Nuisance neighbour

Angry Indians and bitter Pakistanis need a reality check

The noisy, contentious and often childish public debate in India and Pakistan last week, after the United States caught Osama bin Laden, further proves how oblivious strategic analysts on both sides of the border are of the fundamental importance that economics has for a country’s dynamics. However successfully Pakistani spokesmen may brazen it out, and however frustrated Indians may be over their inability to stop Pakistan from exporting terrorism, the hard fact is that Pakistan is losing ground, year after year, month after month.

Most Pakistanis would not be aware that the yield on their government’s 10-year bonds, at 14.1 per cent, is the second highest in the world. This is next to bankrupt Greece (15.7 per cent). That indicates how bleak the markets’ assessment of Pakistan’s economic future is. What is more, the country’s inflation rate (at 12.9 per cent) is the fifth highest in the world. The economic growth rate is abysmal, averaging 3.5 per cent in the last three years, when population growth has been 2.1 per cent. Annual growth of per capita income, therefore, is about 1.4 per cent — less than one-fourth that of India. In 2011, the Pakistan economy’s vital statistics mirror the “Hindu” rates of growth that India recorded in the 1970s. Indeed, with a poor investment rate of 15 per cent (against India’s nearly 40 per cent), Pakistan’s economic growth cannot accelerate much. Moreover, in 1971, the truncated Pakistan had nine million fewer people than new-born Bangladesh; now it has 15 million more — this points to better population control and improved social indicators in India’s eastern neighbour. Though Bangladesh is much poorer than Pakistan, it manages faster economic growth, at 5.4 per cent.

Pakistan’s sustained under-performance has meant that its economy is now only one-ninth that of India; it used to be one-seventh. At one point, its per capita income was noticeably higher than India’s; now it is 20 per cent lower. Project these trends into the future and it should be clear that Pakistan will find it increasingly difficult to sustain its position as a strategic challenger to India; it will simply not have the money or the technology or the industrial prowess. That does not mean it will cease to be a nuisance; a number of semi-failed states are an international nuisance, and Pakistan has its nukes as well as China’s backing.

The question that Pakistanis should be asking themselves is not whether they can trouble India (they can, in the foreseeable future, if that is what gives them satisfaction) but how they think they will be the winners in that game, considering that all they have achieved so far is to score self-goals. They can continue with their stand on Kashmir, perpetuate a sense of victimhood vis-a-vis the US, seek strategic depth in Afghanistan, and treat the army as the country’s strongest institution. But if the instruments for achieving key national goals are the Hafiz Saeeds and Maulana Masood Azhars of the world, not to mention the Taliban, it will not only reflect poorly on Pakistanis but also deliver more self-goals to a deeply challenged society and an economy that survives on international largesse.