewaterhouse Coopers, a professional services firm, recently predicted that Pakistan would become the 16th largest economy by 2050 (in purchasing power parity or PPP terms). That is an improvement of eight spots from its current ranking of 24th. In its most recent edition, The Economist praised Pakistan’s stock market performance that has “risen faster than any other in Asia over the past 12 months”. GDP growth rate is heading back to the 5 percent range and poverty has fallen. The urban middle class is growing. This market segment will potentially grow to $1 trillion by 2030. Infrastructure spending is on the rise and even the woeful power situation has improved. In May this year, MSCI will reclassify Pakistan from Frontier Markets to Emerging Markets, which places it in the category of countries like China and India. A Forbes Magazine article proclaimed that “Pakistan is Getting Ahead of India, Again” pointing out that after besting India in equity market performance, Pakistan had crept ahead of India in the Heritage Foundation’s 2017 Index of Economic Freedom ranking, which places Pakistan 141st and India 143rd.

All this is good news for Pakistan. But, these green shoots can lull both the government and the people into a false sense of accomplishment and counterproductive complacency. With this in mind, I thought I could share some socioeconomic data to contextualise Pakistan’s recent progress. And, in doing so, I wanted to share with people of Pakistan a little bit of what India is about. Before proceeding further, a caveat is needed. For simplicity, I have referred to only one source of data — the World Bank’s World Development Indicators (WDI). Also, due to space limitations, I have relied on only a few indicators. Also, the time period is from 1990 to 2015. The purpose of this piece is not to conduct an academically rigorous analysis but to provide a reasonable sense of the relative performance of these two countries.

Let us start with basic economic data. Per capita GDP in both India and Pakistan is low. But, Pakistan maintained a lead in the 1990s and in the early 2000s. Starting in 2005, India began to inch ahead and by 2015 established a solid lead ($1598 to $1435). This has to do with differing growth patterns. From 1990 to 2015, India’s real GDP grew by an average 6.5 percent per year. In comparison, Pakistan grew by only 4.1 percent. In the last 15 years, the gap increased with India averaging 7 percent growth and Pakistan only 4.2 percent. Key indicators such as investment and savings ratios are much weaker in Pakistan’s case. Inflation has also been higher than in India, which is a factor in low savings and investment. Without structural transformation, these ratios won’t see the kind of improvements that Pakistan needs to grow rapidly. Pakistan’s export performance has also deteriorated over time. In 1990, Pakistan’s exports were about 16 percent of GDP while India’s ratio stood at only 7 percent. In 2015, the ratio has reversed with India at about 20 percent and Pakistan at 11 percent. Foreign Direct Investment as a share of GDP has consistently been higher in India. I could go on. The main point is that Pakistan has a lot of room to grow and it could borrow some ideas from across the border.

Other development indicators show a similar trend. India leads Pakistan in adult literacy (72 percent to 54 percent), youth literacy (90 percent to 74 percent), spending on education as a share of government spending (14 percent to 11 percent), and per capita health expenditure in India is twice that in Pakistan. On the infant mortality rate as well as on children’s immunization, Pakistan is falling behind. This will likely lead to adverse long-term health outcomes. There are, however, some bright spots for Pakistan. Extreme poverty ($1.90 per day, 2011 PPP) is in single digits compared to over 20 percent in India. Inequality is also lower than in India. Pakistan leads in access to improved sanitation facilities (64 percent to 40 percent) and open defecation is more than three times more prevalent in India than in Pakistan. Perhaps India can benefit from Pakistan’s experience in these areas. One area where Pakistan has a big lead is in military spending as a share of GDP (3.6 percent to 2.4 percent). I am not sure that is something to brag about but it is what it is.

The purpose of this piece is not to belittle Pakistan’s progress. I am one of many on our side of the border who wishes peace and prosperity for Pakistan. But, we can learn from each other’s experiences. In the last three decades, India has progressed considerably despite having a population seven times larger than that of Pakistan. This raises important questions. What was Pakistan focusing on after the Afghan war ended in 1989? Where would Pakistan be today if a different policy framework had been adopted? What would Pakistan’s socioeconomic situation be like if the country was not distracted by the rise of extremism and growing tensions with India over Kashmir?

I ask these questions because in the last three decades, Kashmir has suffered terrible losses in blood and treasure. We in Kashmir wonder where we would be now had Pakistan done more to forge peace with India. This is not to suggest that the Government of India should not bear any responsibility for Kashmir’s tragedy. But, India’s large economy allows it to absorb tensions with Pakistan with relative ease. Pakistan has no such luxury. In India, we talk of sustained 7-8 percent growth for a $2.3 trillion economy. Pakistan cannot celebrate 5 percent growth for a $280 billion economy. Pakistan needs a different approach. But, it won’t happen without peace — inside Pakistan, in Kashmir, and with India.

-         The author, formerly with the World Bank, is a National Media Panelist of the Indian National Congress. Sources: www.dailytimes.com.pk   

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