Pakistan and India: The Divergence of Two Economic Trajectories

India’s Union finance minister must be commended for presenting the country’s budget which indeed stands out on the global stage for significant outlays across various sectors. With an outlay which exceeds that of many countries, India’s budget for the fiscal year 2024-25 has garnered attention for its Capital Expenditure Outlay of ₹11,11,111 crore which aims to boost 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 dollars compared to Pakistan's 338 billion dollars.

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

India's economy is larger both in nominal and PPP terms, and it has been growing at a faster rate. Its GDP is approximately 10.55 times higher than Pakistan's. India ranks 5th globally in nominal terms, while Pakistan is at 42nd. India's nominal GDP stands at $3,937 billion, whereas Pakistan's nominal GDP is a nominal $373 billion. India's GDP in terms of Purchasing Power Parity (PPP) terms 8.89 times higher than Pakistan's and it ranks third globally, while Pakistan with $1,642 billion is at 24th.

India's per capita income at $10,123 is 1.73 times higher than Pakistan's which is $6,955, on an exchange rate basis. At 6.808% India's GDP growth rate is significantly higher than Pakistan's which is at a low 2.000%. Pakistan struggles to earn enough foreign exchange to fund its imports. Low productivity per capita and inefficient resource utilisation contribute to this crisis. The country is heavily reliant on foreign loans taken at high interest rates, it faces the daunting task of repaying $80 billion in the next three years.

Pakistan ranks among the 25 countries with the lowest human development globally. Its current GDP, per capita income, and GDP growth are the lowest in the region. Pakistan has faced significant economic challenges since gaining independence. Overall poor economic management has hindered Pakistan's growth. Misaligned policies, corruption, and inadequate fiscal discipline have exacerbated the situation.

Meanwhile India has been making significant strides in improving its infrastructure to foster economic growth and development. The country intends to invest $1.4 trillion in infrastructure between 2019 and 2023 for sustainable national development. Ambitious plans demonstrate 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 161,350 km network. This expansion will enhance connectivity and facilitate smoother transportation across the country. The government plans to build 400 Vande Bharat (semi-high-speed) trains. Additionally, they aim to construct 220 new airports to improve air connectivity. Doubling the port capacity to 3,000 million tonnes per annum is also on the agenda. India’s leading private investors like Adani and Reliance are actively participating in infrastructure projects.

The comparatively poor infrastructural situation in Pakistan has negatively affected the lives of its citizens. Pakistan faces severe power shortages of approximately 5,000 MW. Per capita energy consumption is among the lowest in the world, slowing industrial growth. The rail, road, port, and aviation sectors suffer from inefficiencies, which are now costing the economy over 4% of GDP. Lack of proper water and sanitation provisions remains a significant issue in Pakistan and the increase in population exacerbates the situation, lowering the standard of living.

On the other hand India's economic journey since gaining independence in 1947 has been nothing short of remarkable. India's economy has grown significantly over the years. It is now the 6th largest economy globally, 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 to Pakistan’s low investment-to-GDP ratio (15.1%), which hinders 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 fund infrastructure, and debt servicing consumes a significant portion of available resources.

Since independence, India's per capita income has witnessed 500 times growth. This substantial improvement reflects the country's progress in raising living standards. Its globally competitive services sector, IT, finance, healthcare, etc. now contribute significantly to the country’s GDP. India became a global hub for software services and outsourcing with its companies like TCS, Infosys, and Wipro gaining international prominence. India’s large, young population became 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 expanded. The declared Make in India campaign aims to further boost manufacturing. Scientific research and innovation bolstered India’s global standing.India’s space agency, ISRO, achieved milestones like the Mars Orbiter Mission and Chandrayaan

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

Poverty in Pakistan remains a significant challenge, affecting millions of people. The World Bank recorded that 39.3% of Pakistanis live below the lower middle-income poverty rate of US$ 3.2 per day. The majority of Pakistanis are faced with multidimensional poverty, wherein beyond income, factors like education, health, and living standards are not accessible.

India’s astonishing rise from a so-called ‘third world’ country to a global player, from a struggling nation 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 upheld as a voice for developing nations on global platforms.

Meanwhile Pakistan's economic crisis is multifaceted, stemming from governance issues, external factors, and inadequate investment in human capital. The country has failed to address its capital problem, incentivize private investment, or prioritise infrastructure to foster sustainable growth.

In fact Pakistan faces a critical juncture, and the consequences could extend beyond its borders. And yet the country’s leaders remain obsessed with India. Oblivious to its precarious political-economic state Islamabad remains deeply paranoid about India.

The fear of “not mattering at all” drives Pakistan’s obsession with India, as they perceive themselves as the failed South Asian country. This is driven by religious and political factors, and Pakistan’s actions have often been misguided due to this obsession, leading to misadventures and shortsighted decisions.

Pakistan’s leaders often make provocative statements to engage India in verbal spats, especially on sensitive issues like Kashmir, terrorism, and territorial claims. The fact remains that it is only because of rivalry with India, that Pakistan is even given any sort of international consideration; so its establishment tries to rake up contentious issues with India at global forums. Raising issues with India provides Pakistan with leverage in diplomatic negotiations. It keeps the Kashmir dispute alive on the global stage, ensuring that international attention remains focused on the region. Former US President Barack Obama had in fact commented on Pakistan’s intense focus on India, stating that it was making a mistake in viewing India as an "existential threat".

At the 13th round of Pak-Australia Defence & Security Talks (Chaklala, May 20-21), Pak Chairman Joint Chiefs of Staff Committee Gen. Sahir Shamshad Mirza declared that Pakistan would not accept the notion of India being the net security provider in the region, adding that moves by the West to empower India was disturbing regional strategic balance.

Pakistan remains a nation grappling with multiple issues and labelling it a “failed state” would not be incorrect. The Fragile State Index (FSI), formerly known as the Failed States Index, which evaluates countries based on factors like weak governance, corruption, economic decline, and security threats has ranked Pakistan at 27th place out of 179 countries, indicating a fragile situation.

Pakistan needs to understand that addressing its internal political, economic and developmental challenges is crucial for its own future prosperity. India's economic trajectory continues to evolve, and it remains a dynamic force on the global stage.