India-Pakistan Economies Compared in 2014

[Riaz Haq]

India and Pakistan are running neck and neck in per capita GDP in both nominal US dollar terms and purchasing power parity terms, according to data available from multiple sources.

Nominal and PPP GDP:

CIA World Factbook reports that the 2013 official exchange rate GDP of India is $1.67 trillion while that of Pakistan is $237 billion. It's a ratio of 7, about the same as the population ratio between the two countries.

World Bank's International Comparison Program (ICP) 2011 did a detailed cross-country purchasing power comparison and estimated $778 billion PPP GDP for 2011. It put India's GDP at $5,757 billion, about 7.4 times Pakistan's.  It makes India's economy the third largest and Pakistan's economy 23rd largest in the world in PPP terms.  The ICP findings conclude that Pakistan's per capita income is US$4,450.00, just slightly below India's US$4,735.00. 

India Pakistan Sri Lanka Per Capita Income Source: World Bank

Poverty Rates:

The number of Pakistanis living below the 2005 $1.25 poverty line (set at $1.44 for 2011) is 4.8 million, less than one-seventh of the 35.1 million reported earlier., according to Center for Global Development (CGD). It is a huge drop from about 20% of the population to 3% of the population living below the international poverty line.

World Bank's Revised Poverty Estimates (Source: CGD)

Poverty rates for many other nations, including India and Bangladesh,  have also seen dramatic downward revisions. As a result, India now has 102 million poor, just slightly above China's 99 million. In fact, the new report has cut the world poverty rate in half from 19.7% to 8.9%. Reduction from 21% to 3% for Pakistan poverty is much sharper than the rest of the world because ICP 2011 found it to be the second cheapest in the world.

The revision became necessary after the World Bank's International Comparison Program (ICP) completed a detailed study of a list of around 800 household and non-household products to compare real purchasing power for trans-national income comparison program (ICP). The CGD explained that the revision in poverty rate was necessitated by the results of latest ICP. It said: "Pakistan’s PPP conversion rate for GDP was 19.1 Rupees to the dollar in 2005 and 24.4 in 2011 — a gentle increase of 28 percent. The Consumer Price Index in Pakistan has gone up 102 percent over that same period. That might reflect changing or inadequate ICP commodity baskets or consumption data in one or both years, or mismeasurement of prices by Pakistan’s statistical agencies. But whatever the reason, it appears to apply to a lot of countries. Very few places saw PPP conversion rates climb close to or more than CPIs between 2005 and 2011, which is why poverty rates based on the 2011 PPP numbers tend to be lower."

Rural Poverty: 

One of the key reasons for lower rural poverty in Pakistan is the relatively high per capita agriculture value added  for its region.

Agriculture Value Added Per Capita in Constant 2000 US$--Source: Wo...

Livestock revolution enabled Pakistan to significantly raise agriculture productivity and rural incomes in 1980s. Economic activity in dairy, meat and poultry sectors now accounts for just over 50% of the nation's total agricultural output. The result is that per capita value added to agriculture in Pakistan is almost twice as much as that in Bangladesh and India.

Manufacturing Percentage of GDP Source: World Bank

GDP Growth Rates:

While per capita GDPs of Pakistan and India are neck-and-neck at the moment, the fact is that economic growth rates in Pakistan are continuing lag growth rates in India and other SAARC economies.

Meager 4.1% GDP growth reported by Pakistan for 2013-14 caps sixth consecutive year of disappointing economic performance under "democratic" governments in the country. This slow growth brings back bitter memories of the last lost decade of 1990s when economic growth plummeted to between 3% and 4%, poverty rose to 33%, inflation was in double digits and the foreign debt mounted to nearly the entire GDP of Pakistan as the governments of Benazir Bhutto (PPP) and Nawaz Sharif (PMLN) played musical chairs.

India-Pakistan GDP Growth Rates Since 1990s Source: World Bank

Unless Pakistani leaders find a way to accelerate growth, Pakistan will be left far behind India in terms of per capita gdp by the end of this decade.

Summary:

While India has suffered an economic slow-down in recent years, growth in Pakistan has dramatically plummeted under "democratic" leadership since 2008. Pakistan is in the midst of another lost decade like the 1990s, putting it at risk of being the worst economy in South Asia region and hurting its people in myriad ways including human development rates. This has to change for the better for Pakistan to keep up with its neighbors. 

Related Links:

Haq's Musings

Underinvestment Hurting Economic Growth in Pakistan

Pakistan's Revised PPP GDP 2011

Pakistan Among Top 25 World Economies

Pakistan's Per Capita Income

Pakistan Fares Better Than Neighbors on World Misery Index

Pakistan's Underground Economy

India Pakistan Comparison 

Pakistan Economic History

Pakistan's Expected Demographic Dividend

[Riaz Haq]

Mani-Talk: We Have Not Terrified #Pakistan Into Submission. #India #Narendramodi #Kashmir http://www.ndtv.com/article/opinion/mani-talk-we-have-not-terrified... … via @ndtv

Arun Jaitley thumps his chest and proclaims that we have given the Pakis a "jaw-breaking reply" (munh tod jawab). Oh yeah? The Pakistanis are still there - with their jaw quite intact and a nuclear arsenal nestling in their pockets. Rajnath Singh adds that the Pakis had best understand that "a new era has dawned". How? Is retaliatory fire a BJP innovation? Or is it that we have we ceased being peace-loving and become a war-mongering nation? And Modi thunders that his guns will do the talking (boli nahin, goli). Yes - and for how long? 

The Government struts around as if it has silenced the Pakistani guns. Nothing could be a more dangerous illusion. If the guns have ceased for the present to bark, it is because the Pakistan army has silenced its own guns, even as the Indian army has silenced ours. The idea that we have terrified the Pakistanis into submission by shelling a few homes and killing a few soldiers and several innocents might be a myth that washes here but it is far, far from the truth. The danger is that we will forget the limits that divide peace from war. 

If losing half their country in 1971 and leaving 90,000 prisoners of war in Indian hands has not dimmed Pakistan's zeal to protect itself, big words from our end are not going to make them grovel at Modi's feet. Pakistan is a sovereign nation. It makes its own assessment of the threats to its security. And the kind of talk they have heard in recent days from our governmental chiefs only persuades them that they are right in regarding India as the biggest threat to their security. This marginalizes the sane voices across the border and brings Pakistanis of all hues and colours together in the defence of their homeland. The language of the akhara is not the language of statesmen. And war is not a continuation of diplomacy by other means; it is a confession of the breakdown of diplomacy.
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When a young band of Serbian terrorists slipped into Bosnia to kill Archduke Franz Ferdinand, the Government of Serbia did not know, even as it is entirely likely that the Government of Pakistan did not know that Ajmal Kasab and his gang had slipped into Mumbai to target the iconic Taj Hotel. But, as in India, so in Austria, the suspicion was so strong that there were rogue elements in the Serbian establishment that were backing the terrorists, no proof was needed: suspicion amounted to conviction. Therefore, when the Serbian terrorists struck, assassinating the heir-apparent to the Austro-Hungarian throne, the Empire needed no conclusive proof that the Serbian government was behind the assassination. It knew, as India "knew", that 26/11 was master-minded by the Government of Pakistan. And even as the Pakistan government denied any involvement in such cross-border terrorism and undertook to set in train an investigation into the dastardly terrorist attack, so also, a hundred years earlier, did Serbia condemn the assassination and offer to investigate and bring to justice those responsible. 

But Vienna would not be appeased. An eight-point ultimatum was sent to Serbia demanding full acceptance of the eight conditions within a month. Eventually, after much hemming and hawing, Belgrade accepted seven of the conditions but baulked at the eighth - that a joint Austrian-Serbian investigation be launched into the assassination. That was enough for Vienna to insist that if all conditions were not fulfilled, the far more powerful Austro-Hungarian forces would reduce Serbia to rubble in a matter of days.

The threat was meant to cow the Serbians. The Serbians went as far as they could, but baulked at abject surrender. In consequence, military plans began to roll - to the alarm of both Emperor Franz Joseph of Austro-Hungary as well as the German Kaiser whose belligerence was pushing Vienna further and further down the road to disaster. Their political misgivings were entirely understandable. For Russia had declared that any military action against her Slav cousin would invite Russian retaliation against both Austria and Germany. At the same time, Germany had made it clear that her first target was France. Treaty obligations made it incumbent for France to come to Russia's rescue and vice versa in the event of war. Britain was committed to entering the war in these circumstances. The very balance of power that was supposed to have kept the peace in Europe for a hundred years was now pushing the world to the brink. 

To prevent this catastrophe, the two Emperors who had been the loudest in proclaiming a "munh thod jawab" to Serbia tried at the last moment to stop the guns from booming, but were over-ruled by their respective military hierarchies. War was launched. The mighty Austro-Hungarian Empire conquered Serbia but ended up losing the War and disappearing from the map of the world....


http://www.ndtv.com/article/opinion/mani-talk-we-have-not-terrified...

[Riaz Haq]

From The Economist:

IN OCTOBER 1987 the landmark privatisation of British Petroleum (now BP) was derailed by “Black Monday”, a big stockmarket crash. Pakistan’s planned divestment of a 7.5% stake in OGDCL, a listed but largely state-owned oil firm, has not been quite as cursed, but the circumstances could be more propitious. Pakistan’s government has been on the back foot following street protests in August and September. A nuisance suit to stop the sale was quashed this week by the Supreme Court. But there is likely to be a further delay while OGDCL publishes its results. Meanwhile the oil price has fallen sharply, as have stockmarkets around the world.

The good news for Pakistan’s government is that the appetite for local assets has been strong. Since the start of 2012 MSCI’s index of Pakistani shares has risen by 60% in dollar terms—ahead of global indices as well as Pakistan’s peers among frontier markets, which are less liquid and less open to foreign capital than others (see chart). The surprise is that the market did not fall further over the torrid summer. That was thanks largely to foreigners, who kept piling in even as jittery locals began selling. They bought a net $36m-worth of shares in August, when the protests were at their height, and a further $53m-worth in September.

The market’s bull run began in 2012 when a tax amnesty allowed previously hidden cash to be invested in stocks. Foreigners’ interest was piqued after elections in May of last year which led to the country’s first ever handover from one civilian government to another. The new one was seen as friendlier to business and took advice and credit from the IMF. Reforms were drafted and privatisations scheduled. A $2 billion bond issue this April was many times oversubscribed.

This was encouraging for a country more often seen as a cauldron of instability than as a fount of opportunity. Pakistan remains at the wrong end of international rankings of corruption, human development and security. But it is almost mid-table in the World Bank’s international comparison of the “ease of doing business”, scoring higher than either Brazil or India. Pakistan’s listed firms have a handsome average return on equity of more than 25%. The market is cheap relative to its frontier-market peers, with shares priced at 8.5 times earnings on average....

Pakistan’s market also spans lots of industries with a variety of well-run firms in each, says Andrew Brudenell, who runs a $700m frontier fund for HSBC which has a tilt towards Pakistan. Such diversity is in part a product of successive governments’ habit of privatisation by fits and starts: no fewer than 169 chunks of state-owned firms have been offloaded since 1991. The two most recent sales, in June, were of a 5% stake in Pakistan Petroleum, another oil firm, and of the state’s 20% shareholding in United Bank.

The more shares that float freely, the bigger the weighting Pakistan earns in the stockmarket indices that act as industry benchmarks. It is already the fourth-biggest frontier market, following the promotion of United Arab Emirates and Qatar to MSCI’s emerging-market index in June. This may explain the continued buying of its stocks during the turbulent summer. The sale of the stake in OGDCL is thus pivotal. It will not only give the stockmarket greater depth, but also add to Pakistan’s depleted currency reserves if, as expected, foreigners are the main buyers. The seven further privatisations in the pipeline should bring similar benefits. None of them is an oil company.


http://www.economist.com/news/finance-and-economics/21627718-despit...

[Riaz Haq]

From Daily Times:

KARACHI: Karachi stock market bounced back on Wednesday after six consecutives negative sessions on withdrawal of Islamabad’s prolonged sit-in by Pakistan Awami Tehreek (PAT).
Karachi Stock Exchange (KSE)-100 index gained 246.12 points to close at 29,940.39 points as compared to 29,694.27 of previous session. KSE-30 index went up by 117.15 points as closed at 19,862.25 points as against 19,745.10 points of last closing.
Elixir Securities’ analyst Faisal Bilwani said, “Pakistan equities closed with gains, breaking the six day losing streak primarily triggered by positives on political front as cleric led PAT called off 70 day long sit-in in Islamabad”.
Investors cheered on hopes despite PAT calling for nationwide protests and PTI continuing its sit-in in Islamabad, this move will help ease political tensions.
KSE-100 index pushed by oil stocks tested 30,000 in early trade while gains in MCB Bank (plus 1.5%) and Engro Corporation (plus 2.7%) helped counter profit taking in index heavy illiquids. Maple Leaf Cement (minus 0.7%) that announced lower than estimated first quarterly earnings, led volumes and churned over 45 percent of KSE-100 index and ended the day lower.
We see benchmark to test 30,000 and trade volatile with investors focus on profits and payouts during earnings season. Market will remain sensitive to flows from foreigners and news flow of over politics in days ahead, said Bilwani.
Habib Metropolitan Financial Services’ analyst Amreen Hirani said, “The local bourse finally took a breather as tension on the political front partially alleviated”.
Oil stocks picked momentum after the ongoing correction. In key result announcements, Maple Leaf Cement’s growth was ignored by investors and the scrip was punished on the back of decline registered in Year on Year Y/Y earnings posted by the Company.
Cement scrips kept the momentum strong on robust earnings expectations for first quarter fiscal year (FY15). Corporate result of Meezan Bank Limited announced after market hours Tuesday had an optimistic impact on the scrip Wednesday as the stock closed at its upper circuit.
Ease in the political environment, stable oil prices and ongoing result season might push the index upwards in the coming days, said Ms Hirani.
The market volume increased by 19.97 percent to 172.533 million shares traded on Wednesday as compared to 143.817 million shares traded in previous session.
The overall market capitalisation rose by 1.05 percent and traded Rs 6.979 trillion as compared to Rs 6.906 trillion of previous session. Gainers outnumbered losers 231 to 140, while 20 stocks were remained unchanged amidst the total 391 stocks traded. The KMI-30 index lost 97.69 points to close at 47,503.56 points as compared to 47,601.25 points of previous session. The KSE all-share index went 28.96 points down to close at 21,858.63 points as compared to 21,887.59 points of previous session.
Maple Leaf Cement was the volume leader in the market with 29.045 million shares as it closed at Rs 29.01 followed by Bank of Punjab trading of 14.406 million shares and closed at Rs 8.70. Pak Elektron XR traded 8.209 million shares and closed at Rs 27.14.

http://www.dailytimes.com.pk/business/23-Oct-2014/kse-100-up-by-246...

[Riaz Haq]

Russia and Pakistan on Thursday signed their very first military cooperation agreement and laid out future avenues of cooperation, ending years of division over Islamabad's close military ties with the U.S. and Moscow's with India.

Sergei Shoigu, the first Russian defense minister to visit Pakistan since 1969, characterized his meeting with counterpart Khawaja Asif as an important step in strengthening ties between Moscow and Islamabad.

"During the meeting we agreed that bilateral military cooperation should take on a more practical orientation and enhance the combat capability of our armed forces," news agency TASS quoted Shoigu as saying after the meeting.

Although the concrete terms of the agreement are not publicly known, Shoigu said joint naval exercises will be a key feature of future cooperation with Pakistan, as well as military officer exchanges, arms sales and counternarcotics and counterterrorism cooperation.

Behind the scenes, Shoigu may have been negotiating an important sale of Mi-35 transport helicopters to Pakistan, Yury Barmin, an expert on Russian arms sales, told The Moscow Times.

Russia approved the delivery of 20 Mi-35s to Pakistan in November, but the details still have to be negotiated, "which is probably one of the reasons why Shoigu is traveling to Pakistan a week after this informal approval was issued by Moscow," Barmin said.

But more important than specific defense contracts are Russia's growing strategic interests in the region, driven by security concerns shared with Pakistan — such as instability in Afghanistan following the withdrawal of U.S. troops and counterterrorism and counternarcotics efforts.

Nonetheless, Moscow will play it safe to ensure that its moves do not anger India, Russia's main strategic partner in the region, said Pyotr Topychkanov, an analyst at the Carnegie Moscow Center.

Regional Interests
India last year purchased $3.8 billion worth of Russian arms — far ahead of the $981 million worth it purchased from the U.S., according to data from the Stockholm International Peace Research Institute (SIPRI).

Last year Russia's recorded exports to Pakistan were much more limited, valued at a mere $22 million, according to SIPRI. The total sum is somewhat higher than this, as Russia also sells arms to Pakistan through China.
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Shared security interests are also drawing Pakistan and Russia closer together, as evidenced by Shoigu's announcement that joint military exercises and security cooperation will become a routine feature of their bilateral relationship.

"The main purpose of these exercises is to share experience in counterterrorism, counternarcotics and anti-piracy," Topychkanov said.

According to Barmin, the key concern driving Moscow to court Islamabad is the alarming flow of narcotics out of Afghanistan.

"Forty percent of Afghan drugs travel by sea, and a lot of it ends up in Russian ports," Barmin said.

Also at play is Pakistan and India's possible ascension next year to the Shanghai Cooperation Organization, an economic and military organization comprising Russia, China and several other Central Asian states.

"In the run-up to the SCO's summit in Ufa in July 2015, Russia will be courting the two countries … and will avoid doing controversial things, such as active defense cooperation with Islamabad," Barmin said.

http://www.themoscowtimes.com/business/article/russia-signs-landmar...

[Riaz Haq]

Big city people per hectare: ‪#‎Bangladesh‬ 175 ‪#‎India‬ 105 ‪#‎Pakistan‬ 92 ‪#‎US‬ 21 As people get richer they use more space http://econ.st/1Bh83K3

Those who argue that suburbia is dying are wrong on the facts; those who say it is doomed by the superiority of higher-density life make a far from convincing case. Cities that have sought to stop the sprawl—London is the most striking example—have achieved dubious benefits at great cost.

http://www.economist.com/suburbs?fsrc=scn/tw/te/pe/ed/suburbs

[Riaz Haq]

Vibrant Gujarat, held every two years, has yielded billions of dollars in investment promises, though only a fraction of the deals announced have come to fruition......Eight months into Modi's rule, his failure to lift the economy from its longest growth slowdown in a generation has raised questions about how much substance there is behind his promise of "red carpet, not red tape". http://news.yahoo.com/indias-modi-promises-predictable-policies-sta...

[Riaz Haq]

Indians will always be ugly neighbours to hotter Pakistanis: BuzzFe...

By Ibriz Sheikh

Published: February 16, 2015

PHOTO COURTESY: THE AEROGRAM

Pakistan were crushed by  India in their first World Cup match on Sunday, but BuzzFeed India’s editor Rega Jha’s gave Pakistanis something to cheer about when she admitted on Twitter that Pakistanis were ‘hotter’ than ‘ugly’ Indians.

Taking to her Twitter account, the 23-year-old editor tweeted, “it’s so sad that no matter who wins, Pakistanis will continue to be way hotter than us and we’ll continue to be their ugly neighbours.”

The tweet, for obvious reasons, sparked an outrage among Indians who were merciless in their responses to the BuzzFeed editor’s tweet.

Some however, took a more comical approach to Jha’s opinion and retweeted her sentiment in good faith.

Jha’s tweet was retweeted over 2,000 times since it went up and was favourtied by over 1,000 twitter users. However, many argued that the young editor was simply trying to attract attention.

Within three hours of posting the tweet, Jha took back her statement by claiming that “all Indians are beautiful, inside and out.”

http://tribune.com.pk/story/839204/indians-will-always-be-ugly-neig...

[Riaz Haq]

I recently came across a blog titled ‘What’s Really Going on with income trends in India and Pakistan’.  The blog was written by a Pakistani economist working in the Washington office of the World Bank. I have known the author and have great respect for him as an economist and as a person.  However, it pains me to see that in this blog at least, excessive generalisations and selective analysis is presented to promote a political agenda.

Nobody can deny the fact that for over a decade, India’s economy has been doing very well.  In comparison, Pakistan is having severe difficulties; partly due to internal reasons and partly imposed by the geo-political situation in the region. In my opinion, Pakistan could be well served by taking a few pages out of India’s economic management playbook.

Yet, when the author tried to compare the trends of per-capita incomes in both the countries, he seemed baffled to discover that as per the Exchange Rate Parity (ERP), Pakistan is not doing as bad in comparison to India as it should have been doing in his opinion.

Figure 1. Headline GDP per capita of India and Pakistan, 1990-2015 (current US dollars). Photo: World Development Indicators

As per the author,

“What is wrong with this picture? Why is there no difference in average growth between the two countries between 1990 and 2008, when India is supposed to have been on a reforms and high-investment path and Pakistan on a failed-state path.”

Rather than trying to find reasons for this lack of “evidence” to support his hypothesis, he blames it all on the data, and goes hunting for alternative data sources which would support his pre-suppositions, which he finds in terms of per-capita income measured in Purchasing Power Parity (PPP).

Figure 2. GDP per capita of India and Pakistan, 1990-2015 (constant 2011 international dollars). Photo: World Development Indicators

He then tries to convince us that per-capita income measured in PPP is a much better index of economic welfare than that measured in ERP.

“Don’t be misled by ‘headline’ data. Current dollar figures used in the media and in everyday discourse need to be scrutinised and adjusted to get the true picture.”

The author is a very good economist and it is inconceivable that he doesn’t know that superiority of PPP over ERP is not universally true, especially if one or both countries have some ‘administered prices’. In case of administered prices and/or large scale subsidies, per-capita income measured in PPP may even be a poorer indicator of welfare than its ERP counterpart.

We all know that there are a lot of subsidies in India, from food to agricultural inputs, from fuel to credits. These subsidies help in keeping domestic prices low, and hence better PPP.  India spends more than 10 per cent of the Union Government’s budget on subsidies.

On the other hand, Pakistan has eliminated all subsidies except a minor subsidy on wheat.  However, since the commodity price shock of 2007, electricity is also being subsidised.  Still Pakistan spends only three to four per cent of its federal budget on subsidies.

As per the 2015/16 budget, India has allocated equivalent of $ 37 billion for subsidies. In comparison, Pakistan has allocated only $ 1.3 billion. With much higher subsidies, it is no surprise that India does significantly better than Pakistan in PPP terms (than in comparison using ERP). In other words, India’s higher growth in per-capita income measured in PPP terms has been “bought” using taxpayer money.

However, what bothered me most about the content of the blog was how the income story was only half-told.  Going by the title of the blog, the readers expected an attempt by the author to show what really is going on with the income figures in these two countries.  To elaborate, I would like to present two additional charts, similar to the charts presented by the author. Both of the charts use World Bank data.

Income disparities (if we exclude the “freak year”1995 for Pakistan) have been falling in Pakistan, while rising in India. I know the author would say,

“What’s the big deal, if there is nothing to share, the disparities in Pakistan will fall anyway.”

But then let’s look at the second chart.

In the early 90s, Pakistan had a much higher incidence of poverty than India. Despite the slower economic growth and a plethora of other problems, by 2010, incidence of poverty in Pakistan was about one-half of that in India.

What will happen in the future is hard to predict, but to date, it appears that the ‘failed’ state has managed to do much better in using its meagre economic growth to lower poverty than the ‘shining example of economic reforms’ has done with its rapid growth. Maybe India could be better served by taking a few pages out of Pakistan’s poverty reduction playbook.

The strong pro-growth (and an anti-poverty reduction) slant is perhaps reflective of the ideological change at the World Bank (where the author is employed), which has now taken some of its attention away from poverty reduction to focus on shared prosperity.

http://blogs.tribune.com.pk/story/28981/perhaps-india-can-take-a-fe...

[Riaz Haq]

India is far ahead of Pakistan in more ways than I can count :-) 

Here are some: 

1. India leads the world in open defecation....in absolute numbers and percentages. 

2. India leads the world in child marriages....in absolute numbers and percentages. 

3. India has more poor, hungry and illiterate people than any other country in the world. In  percentage terms, the poverty rate in India is 2X higher than in Pakistan. 

4. More farmers have killed themselves in India than any other country in the world. 

5. Top 1% of Indians own 58% of India's wealth, 2nd only to Russia's 70%.

6. India has a mass murderer Modi as its elected leader. 

7. India has more slaves than any other country in the world. 

8. India has had more anti-minority riots than any other country in the world. 

9. India is only one of only two countries where Apartheid is still rampant....the other is Israel. 

10. There are more active insurgencies in India than any other country in the world. 

And yet, India is a "secular democracy"!!!!!

All of the above are easily verifiable facts from credible sources which track such data.