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Pakistan was richer than India through most of the 1980s, 1990s and early 2000s. Now it is almost twice as poor. What happened?

Pakistan was richer than India through most of the 1980s, 1990s and early 2000s. Now it is almost twice as poor. What happened?

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  1. A few disclaimers: I come from the Indian perspective, so I will be accused of trying to rub salt in people’s wounds etc. However, I believe that a strong South Asia is good for everyone.

    I want to understand how Pakistan, which used to be richer than India for most of the last 40 years, has seen a dramatic reversal of fortune. I believe that there are lessons to learn for India, and for Pakistan too.
    I don’t think Pakistan’s misfortunes are unique to Pakistan, and I believe they can happen to anyone if they are not careful.

    [Source data](https://data.worldbank.org/indicator/NY.GDP.PCAP.CD).

  2. We start falling behind India around 2006, which makes sense. Political unrest, terrorism, target killings, increased corruption, a devastating earthquake, transition from a military dictatorship to a democracy etc all happened around and after that year. 2007 to 2010 were some very dark years.

  3. India focused on self-sufficiency and concentrated on local industry over foreign investment, even into the 90s. Pakistan continued to be reliant, especially on the US.

    Once the US left after Afghanistan and dropped support, Pakistan’s descent began. There have been flourishes of economic progress here and there, but nothing truly sustainable.

    Also, no proper effort on birth control (compare population rise with Bangladesh). Constant military spending. Giving up the country for the war on terror without getting anything in return. The impact of millions of Afghan refugees. Nothing close to the caliber of IIT and IIM, leading to constant brain drain.

    Going back a bit more, nationalization of industries by Bhutto was a complete disaster, and many wealthy business people left the country.

    A lot of factors. Unfortunately most of them irreversible at this point.

  4. There is no one answer to this. A country can be stable, have great allies and still be poor. If you look at North India, their GDP per capita is lower than Pakistans. The tech sector certainly helped South India and their country as a whole, but I am sure there is more to it than that. Such comparisons are not useful.

    We need to look at our economy from our own geopolitical perspective. We have had some bad luck. Corruption is one thing. Corrupt administrations are another. The actions of which are haunting us to this day. People like to point out that Nawaz and Zardari are billionaires. Keep in mind that these are individual families, not organisations like the Army. Keep in mind that for every dollar they stole, they spent another 10 dollars enabling the theft. Its a pyramid. You have to pay thousands of people to keep the corruption machine going. If their London flats cost 30 million, then it cost Pakistan 300 million once all the “stakeholders” had gotten their share. The damage these families have done is frankly insane and must run in the 100s of billions.

    I think this is one of the main reasons we fell behind.

  5. my 2 cents.

    India: India was days away from running out of USD for buying crude etc. at the beginning of 90s. India embraced globalization, while keeping restrictions in few industries. There was large English speaking population that quickly took advantage of the IT boom in late 90s and early 2000s. Politicians are not directly responsible for this growth – this is more of right place at the right time. India has very large population and only parts of the India are fertile land compared to Pakistan.

    I don’t know whole lot about Pakistan, so take it with grain of salt. Correct me if I am wrong.

    Pak: relaying too heavily (even if it is symbolic) on US and China made the country dependent on others. foreign loans breed complacency and corruption. Country started with much better land and water resources, could have been the agricultural power house in the world. Also Religious fanatics would be a great drag as long as they exist – it would be one step forward and two steps backward.

  6. Looking at from a non-political perspective, there are separate growth drivers for both countries throughout our recent history. I dont know what was driving economic growth in india, but in Pakistan, in the mid 50’s to late 60’s economic growth was being driven by jute and govt focus and support into creating local industrial titans. The 70’s was a time of turmoil and security issues, and nationalization (notice the dip). Then we started getting back into economic industrialization policies (as many indicators show, regardless of geo-political events around the time). Late 80’s and early 90’s was when both Pakistan and India started economic liberalization, and by all means it was going well initially, before political turmoil and energy shortages ruined it. This entire era is attempts at industrialization being hard capped by energy and foreign currency requirements bottle-necking both countries.

    ​

    From 2000’s onwards, in my humble opinion, the Indian software and services export boom started becoming significant, subsidizing Indias need for foreign currency, and hence easing the imports and energy chokehold on growth. Pakistan’s continued to finance its need for foreign currency by foreign aid and IMF loans (13 programs hurr durr). Then people in india figured out a construction/infrastructure lending and financing system and pushed all of you into a simultaneous construction and services boom, which india continues to ride until today, though it remains to be seen how long that can sustain india as a growth driver. For us, the chickens came home to roost, and we are now stuck in a perpetual credit/finance/current-account crises.

  7. People here yelling “krruption” “democracy” are missing the point. In 1991, India’s economy was in the gutter. It underwent an [IMF program](https://en.wikipedia.org/wiki/1991_Indian_economic_crisis) – its first and last – that, after a period of economic hardship, overhauled the way its economy was structured and set the stage for the growth of a services-based economy. That’s what IMF programs – if done right – are meant to do: take painful measures towards course correction.

    Pakistan, on the other hand, is on its 13th (!) IMF program, using it as a helping hand each time without any meaningful reforms, and still economically stuck in the rentier economy of the 60s and 70s (when foreign aid could be relied upon) when other countries have moved far ahead. Pakistan is also uniquely unfortunate in that the landowning elite (feudal landlords) were not only allowed to continue but are major players in the political process. Say what you want about Nehru, I admire the man’s uncompromising stand on abolishing the landed elite once and for all and putting all power in the hands of the elected government. All of the Asian tigers – Japan, South Korea, Singapore, Vietnam – also got rid of their landed elite upon independence because they knew they’d keep the nation hostage to their whims.

  8. Finally a question I want to answer. Do you really want to know?

    We can sum it up in a few things: education, land reform, GE giving India outsourcing work and maybe not wasting time with the Afgan war.

    I can go into detail on all of these. But those things all happened in or by the 1980s.

  9. Economic rise and decline isn’t instant. Mr. 10% probably accelerated it but India has been investing in education, diplomacy, and industry development for a while to be where it is. Pakistan I can’t confidently throughout party leadership changes, civilian and military rulers explain what it’s economic plan has been in the long term.
    Correct me if I’m wrong in the past 30 years what industry or service has Pakistan developed to export or provide dividends to increase its wealth? What can we Pakistanis say we are competitive at, on a global scale? Like we are the top 10 at making something to be known well for that an run 10% of our economy. Football exports don’t even account for repaying the M11 Motorway going from Sialkot to Lahore.

  10. This is really a new bit of information for me. And maybe most of us didn’t believe this could be true that pakistans citizen at least as a metric , enjoyed better prosperity during a certain period.

    I feel two important things happened
    A) india was pushed to a corner in 1991/2 and they had to open up the economy. Let Big global companies come in and exploit the market. Indian companies also upped the game and started supplying globally. The IT revolution pushed by y2k concerns also fueled the growth of the services exports

    B) I feel 9/11 was a milestone. And pakistan got pulled into a narrative which it neither owned nor controlled. Suddenly the entire system just had one priority, to fight (someone else’s) war on terror and while also managing internal conflicts which were not exactly aligned to fight the war on terror.

    Corruption, inept leadership, internal politics etc are all characteristics of our region. I am not sure if we are too different to be able to explain the gap.

    Edit: since we are talking per capita, I think population growth rate also seems to be a significant factor in this. Maybe thats the only factor, everything else being marginal.

  11. This post and the associated picture is misleading. It’s of GDP per capita not actual GDP. India was never poor than Pakistan.
    Yet, people are giving reasons as to why Pakistan was richer than India and why it is poor now.

  12. Because America pulled out its money that was keeping Pak artificially rich it was just a bubble economy that had to burst.. Idk why people forget that.. U have to be a fool to think Pak was doing good in any way better than India in that time. Name ONE industry that flourished. Name ONE business that has any global standing that was build in that era. Absolutely nothing was done in any dictatorship, they just became stooges for America and in return America inflatted our economy!

  13. inept democratic governments and terrorism. from 2006 onwards.

    although i would not use GDP per Capita as a basis of comparison. Mean based Statiscal analysis can lie. Median Houshold income would be a better source of comparison as it lessens the impact of outliers ( the filty rich and the extremely poor) compared with per Capita GDP.

  14. Uhhhh, IDK maybe 9/11, us getting involved in the American “War on Terror” because of which we suffered a bunch of terrorism which further slowed us down :))))))))

  15. Low FDI, non-existent industry, Afghan war which destroyed ex-FATA, two hostile neighbours which increased defence spending, no land reforms, corruption, political instability (dictatorships to democracy), Karachi gang wars, mafias, no long term economic planning, etc.

  16. The same reason why INDIA was ahead of china around the same period but is now no where close to china economic liberalization taken by dengziaoping 10 years earlier than economic liberalization taken by narasimha rao in India thus there is a consistent ten year gap in development of the two nations.

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