Comparative Development Experiences of India and its Neighbours Class 12 Economics

Introduction

Foreign Direct Investment

Demographic Profile

Human Development Some important parameters of human development are:

• Life expectancy: the higher the better.
• Adult literacy rate: the higher the better.
• Infant mortality rate: the lower the better.
• Maternal mortality rate: the lower the better.
• Percentage of the population having access to improved water sources: the higher the better. 
• Percentage of undernourished population: the lower the better.

With a view to accelerating the pace of growth, different countries are forming regional and global economic groups based on common agreements of bilateral relations. e.g., SAARC, EU, ASEAN, G-8, G-20.

Common Success Story of India and Pakistan

• A substantial rise in GDP per capita.
• Self-sufficiency in food production.
• The dualistic nature of the economy is gradually declining.
• Considerable reduction in the incidence of poverty.

Common Failures of India and Pakistan

• Relatively slow pace of GDP growth, compared with China.
• Poor performance in HDI ranking.
• Dismal Fiscal Management.
• Political survival of a dominating issue rather than good governance.

Development Path of India, Pakistan and China

• All three countries started their development path at the same time. India and Pakistan got independence in 1947 and people’s Republic of China was established in 1949.
• All three countries had started planning their development strategies in similar ways. India announced its First Five Year Plan in 1951, Pakistan announced in 1956 and China in 1953.
  
• India and Pakistan adopted similar strategies, such as creating a large public sector and raising public expenditure on social development.
• Both India and Pakistan had adopted the ‘mixed economy’ model but China had adopted the ‘Command Economy’ model of economic growth.
• Till the 1980s, all three countries had similar growth rates and per capita incomes.
• Economic Reforms were implemented in China in 1978, in Pakistan in 1988 and in India in 1991.
  

Development Strategy

• A Sound Trade System: India was a country with a history of closed trade. Because of this historical context, India faces a critical challenge in developing a new policy that can support the new trade system. This new trade reform has been implemented in the Indian economy and has accelerated India's growth.
• Poverty Reduction: To reduce poverty in India, several poverty alleviation programs have been implemented. This would aid in increasing per capita income, improving nutrition, and reducing poverty in some states.
• Rural Development: As a part of this strategy, India implemented a variety of measures to develop areas that are lagging behind in the overall development of the village economy.
• Employment Generation: Several economic reforms have been initiated in order to generate employment in the country, to provide gainful self-employment and skilled wage employment opportunities.
  

2. Development 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.
• A Programme named ‘The Great Leap Forward (GLF) campaign was initiated in 1958, which aimed at industrialising the country on a massive scale. Under this programme, people were encouraged to set up industries in their backyards.
• In 1965, Mao Tse Tung introduced the ‘Great Proletarian Cultural Revolution (1966-1976)’, under which students and professionals were sent to work and learn in the countryside (rural areas).
• In rural areas, a commune system was started, under which people collectively cultivated
   lands.
• Reforms were introduced in China in phases.
• In the initial phase, reforms were initiated in the agriculture, foreign trade, and investment sectors. In the later phase, reforms were initiated in the industrial sector.
• 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 raw materials and products on the basis of prices fixed by the government and the rest were purchased and sold at market prices.
• In order to attract foreign investors, Special Economic Zones (SEZ) were set up. SEZ is a geographical region that has economic laws different from a country’s typical economic laws. Usually, the goal is to increase foreign investment.
  

3. Development Strategies of Pakistan

• Pakistan followed the mixed economy model with co-existence of public and private sectors.
• Pakistan Introduced tariff protection for the manufacturing of consumer goods, together with direct import controls on competing imports.
• The introduction of the Green Revolution and the increase in public investment in infrastructure in select areas led to a rise in the production of food grains.
• In the 1970s, Capital goods industries were nationalised.
• In 1988, structural reforms were implemented. Major thrust areas were denationalisation and encouragement to the private sector.
• Pakistan also received financial support from Western nations and remittances from emigrants to the Middle countries. This helped the country in stimulating economic growth.

Success and Failure of Strategies

• There was the existence of infrastructure in the areas of education and health and land reforms. 
• There was decentralised planning and the existence of small enterprises.
• Through the commune system, there was a more equitable distribution of food grains.
• There was an extension of basic health services in rural areas.

Failures of Structural Reforms in China

• There was a slow pace of growth and a lack of modernisation in the Chinese economy under Maoist rule.
• The Maoist vision of economic development based on decentralisation, self-sufficiency and shunning of foreign technology had failed.
• Despite extensive land reforms, collectivisation, the Great Leap Forward and other initiatives, the per capita gain output in 1978 was the same as it was in the mid-1950s.

China has an Edge Over India

• The Chinese reform process began more comprehensively during the 80s when India was in the midst of a slow growth process.
• Rural poverty in China declined by 85% during the period 1978 to 1989. In India, it declined only by 50% during this period, Global exposure of the economy has been far wider in China than in India. China’s export-driven manufacturing has recorded exponential growth, while India continues to be only a marginal player in the international markets.

Common Success of Structural Reforms in India and Pakistan

• Both India and Pakistan have succeeded in more than doubling their per capita incomes in spite of high growth rate of population.
• The incidence of poverty has also been reduced significantly. However, the level of poverty is lower in Pakistan.
• Both countries have achieved self-sufficiency in the production of food.
• Both countries have succeeded in developing their service and industry sectors at a fast rate.
• The use of modern technology is improving in both countries.

Economic Development Strategy After Independence

• Both public and private sectors were allotted to carry out business activities. The public sector was allotted activities like coal, mining, steel, power, roads etc. The private sector was allotted to establish industries subject to control and regulations in the form of law.
• The public sector was given a major push by the Government. Maximum revenues in this sector were invested which increased from Rs. 81.1 crore in the First Five-Year Plan (1951-56) to Rs 34,206 crores in the Ninth Five-Year Plan (1992-97)
• The public sector was given importance in order to eliminate poverty, unemployment etc.
• The public sector contributed to the industrialisation of the economy. It also helped the Indian economy to achieve a considerable degree of self-sufficiency.
  

Common Failures of Structural Reforms in India and Pakistan

• The growth rate of GDP and its sectoral constituents have fallen in the 1990’s.
• Poverty and unemployment are still areas of major concern in both countries.
  

Areas Where Pakistan has an Edge Over India

• Migration of workforce from agriculture to industry,
• Migration of people from rural to urban areas.
• Access to improved water sources.
• Reduction in below poverty line population.
  

Areas where India has an Edge Over Pakistan

Comparative Study – India, Pakistan and China

1. Demographic Indicators

• The population of Pakistan is very small and accounts for roughly about one-tenth of China and India.
• Though China is the largest nation geographically among the three, its density is the lowest.
• Population growth is highest in Pakistan followed by India and China. One child norm which was introduced in China in the late 1970s is the major reason for low population growth. But this measure led to a decline in the sex ratio, that is the proportion of females per 1000 males.
• The sex ratio is low and biased against females in all the three countries. There is a strong son preference prevailing in all these countries.
• The Fertility rate is low in China and very high in Pakistan.
• Urbanisation is high in both China and Pakistan- with India having 28 per cent of its people living in Urban areas.

2. Gross Domestic Product (GDP) and Sectors

• China had the world's second-largest GDP (PPP) of 10.1 trillion in 2013, followed by India's GDP (PPP) of 1.86 trillion and Pakistan's GDP (PPP) of 0.47 trillion.
• On this path of Development china’s average growth rate is about 9.5% while India’s and Pakistan’s average growth rate is about 5.8% and 4.1% respectively.
• In China, in the year 2011. with 37 per cent of its workforce engaged in agriculture, its contribution to GDP is 9 per cent (approx). In India and Pakistan, the contribution of the agricultural sector to GDP is about 19% and 21% respectively. In India, about 56% are engaged in the agricultural sector, while in Pakistan this figure is about 45%.
• In China, manufacturing contributes the highest to GDP at 47 per cent whereas in India and Pakistan, it is the service sector that contributes the highest (more than 50 per cent of GDP)
• Though China has followed the classical development pattern of a gradual shift from agriculture to manufacturing and then to services, India and Pakistan’s shift has been
   directly from agriculture to service sector.
• In the 1980s, India, China and Pakistan employed 17, 12 and 27 per cent of their workforce in the service sector respectively. In 2011, It reached the level of 25, 33 and 35 percent respectively (approx.).
• China’s growth is mainly contributed by the manufacturing sector whereas in both India and Pakistan, the service sector is emerging as a major player of development.

3. Human Development Indicators

• In most areas of human development, China has performed better than India and Pakistan. This is true for many indicators-per Capita GDP or proportion of population below
   the poverty line, health indicators such as mortality rates, access to sanitation, literacy, life expectancy or malnourishment etc.
• Pakistan is ahead of India in reducing the proportion of people below the poverty line and also its performance in transferring the labour force from the agricultural sector to the industrial sector and access to water is better than India.
• Contrary to it, India is ahead of Pakistan in the education sector and in providing health services.
• India and Pakistan are ahead of China in providing improved water sources.

Conclusion

• India
• India performed moderately as is clear from
  • A majority of its people still depend on agriculture.
  • Infrastructure is lacking in many parts of the country.
  • It has yet to raise the level of living of more than 22% of its population that lives below the poverty line.
• Pakistan
• Pakistan has performed poorly. The reasons for the slowdown of growth and re-emergence of poverty in Pakistan’s economy are:
  • Political instability.
  • Volatile performance of the agriculture sector.
  • Over-dependence on remittances.
  • Growing dependence on foreign loans on the one hand and increasing difficulty in paying back the loans on the other.
• China
• China has performed comparatively the best as is clear from:
  • Success in raising the level of growth along with alleviation of poverty.
  • It used the market mechanism to create additional social and economic opportunities without political commitment.
  • By retaining collective ownership of land and allowing individuals to cultivate land, China has ensured social security in rural areas.
  • Public intervention in providing social infrastructure has brought about positive results in human development indicators in China.