DEVELOPMENTAL EXPERIENCE OF INDIA AND ITS NEIGHBORS

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, has both short as well as long-term implications for each country, including India. 

Many regional and global economic groupings are formed such as the SAARC, European Union, ASEAN, G-8, G-20, BRICS etc. primarily to strengthen their own domestic economies.

There is also an increasing eagerness to understand the developmental processes pursued by their neighboring nations, this is considered as essential by developing countries as they face competition from the developing world as well.

Developmental Path 

1. All the three nations have started towards their developmental path at the same time. While India and Pakistan became independent nations in 1947, the People's Republic of China was established in 1949.

2. Jawaharlal Nehru had 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.

3. All the three countries had started planning their development strategies in similar ways. While India announced its first Five Year Plan for 1951-56, Pakistan announced its first five year plan, called the Medium Term Plan, in 1956. China announced its First Five Year Plan in 1953.

4. India and Pakistan adopted similar strategies such as creating a large public sector and raising public expenditure on social development. Till the 1980s, all the three countries had similar growth rates and per capita incomes. 

Developmental Strategies of China  

After the establishment of the People's Republic of China under one party rule, all the critical sectors of the economy, enterprises and lands owned and operated by individuals were brought under government control. 

Certain development strategies of China are  :

i). Great Leap Forward (GLF) : This campaign initiated in 1958 aimed at industrializing the country on a massive scale. People were encouraged to set up industries in their backyards. In rural areas, communes were started. Under the commune system, people collectively cultivated lands.

ii). Great Proletarian Cultural Revolution (1966-76) : In 1965, Mao Tso Tung started a cultural revolution on a large scale. In this revolution, students and professionals were sent to work and learn from the countryside. Unlike GLF, the cultural revolution did not have an explicit economic rationale.

iii). 1978 Reforms:  Since 1978, China began to introduce many reforms in phases. The reforms were initiated in agriculture, foreign trade and investment sectors. In agriculture, lands were divided into small plots which were allocated to individual households. They were allowed to keep all income from the land after paying taxes. In the later phase, reforms were initiated in industrial sector.

All enterprises which were owned and operated by local collectives in particular, were allowed to produce goods. At this stage, enterprises owned by the government (known as State Board Enterprises – SOEs), in India we call them public sector enterprises, were made to face competition.

 

In reform, prices were fixed in two ways, i.e., 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.

The goal of Chinese economic reforms was to generate sufficient surplus to finance the modernization of the mainland Chinese economy. In order to attract foreign investors, Special Economic Zones (SEZs) were set up. 

Developmental Strategies of Pakistan 

Various economic policies that Pakistan are: 

i). Pakistan follows the mixed economy model with co-existence of public and private sectors.

ii). In the late 1950s and 1960s, 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.

iii). The introduction of the 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.

iv). In the 1970s, nationalization of capital goods industries took place. Pakistan then shifted its policy orientation in the late 1970s and 1980s when the major thrust areas were denationalization and encouragement of the private sector.

v). During this period, 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.

vi). The government also offered incentives to the private sector. All this created a conducive climate for new investments. In 1988, reforms were initiated in the country.

Comparison Between The Countries 

1. Demographic Indicators 

 Some demographic indicators of India, China and Pakistan are :

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

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

iii). The population growth as being highest in Pakistan, followed by India and China. One child norm was introduced in China in late 1970’s to check the problem of population growth. This measure led to decline in the sex ratio.

iv). However, the sex ratio is low and biased against females in all the three countries. Scholars cite son preference prevailing in all these countries as the reason. In recent times, all the three countries are adopting various measures to improve the situation.

v).  After a few decades there will be more elderly people in proportion to young people due to one child norm.

vi). The fertility rate is also low in China and very high in Pakistan. Urbanization is high in China with India having 33 percent of its people living in urban areas.

2. GDP And Sectors 

i). China has the second largest GDP (PPP) of US$ 10.1 trillion whereas, India’s GDP (PPP) is US $ 4.2 trillion and Pakistan’s GDP (PPP) is 0.47 trillion US$; roughly about 10% of India’s GDP. 

ii). When many developed countries were finding it difficult to maintain a growth rate of even 5 per cent, China was able to maintain near double-digit growth for one decade. Also in the 1980s Pakistan was ahead of India, China was having double-digit growth and India was at the bottom.

iii). In 2000-10, there was a decline in India and China’s growth rates whereas Pakistan met with drastic decline at four per cent. Some scholars hold the reform processes introduced in 1988 in Pakistan and political instability over a long period as reasons behind this trend.

iv). In China, due to topographic and climatic conditions, the area suitable for cultivation is relatively small ,only about 10 percent of its total land area. The total cultivable area in China accounts for 40 per cent of the cultivable area in India. Until the 1980s, more than 80 per cent 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.

v).  In 2013, with 28 percent of its workforce engaged in agriculture, its contribution to GDP in China was 10 percent. In both India and Pakistan, the contribution of agriculture to GDP was at 17 and 25 per cent, respectively, but the proportion of workforce that works in this sector is more in India.

vi). In Pakistan, about 45 percent of people work in agriculture whereas in India it is 56 percent. The sectoral share of output and employment also shows that in all the three economies, the industry and service sectors have less proportion of workforce but contribute more in terms of output.

vii). In China manufacturing and service sectors contribute the highest to GDP at 47 and 43 percent, respectively whereas in India and Pakistan, it is the service sector which contributes the highest by more than 50 percent of GDP.

viii). The proportion of workforce engaged in manufacturing in India and Pakistan were low at 19 and 20 percent respectively.

ix). 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. 

x). The proportion of workforce in the 1980s, Pakistan was faster in shifting its workforce to the service sector than India and China. In the1980s, India, China and Pakistan employed 17, 12 and 27 per cent of its workforce in the service sector respectively. In 2010, it reached the level of 25, 33 and 35 percent, respectively.

xi). In the last three decades, the growth of the agriculture sector, which employs the largest proportion of workforce in all the three countries, has declined. 

x). In the industrial sector, China has maintained a near double-digit growth rate whereas for India and Pakistan growth rate has declined.

xi). In the case of the service sector, China was able to raise its rate of growth during 1980-2010 while India and Pakistan stagnated with its service sector growth.

xii) Thus, China’s growth is mainly contributed by the manufacturing and service sectors and India’s growth by service sector. During this period, Pakistan has shown deceleration in all the three sectors. 

3. Indicators of Human Development 

India, China and Pakistan have performed in some of the selected indicators of human development. 

Some Selected Indicators of Human Development, 2009-10 are: 

i). China is moving ahead of both India and Pakistan in terms of indicators of human development.

ii). Pakistan is ahead of India in reducing the proportion of people below the poverty line and also its performance in sanitation. But neither of these two countries has been able to save women from maternal mortality.

iii). In China, for one lakh births, only 37 women die whereas in India 200 women die and in Pakistan 260 women die respectively. Surprisingly all the three countries report providing improved drinking water sources for most of its population.

iv). The proportion of people below the international poverty rate of $ 1 a day, India has the largest share of poor among the three countries.

v) ‘Liberty indicators’ One such indicator has actually been added as a measure of ‘the extent of democratic participation in social and political decision-making’ but it has not been given any extra weight.

vi) Some of the ‘liberty indicators’ like measures of ‘the extent of Constitutional protection given to rights of citizens’ or ‘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. 

Development Strategies - An Appraisal 

It is common to find developmental strategies of a country as a model to others for lessons and guidance for their own development.

It is particularly evident after the introduction of the reform process in different parts of the world. In order to learn from the economic performance of our neighboring countries, it is necessary to have an understanding of the roots of their successes and failures and necessary to distinguish between, and contrast, the different phases of their strategies. 

Some of them are:

 i). China did not have any compulsion to introduce reforms as dictated by the World Bank and International Monetary Fund to India and Pakistan.

ii). They felt that Maoist vision of economic development based on decentralization, self sufficiency 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-1950s.

iii). 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. 

iv). 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 examples on how reform measures led to rapid growth in China.

v). But whereas scholars argue that in Pakistan the reform process led to worsening of all the economic indicators. The proportion of poor in the 1960s was more than 40 per cent which declined to 25 percent in 1980s and started rising again in 1990s. The Reasons for the slow-down of growth and re-emergence of poverty in Pakistan’s economy, as scholars put it, are agricultural growth and food supply situation were based not on an institutionalized process of technical change but on good harvest. 

vi). Pakistan’s most of the 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 the one hand and increasing difficulty in paying back the loans on the other. 

vii). However, during the last few years, Pakistan has recovered its economic growth and has been sustaining. In 2015-16, the Annual Plan 2016-17reports that, the GDP registered a growth of 4.7 percent, highest when compared to the previous eight years. While agriculture recorded growth rate far from satisfactory levels, industrial and service sectors grew at 6.8 and 5.7 per cent respectively, and many macroeconomic indicators also began to show stable and positive trends.

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