Pakistan and India: Two Economic Trajectories Diverge

India The Union Finance Minister must be commended for presenting a budget for the country that truly stands out in the global arena for its significant spending across sectors. With spending exceeding that of many countries, India’s budget for fiscal year 2024-25 has grabbed attention for its capital expenditure of ₹11,11,111 crore, aimed at boosting infrastructure development and economic growth.

In fact, the Gross State Domestic Product (GSDP) of four Indian states exceeds Rs 20 lakh crore. Maharashtra leads with an economy valued at $439 billion compared to Pakistan’s $338 billion.

Pakistan and India, despite their shared history of independence in 1947, have followed distinct growth paths. While both nations have faced obstacles, India’s diversified economy, demographic advantage, and strategic reforms have contributed to impressive growth, Pakistan’s current situation is precarious.

India’s economy is larger in both nominal and PPP terms and is growing at a faster rate. Its GDP is about 10.55 times higher than Pakistan’s. India ranks 5th in the world in nominal terms while Pakistan ranks 42nd. India’s nominal GDP is $3,937 billion while Pakistan’s nominal GDP is $373 billion. India’s GDP in purchasing power parity (PPP) terms is 8.89 times higher than Pakistan’s and ranks third in the world while Pakistan ranks 24th with $1,642 billion.

India’s per capita income of $10,123 is 1.73 times higher than Pakistan’s $6,955, based on the exchange rate. At 6.808%, India’s GDP growth rate is much higher than Pakistan’s, which is just 2,000%. Pakistan is struggling to earn enough foreign exchange to finance imports. Low per capita productivity and inefficient resource use are contributing factors to this crisis. The country is heavily dependent on foreign loans taken at high interest rates and faces the daunting task of repaying $80 billion over the next three years.

Pakistan is one of the 25 countries with the lowest levels of human development in the world. Its current GDP, per capita income and GDP growth are the lowest in the region. Pakistan has faced significant economic challenges since independence. Overall, poor economic management has hampered Pakistan’s growth. Incoherent policies, corruption and insufficient fiscal discipline have worsened the situation.

Meanwhile, India has made significant progress in improving its infrastructure to support economic growth and development. The country is set to invest $1.4 trillion in infrastructure between 2019 and 2023 for sustainable national development. The ambitious plans show India’s commitment to creating world-class infrastructure assets and driving economic progress. And by 2025, the Indian government aims to add 38,650 km of highways to the existing network of 161,350 km. This expansion will improve connectivity and facilitate smoother transportation across the country. The government is planning to build 400 Vande Bharat (semi-high-speed) trains. In addition, they are planning to build 220 new airports to improve air connectivity. Doubling the port capacity to 3,000 million tonnes per annum is also on the agenda. Leading private investors in India such as Adani and Reliance are actively participating in infrastructure projects.

Pakistan’s relatively poor infrastructure situation has negatively affected the lives of its citizens. Pakistan faces a serious power shortage of around 5,000 MW. Per capita energy consumption is among the lowest in the world, which is hampering industrial growth. The railway, road, port and aviation sectors suffer from inefficiencies that currently cost the economy over 4% of GDP. The lack of adequate water and sanitation supplies remains a serious problem in Pakistan, and population growth is exacerbating the situation, lowering living standards.

On the other hand, India’s economic journey since independence in 1947 has been nothing short of remarkable. The Indian economy has grown significantly over the years. It is currently the 6th largest economy in the world with a GDP of $3.17 trillion. Since the economic reforms of 1991, there has been a tenfold increase in GDP (at constant prices).

Compare this with Pakistan’s low investment-to-GDP ratio (15.1%), which makes it difficult to implement large-scale infrastructure projects. Informal savings, often in real estate or gold, remain outside the formal financial system. Fiscal deficits limit the government’s ability to finance infrastructure, and debt servicing takes up a significant portion of available resources.

Since independence, India’s per capita income has increased 500-fold. This significant improvement reflects the country’s progress in raising its living standards. Its globally competitive services sector, IT, finance, healthcare, etc., now contribute significantly to the country’s GDP. India has emerged as a global hub for software services and outsourcing, and its companies, such as TCS, Infosys, and Wipro, have gained international recognition. India’s large, young population has become an asset. Its skilled workforce has contributed to economic growth, driving innovation and productivity.

With companies like Tata, Mahindra and Bajaj leading the way, the manufacturing sector has expanded. The declared Make in India campaign aims to increase manufacturing further. Research and innovation have strengthened India’s global position. The Indian space agency ISRO has achieved milestones like Mars Orbiter and Chandrayaan mission

India boasts some of the richest individuals in the world. These tycoons have amassed fortunes in industries ranging from technology to manufacturing. Mukesh Ambani, Gautam Adani, Shiv Nadar, Cyrus Poonawalla, Lakshmi Mittal are just a few names to boast about. These individuals exemplify India’s entrepreneurial spirit and economic prowess.

Poverty in Pakistan remains a serious challenge affecting millions of people. The World Bank has reported that 39.3% of Pakistanis live below the lower median poverty line of $3.2 per day. Most Pakistanis struggle with multidimensional poverty, where factors such as education, health, and living standards are not available beyond income.

India’s astonishing rise from a so-called “third world” country to a global player, from a struggling country to an economic powerhouse, is a testament to resilience, innovation and strategic vision. Challenges remain, but the trajectory is promising. India is also actively engaged in international forums, strengthening diplomatic ties and is being upheld as a voice for developing nations on global platforms.

Meanwhile, Pakistan’s economic crisis is multifaceted, stemming from governance problems, external factors, and inadequate investment in human capital. The country has failed to address the capital problem, encourage private investment, or prioritize infrastructure to support sustainable growth.

In reality, Pakistan is facing a critical juncture, and the consequences could extend beyond its borders. Yet the country’s leaders remain fascinated with India. Unaware of its precarious political and economic state, Islamabad remains deeply paranoid about India.

The fear of “not being relevant at all” fuels Pakistan’s obsession with India, as they see themselves as a failed South Asian nation. This is driven by religious and political factors, and Pakistan’s actions have often been flawed because of this obsession, leading to misadventures and short-sighted decisions.

Pakistan’s leaders often make provocative statements to draw India into verbal spats, especially on sensitive issues like Kashmir, terrorism and territorial claims. The fact remains that Pakistan is only treated internationally because of its rivalry with India; so its organization tries to raise issues with India in global forums. Raising issues with India gives Pakistan an advantage in diplomatic negotiations. It keeps the Kashmir dispute on the international stage, ensuring that international attention remains focused on the region. Former US President Barack Obama commented on Pakistan’s intense focus on India, stating that it was making a mistake in viewing India as an “existential threat.”

During the 13th round of Pakistan-Australia defence and security talks (Chaklala, May 20-21), Chairman of the Pakistan Chiefs of Staff Committee, General Sahir Shamshad Mirza, said Pakistan would not accept the idea of ​​India being a net security provider in the region, adding that Western actions to strengthen India’s position were disturbing the regional strategic balance.

Pakistan remains a country with many problems and calling it a “failed state” would not be incorrect. The Fragile States Index (FSI), formerly known as the Failed States Index, which rates countries based on factors such as poor governance, corruption, economic decline and security threats, ranked Pakistan 27th out of 179 countries, indicating a fragile situation.

Pakistan must recognize that addressing its domestic political, economic, and development challenges is critical to its own future prosperity. India’s economic trajectory continues to evolve and remains a dynamic force on the global stage.