Time for a wake-up call

Pakistan has been left behind, in terms of economic growth, by other SAARC countries and particularly by India.

THERE IS a story popularised by a generation of bureaucrats and economic planners, which, as part of Pakistan's economic development history, has become part of 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 its economy was progressing. Many countries sought to emulate Pakistan's economic planning strategy and one of them, South Korea, copied its Second Five Year Plan, 1960-65. And while in the early 1960s the per capita income of Pakistan and Korea was more or less equal, the latter ended up among the more developed of the developing countries, with a GDP per capita greater than $8,000 today.

Even if this story is not entirely true, it does reveal 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 have advanced to near developed country status. This, they have argued, is a recognised fact — the Asian Miracle — and Pakistan should learn its lessons but not feel too discouraged by this trend. After all, 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 were way ahead of India's.

This is no longer true, and India has not just overtaken Pakistan but is set to increase the gap. This has major repercussions for 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, Pakistan's per capita income was $ 420, and India's $ 460. It is possible, given Pakistan's poor economic performance compared to India's in these last two years, that the difference has widened further. What is worse, Pakistan's Purchasing Power Parity (PPP) income in 1990 was $1360, while India's was $1380. In 2001, Pakistan's per capita PPP had risen to $1860, by $500 or 37 per cent. India's PPP per capita in this decade had more than doubled to $2820 per capita. This is only the first of numerous social and economic indicators that show the growing difference between India and Pakistan during the 1990s, a trend that has intensified further these last three years.

In the decade 1980-90, Pakistan's economic performance measured in terms of growth rate in agriculture, industry, merchandise exports, and even of GDP, was better than that of India. In the 1990s, however, following both Pakistan's and India's economic reforms and liberalisation, done very differently no doubt, the latter's growth rates in all these sectors (except agriculture) were not just higher, but significantly so (often twice as high) in every single category. Perhaps the most extraordinary difference in comparative growth trends 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 that, sadly, has been made even worse in the last two years following 9/11 and Pakistan's role in the U.S.-led `War Against Terror'.

Since 1993, India's growth rate has been higher than Pakistan's every single year. In four of the last 10 years, India's growth rate has been double that of Pakistan's. This is not all. If we look at the seven SAARC countries, even Bangladesh and Nepal perform far better than Pakistan today, and this is especially so if we look at the 1980s. In that decade, Pakistan had the second highest GDP growth rate after the Maldives; by the 1990s, Pakistan's GDP growth rate was the lowest of the seven.

It is not just these `hard' economic statistics that show how Pakistan has been left behind by other SAARC countries and particularly by India, but numerous other softer indicators also reemphasise this trend.

The U.N. 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 (better) than India and Bangladesh. In 2003, India is ranked far higher than Pakistan, as is Bangladesh. More importantly, Pakistan's rank fell from 138 to 144 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. There are numerous other social and economic indicators that re-emphasise the fact that Pakistan has been left far behind. The difference is clear: India's economic growth has by far overtaken Pakistan's, a trend that is unlikely to be reversed for some time to come. The implications of this should be obvious to all. It is time Pakistan's leadership realised this and started putting its economic, social, political and foreign policy in order.

(The writer is an economist and commentator based in Karachi.)

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