Passage Based Questions: Comparative Development Experiences of India and its Neighbours

Passage - 1

Direction: Read the following news article and answer the question that follows:

SINO-PAK FRIENDSHIP CORRIDOR

The China-Pakistan Economic Corridor (CPEC) has deepened the decades-long strategic relationship between the two nations. However, it has also sparked criticism for burdening Pakistan with substantial debt and allowing China to use its debt-trap diplomacy to gain access to Pakistan's strategic assets. The foundations of CPEC, part of China's Belt and Road Initiative, were laid in May 2013. At that time, Pakistan was struggling with weak economic growth. China committed to playing an integral role in supporting Pakistan's economy.

Pakistan and China have a strategic relationship that spans decades. Pakistan turned to China when it needed a rapid increase in external financing to meet critical investments in hard infrastructure, particularly power plants and highways. CPEC's early projects met this need, leading to a dramatic increase in Pakistan's power generation capacity, which brought an end to supply-side constraints that had caused rolling blackouts across the country.

Pakistan embraced CPEC, leveraging Chinese financing and technical assistance to end power shortages that had paralysed its economy. Years later, China's influence in Pakistan has increased at an unprecedented pace.

China as Pakistan's Largest Bilateral Creditor:
China's ability to exert influence on Pakistan's economy has grown substantially in recent years, mainly due to Beijing now being Islamabad's largest creditor. According to documents released by Pakistan's finance ministry, Pakistan's total public and publicly guaranteed external debt stood at $44.35 billion in June 2013, with only 9.3 percent owed to China. By April 2021, this external debt had surged to $90.12 billion, with Pakistan owing 27.4 percent-$24.7 billion-of its total external debt to China, according to the International Monetary Fund (IMF).

Additionally, China provided financial and technical expertise to help Pakistan build its road infrastructure, expanding north-south connectivity to improve the efficiency of moving goods from Karachi to Gilgit-Baltistan (POK). These investments were crucial in better integrating the country's ports, especially Karachi, with urban centres in Punjab and Khyber Pakhtunkhwa provinces.

Despite power imbalances between China and Pakistan, the latter still retains significant agency in determining its policies, even if such policies come at the expense of the long-term socioeconomic welfare of Pakistani citizens.

Answer the following questions:

Q1: What are two economic benefits of the China-Pakistan Economic Corridor (CPEC) for Pakistan's economy?
Ans: Economic advantages of the China-Pakistan Economic Corridor (CPEC) for Pakistan's economy include:
(i) Improved road infrastructure and connectivity: China provided financial and technical expertise to build and upgrade roads, especially north-south corridors linking Karachi with northern areas. This reduced transport time and costs, strengthened links between ports and industrial/urban centres, facilitated domestic and international trade, and created jobs during construction and maintenance-thereby raising incomes in related sectors.
(ii) Expansion of power generation capacity: CPEC projects significantly increased Pakistan's electricity supply, eliminating the supply-side constraints that caused frequent blackouts. Reliable power has allowed factories and services to operate continuously, increased industrial output and productivity, attracted investment, and improved living standards for households.

Q2: How does Pakistan's bilateral 'debt-trap' situation with China affect the Pakistani and Chinese economies?
Ans: China's growing role as Pakistan's largest bilateral creditor has important implications for both economies:
(i) Effects on Pakistan: Pakistan's external debt rose from $44.35 billion in June 2013 (with 9.3% owed to China) to $90.12 billion by April 2021, of which 27.4% ($24.7 billion) was owed to China (IMF). This increases Pakistan's repayment obligations and can reduce fiscal space for other development spending. Higher debt dependence may constrain Pakistan's policy choices and expose it to pressures during loan renegotiations, which can have long-term socioeconomic costs if debt servicing crowds out public investment. At the same time, Pakistan retains agency in deciding projects and policies, so outcomes depend on its fiscal management and negotiation strategies.
(ii) Effects on China: Lending under CPEC advances China's strategic and economic interests by creating markets for Chinese firms, exporting capital and expertise, and enhancing regional connectivity that benefits Chinese trade. However, these loans also attract criticism of "debt-trap diplomacy," which can affect China's diplomatic reputation and create risks if borrower countries face repayment difficulties that require restructuring or write-downs.