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COMPARATIVE INDIA AND IT'S NEIGHBORS

INTRODUCTION

Intro

Over the last two decades or so, the economic transformation that is taking place in different countries across the world partly because of the process of globalization, which has both long and short implications for each country, including India.

Nations have been primarily trying to adopt various means which will strengthen their own domestic economies. To this effect, they are forming regional and global economic groups such as the SAARC, European Union, ASEAN, G-8, BRICS, etc.

Intro cont.

Introduction Cont...

In addition, there is an increasing eagerness on the parts of various nations to try and understand the developmental processes pursued by their neighboring nations as it allows them to better comprehend their own strengths and weaknesses vis-`a-vis [in relation to] their neighbours.

In the unfolding process of globalization, this particularly considered essential while developing countries as they face competition not only from developed nations but also amongst themselves.

An understanding of the other economies in our neighourhood is also required, as all major common economic activities in the region impinge [has an affect,mostly negative] on overall human development in a shared environment.

Logos

LESSON OBJECTIVES.

objectives

> Compare the development strategies pursued by India and the largest two of it's neighboring economies- Pakistan and China.

> It should be remembered that despite being endowed with vast natural resources, there is little similarity between the political power setup of India- the largest democracy of the world which is wedded to secular and deeply liberal Constitution for more than half a century.

Path

DEVELOPMENT PATH- A snapshot view

*India, Pakistan and China have similar development strategies. All three nations started towards the development path at the same time.

*While India and Pakistan became independent nations in 1947, People's Republic of China was establishes in 1949.

*In a speech at that time, Jawaharlal Nehru said, "These new and revolutionary changes in China and India, even though they differ in content, symbolize the new spirit of Asia and new vitality which is finding expression in the countries in Asia".

Development strategies

  • All three countries started their planning development strategies in similar ways. While India announced its first Five Year Plan for 1951-1956, Pakistan announced its first five year plan, now called the Medium Term Development Plan, in 1956.
  • China announced it's First Five Year Plan 1953. India and Pakistan adopted similar strategies, such as creating a large public sector and raising public expenditures on social development.
  • Till the 1980's, all three countries had similar growth rates and per capita incomes.

INDIA

  • India announced its first Five Year Plan for 1951-1956.
  • Until March 2017, India has been following the Five Year Plan- based model.
  • India and Pakistan adopted similar strategies.

CHINA

  • China announced its first First Five Year Plan in 1953.
  • After the establishment of People's Republic of China under one party rule, all critical sectors of the economy, enterprises and lands owned and operated by individuals were brought under government control.
  • The Great Leap Forward (GLF) campaign initiated in 1958 aimed at industrializing the country on a massive scale.
  • People were encouraged to setup industries in their backyards.
  • In rural areas, communes were started. Under the Commune system, people collectively cultivated lands. In 1958 there were 26,000 communes covering almost all the farm population.

  • GLF campaign met with many problems. A severe drought caused havoc in China killing about 30 million people.
  • When Russia had conflicts with China, it withdrew its professionals who had officially been sent to China to help in the industrialization process.
  • In 1965, Mao introduced the Great Proletarian Cultural Revolution (19566-76) under which students and professionals were sent to work and learn from the countryside.
  • The present day fast industrial growth in China can be traced back to the reforms introduced in 1978.
  • China introduced reforms in phases. In the initial phase, reforms were initiated in agriculture, foreign trade and investment sectors. In agriculture, for instance, commune lands were divided into small plots, which were divided into small plots, which were allocated (for use and not ownership) to individual households.
  • They were allowed to keep all income from the land after paying stipulated taxes. In the later phase, reforms were initiated in the industrial sector.
  • Private sector firms, in general, and township and village enterprises, i.e., those enterprises which were owned and operated by local collectives, in particular, were allowed to produced goods.
  • At this stage, enterprises owned by government (known as State Owned Enterprises-SOE's), which, in India, is called public sector enterprises, were made to face competition.
  • The reform process also involved dual pricing. This means fixing the prices in two ways; farmers and industrial units were required to buy and sell fixed quantities of inputs and outputs on the basis of prices fixed by the government and the rest were purchased and sold at market prices.
  • Over the years, as production increased, the proportion of goods or inputs transacted in the market also increased.
  • In order to attract foreign investors, special economic zones were set up.

PAKISTAN

  • While viewing the various economic policies that Pakistan adopted, we will notice many similarities with India.
  • Pakistan also follows the mixed economy model with co-existence of public and private sectors. In the late 1950's and 1960's, Pakistan introduced a variety of regulated policy framework (for import substitution-based industrialization).
  • The policy combined tariff protection for manufacturing of consumer goods together with direct import controls on competing imports. The introduction of Green Revolution led to mechanization and increase in public investment in infrastructure in select areas, which finally led to a rise in the production of food grains.
  • This changed the agrarian structure dramatically. In the 1970's, nationalization of capital goods industries took place.
  • Pakistan then shifted its policy orientation in the late 1970's and 1980's when the major thrust areas were denationalization and encouragement of private sectors.
  • Pakistan also received financial support from western nations and remittances from continuously increasing outflow of emigrants to the Middle-East.
  • This helped the country in stimulating economic growth.
  • The then government offered incentives to the private sectors.
  • In 1998, reforms were initiated in the country.

Demographic Indicators

Indicators

1

If we take a look at the global population, out of every six individuals living in this world, one is an Indian and another a Chinese.

Here, we shall compare the some demographic indicators of India, China, Pakistan.

The population of Pakistan is very small and accounts for roughly one-tenth of China or India.

Though China is the largest nation and geographically occupies the largest area among the three nations, its density is the lowest.

Demographic distribution

The population growth as being the highest in Pakistan, followed by India and China

According to scholars

  • Scholars point out the one-child norm introduced in China in the late 1970's as the major reason for low population growth.
  • They also state that this measure led to a decline in the sex ratio, the proportion of females per 1000 males.
  • However, from the table, it is noticed that the sex ratio is low and biased against females (women) in all three countries.
  • The fertility rate is also low in China and very high in Pakistan.
  • Urbanization is high in China with India having 33% of its people living in urban areas.

~ One of the much-talked issues around the world about China is its growth of Gross Domestic Product.

~ China has the second largest GDP (PPP)

of $19.8 trillion, whereas, India's GDP (PPP) is $8.07 trillion and Pakistan's GDP is $0.49 trillion, roughly about 12% of India's GDP.

~ India's GDP is about 40% of China's GDP.

~When many developed countries found it difficult to maintain a growth rate of even 5%, China was able to maintain near double-digit growth for one decade.

Gross Domestic product and sectors

Notice that in the 1980's, Pakistan was ahead of India; China was having double-digit growth and India was at the bottom. In 2011-15, there was a decline in India and China's growth rate, whereas, Pakistan met with drastic decline at 4%. Some scholars hold the reform process introduced in 1988 in Pakistan and political inability over a long period as reasons behind this trend.

Agriculture

  • First lets take a look at how people engaged in different sectors contribute to the Gross Domestic Product. It was pointed out previously, that China and Pakistan have more proportion of urban population than India.
  • In China, due to the topographic and climatic conditions, the area suitable for cultivation is relatively small- only about 10% of its total land area. The total cultivatable area in China accounts for 40% of the cultivatable area in India.
  • Until the 1980's, more than 80% of the people in China were dependent on farming as their sole source of livelihood.
  • Since then, the government encouraged people to leave their fields and pursue other activities such as handicrafts, commerce and transport.

Industries

  • In 2014-15, with 28% of its workforce engaged in agriculture, its contribution to the GDP in China is 9%.

cont.

  • In both India and Pakistan, the contribution of agriculture to GDP were 17% and 25%, respectively, but the proportion of workforce that works in this sector is more in India.
  • In Pakistan, about 43% of people work in agriculture, whereas, In India, it is 50%.
  • The sectoral share of output and employment also shows that in all three economies, the industry and service sectors have less proportion of workforce but contribute more in terms of output.
  • In China, manufacturing and service sectors contribute the highest to GDP at 43% and 48%, respectively whereas, in India and Pakistan, it is the service sector which contributes the highest by more than 50% of GDP.
  • In the normal course of development, countries first shift their employment and output from agriculture to manufacturing and then to services.

cont.

  • The proportion of workforce engaged in manufacturing in India and Pakistan were low at 21% and 23% respectively. The contribution of industries to GDP is at 30% in India and 21% in Pakistan.
  • In these countries, the shift is taking place directly to the service sector.
  • Thus , in both India and Pakistan, the service sector is emerging as a major player of development. It contributes more to GDP and, at the same time, emerges as a prospective employer.
  • If we look at the proportion of workforce in the 1980's, Pakistan was faster in shifting its workforce to service sector than India and China.
  • In the 1980's, India, China and Pakistan employed 17%, 12% and 27% of its workforce in the service sector respectively.
  • In 2014, it reached the level of 29%, 43%, and 34%, respectively.
  • In the last three decades, the growth of agriculture sector, which employs the largest proportion of all three countries, has declined.

cont.

cont.

  • In the industrial sector, China has maintained a near double-digit growth rate whereas for India and Pakistan's growth rate has declined.
  • In the case of the service sector, China was able to raise its rate of growth during 1980-2015, while India and Pakistan stagnated with its service sector growth.
  • Thus, China's growth is mainly contributed by the manufacturing and service sectors and India's growth by the service sector.
  • During this period, Pakistan has shown a deceleration in all three sectors.

Industries

INDICATORS OF HUMAN DEVELOPMENT

Indicators 2

  • The table shows that China is moving ahead of India and Pakistan. This is true for many indicators- income indicator such as GDP per capita, or proportion of population below poverty line or health indicators such as mortality rates, access to sanitation, literacy, life expectancy or malnourishment.
  • Pakistan is ahead of India in reducing proportion of people below the poverty line and also its performance in sanitation. But, neither of the two countries have been able to save women from maternal mortality.
  • In China, for one lakh births, only 27 women die whereas in India and Pakistan, about 178 and 174 women die respectively.
  • Surprisingly all the three countries report providing improved drinking water sources for most of its population.
  • You will notice that for the proportion of people below the international poverty rate of $3.10 a day, India has the largest share of poor among the three countries

some indicators

  • In dealing with or making judgements on such questions, however, we should also note a problem while using the human development indicators given above with conviction.
  • This occurs because of these are all extremely important indicators; but these are not sufficient. Along with these, we also need what may be called 'liberty indicators'.
  • One such indicator has actually been added as a measure of 'the extent in social and political decision-making' but it has not been given any extra weight.
  • Some obvious 'liberty indicators' like measures of 'the extent of constitutional protection of the Independence of the Judiciary and the Rule of Law' have not even been introduced so far
  • Without including these (and perhaps some more) and giving them overriding importance in the list, the construction of a human development index may be said to be incomplete and its usefulness limited.

An Appraisal

Development strategies

  • It is common to find developmental strategies of a country as a model to others for lessons and guidance for their development.
  • It is particularly evident after the introduction of the reform process in different parts of the world.
  • In order to learn from economic performance of our neighboring countries, it is necessary to have an understanding of the roots of their success and failures.
  • It is also necessary to distinguish between,and contrast, the different phases of their strategies.
  • Though countries go through their development differently, let us take initiation of reforms as a point of reference.

Reforms

We know that reforms were initiated in China in 1978, Pakistan in 1988, and India in 1991. Lets asses their achievements and failures in pre- and post-reform periods.

Why did China introduce structural reforms in 1978?

  • China did not have any compulsion to introduce reforms as dictated by the World Bank and International Monetary Fund to India and Pakistan.
  • The new leadership at the time in China was not happy with the slow pace of growth and lack of modernization in the Chinese economy under the Maoist rule. They felt the Maoist vision of economic development based on decentralization, self efficiency and shunning of foreign technology, goods and capital had failed.
  • Despite extensive land reforms, collectivization, the Great Leap Forward and other initiatives, the per capita grain output in 1978 was the same as it was in the mid-1950's.

  • It was found that establishment of infrastructure in the areas of education and health, land reforms, long existence of decentralized planning and existence of small enterprises had helped positively in improving the social and income indicators in the post reform period.
  • Before the introduction of reforms, there had already been massive extension of basic health services in rural areas.
  • Through the commune system, there was more equitable distribution of food grains.
  • The experimentation under decentralized government enabled to assess the economic, social, and political costs of success or failure.
  • For instance, when reforms were made in agriculture (handing out of land to individuals for cultivation), it brought prosperity to a vast number of poor people. It created conditions for the subsequent phenomenal growth in rural industries and built up a strong support base for more reforms.

  • Scholars quote many such example on how reform measures led to rapid growth in China.
  • Scholars argue that in Pakistan the reform process led to worsening of all the economic indicators. In the earlier section it was noticed that compared to the 1980's, the growth rate of GDP and its sectoral constituents fell in the 1990's.

  • Though the data on international poverty line of Pakistan is quite health, scholars using the official data of Pakistan indicated rising poverty.
  • The proportion of poor in 1960's were more than 40% which declined to 25% in the 1980's and started rising again in the 1990's.
  • The reasons for the slow-down of growth and re-emergence of poverty in Pakistan's economy, are agricultural growth and food supply situation were based not on institutional process of technical change but on good harvest.

  • When there was a good harvest, the economy was in a good condition, when it was not, the economic indicators showed stagnation or negative trends.

  • We can recall that India had to borrow from the IMF and World Bank to set its balance of payments crisis; foreign exchange is an essential component for any country and it is important to know how it can be earned.
  • If a country is able to build up its foreign exchange earnings by sustainable export of manufactured goods, it need not worry.
  • In Pakistan, most foreign exchange earnings came from remittances from Pakistani workers in the Middle-East and the exports of highly volatile agricultural products; there was also growing dependence on foreign loans on one hand increasing difficulty in paying back the loans on the other.
  • However, in the last few years, Pakistan has recovered its economic growth and has been sustaining.
  • In 2015-16, the Annual Plan 2016-17 reported that, the GDP registered a growth of 4.7%, highest when compared to the eight years.
  • While agriculture recorded growth rate far from satisfactory level, industrial and service sectors grew at 6.8% and 5.7% respectively. Many macroeconomic indicators also began to show stable and positive trends.

CONCLUSION...

CONCLUSION

What are we learning from the developmental experiences of our neighbours?

India, China and Pakistan have traveled more than five decades of the developmental path with varied results.

Till the late 1970's, all of them were maintaining the same level of low development.

The last three decades have taken these countries to different levels.

India with democratic institutions, performed moderately, but a majority of its people still depend on agriculture.

Infrastructure is lacking in many parts of the country. It is yet to raise the level of living of more than one-fourth of its population that lives below the poverty line

  • Scholars are of the opinion that political instability, over-dependence on remittances and foreign aid along with volatile performance of agriculture sector are the reasons for the slowdown of the Pakistan economy.

  • Yet, last three years , many macroeconomic indicators began showing positive and higher growth rates reflecting the economic recovery.
  • In China, the lack of political freedom and its implications for human rights are major concerns, yet, in the last three decades, it used the 'market system without losing political commitment and succeeded in raising the level of growth along with alleviation of poverty.
  • It is noticeable, that unlike India, and Pakistan, which are attempting to privatize their public sector enterprises, China has used the market mechanism to 'create additional social and economic opportunities'.

conclusion cont.

  • By retaining collective ownership of land and allowing individuals to cultivate lands, China has ensured social security in rural areas.
  • Public intervention in providing social infrastructure even prior to reforms has brought about positive results in human development indicators in China.

cont.

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