India and Pakistan at 75: A Tale of Two Divergent Economic Paths

This summer, India and Pakistan will each mark 75 years since independence. Over the years, the two countries have taken divergent economic paths. Pakistan's growth exceeded India's as recently as the late 1980s. But since then, India has become one of the world's largest economies, while Pakistan's has failed to keep pace. This event compared and contrasted each country's economic evolution, identified key economic policies and turning points, and highlighted what each must do to achieve future economic success. The event also considered how the economic trajectories of India and Pakistan have shaped U.S. policy toward each country. 

Selected Quotes

Atif Mian

“Everyone knows that the size of the military relative to India certainly, in Pakistan’s economy, is larger. But the key question is: how important is that as a causal or structural force in explaining Pakistan’s trajectory? …If you just look at the U.S., the U.S. has a much higher military expenditure than Europe… I don’t know of anyone serious who has mentioned that as a handicap to the U.S. growth rate as opposed to Europe for example… So I just want to give a little bit of pause. We are a bit too quick to judgment on these kinds of issues… I don’t think it’s as simple as ‘let’s cut the military budget in half and things will be hunky-dory’—not at all.”

"As a citizen of South Asia… I have never been as alarmed about India and Pakistan as I am now, because they seem to be institutionalizing polarization between the two countries. There is so much heightened animosity for each other at a public social level, which I think is very dangerous for the region. And we need to recognize that and we need to do something about that… there is great value in somehow coming together as people, and thinking about the common good as well as our respective national objectives.”

Arvind Subramanian

"When nations begin there’s an inheritance, there are critical junctures, and then critical choices are made at that juncture. And I think for both India and Pakistan, those early decisions were fateful, and they created a lot of path dependency. It’s not that they remained forever, but some remained and endured for a long time… I think it’s this rich interaction between the inheritance, the early choices, and then history evolves—you get crises, you have the role of ideas, you have accidents, and then of course you have political agencies. So all of these things shape the broader trajectory of every country’s development, and that was no less true of India.” 

“As the economy has slowed down and as there’s been a sense that it’s a zero-sum game, then once more affirmative action reservations have come to the surface, once again states are saying ‘jobs for locals’, so in a sense you have this combination of slowing growth, a pattern of growth which is not as employment creating, you have demography, and you have politics all interacting to make the employment situation a little more difficult… so I think this is something that India has to get to grips with quite soon.”

Teresita Schaffer

“With the U.S. and Pakistan there has been, for some years now, a quest for a new big issue in the relationship. Pakistan is frankly sick and tired of having Afghanistan be the main issue in their relationship with Washington. And the security relationship is complicated. So how about building up the economic relationship? This is something that gets a lot of enthusiasm in theory from the U.S. government… but it’s very difficult to persuade new investors to come in, because what they read about is trouble, in various ways… I think it would have a lot of good effects if you could get an increase in trade and an increase in investment going, but ultimately what that will take is some diversification of what Pakistan produces (a high percentage of their exports to the US are ready-made garments) and a decrease in the anxiety of businesses sticking their toe in the Pakistani pond.”