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VIEWPOINT: KAUTILYA
Dawn Of A New Hope
A
Pakistani economist says that Pakistan could be India's Mexico or its
Canada
By Jairam Ramesh
India and Pakistan
are both testimonies to the proposition that the growth rate of an economy
is inversely proportional to the brilliance of its economists. One of
the most distinguished of this tribe has been the Shimla-born, Washington-based
investment banker Shahid Javed Burki who topped off a glittering international
career by serving as finance minister in Islamabad between November 1996
and February 1997.
Burki has just written a series of five fascinating
articles in the daily Dawn. He analyses the future of the world economy
as it is likely to evolve in the next few decades and the options before
Pakistan. He calculates that by 2025 China and India will be the second
and third largest economies of the world respectively and together account
for about 40 per cent of world output-a throwback to the pre-18th century
as it were. Burki says Pakistan faces a choice. If it continues on its
present low growth path, it will place itself in reference to India in
the same position that Mexico currently has to the US. If its growth recovers,
Pakistan could be to India what Canada is to the US. In Burki's picturesque
words, Pakistan can either be India's Mexico or Canada.
Burki's calculations are based on what are called
purchasing power parity (PPP) rates. When its national income or gross
domestic product (GDP) is converted into dollars at the present exchange
rate, India is the 11th largest economy in the world. But a dollar can
fetch more in India than in developed countries. The prices of most services,
for instance, are lower in developing countries. The PPP rate derived
from price surveys converts GDP figures into international dollars. On
this basis, India becomes the fourth largest economy and China sees its
position go up from seventh to second. India is poised to overtake Japan
and become the world's third largest economy based on GDP (PPP) by 2010.
 Burki's
vision is magnificent but makes two big assumptions. First, that the current
phase of growth fatigue in India will end and we will soon return, at
the very minimum, to the 7 per cent growth trajectory witnessed during
1993-97. Second, that Pakistan will want to anchor itself with south Asia.
Presently, both assumptions appear heroic. The Indian economy cannot grow
at 7 per cent with things as they are in Delhi and in the states. Prime
Minister A.B. Vajpayee means well but his administration is in a deep
coma. National political parties are unable to come together on economic
essentials. State chief ministers are talking reforms alright but actual
action is disproportionately low. As far as Pakistan is concerned, its
commitment to south Asia is suspect. It sees itself more as part of the
Middle East and Central Asia. In spite of tangible benefits that will
accrue to it, Pakistan resists the idea of a South Asian Free Trade Area
(SAFTA) and continues to deny MFN status to India.
MFN stands for "Most Favoured Nation"
and is a pillar of the global trading system. When country A extends MFN
status to country B, it means that A will not discriminate against B and
B's exports to A will face import duties no higher than the lowest level
set by A. Pakistan fears that extending MFN status to India will destroy
its industry; actually the fear is more that greater trade will open a
window to normalisation that will endanger Pakistani society. Some Karachi-based
businessmen favour greater trade with India but that is not being permitted
by Islamabad. Officially recorded bilateral trade is now around $800 million,
although trade through third places like Dubai could be many times more.
Burki's vision also calls for open borders, greater trade, investment,
cultural and educational contacts.
The 1980s saw Pakistan's GDP growth still at
an impressive 1950-1980 average of 6 per cent per year. This was the decade
in which India broke out of its pre-1980 Hindu rate of growth of 3.5 per
cent per year and recorded almost a 5.5 per cent growth rate. However,
the 1990s were dramatically different when India increased its GDP growth
rate to about 6.5 per cent while Pakistan's growth rate plummeted to about
3.8 per cent. Pakistan is now classified as a severely indebted country
(India is lowly indebted) and is in the middle of a $600-million IMF borrowing
programme with tough conditionalities that started in November 2000 and
runs till September 2001. Burki feels that Pakistan is on the mend and
that the worst is over but is perplexed why the press and the public in
his country think otherwise.
If General Musharraf is savvy, as he surely
is, he should propose a joint panel of experts that includes the Indo-Pak
community in the US to prepare a blueprint for greater economic ties between
the country he rules and the country of his birth. To hold everything
hostage to Kashmir is to ensure that south Asia remains the last bastion
of poverty and obscurantism-economic and religious.
(The author is with the Congress party. These
are his personal views.)
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