Why Pakistan Needs India Now
Another assassination and another lament by commentators on both sides of the India-Pakistan border about the spiraling downward of Pakistani society further into the abyss.
The tragic assassination of Punjab Governor Salmaan Taseer has been taken by many as a sign of the ascendancy of fundamentalist Islam and the danger this poses to the Pakistani state, to say nothing of the repercussions for India.
But what has been missing from the commentary? Striking by its absence is any reference to the dire economic straits that Pakistan now finds itself in.
While elites in Pakistan and India decry the demise of political liberalism in Pakistan, they miss out the flipside, which is the lack of commitment to a much-needed liberal economic policy. Apart from the on-again, off-again export of onions from Pakistan to Indiawhich is designed to solve an Indian problemthe economic side of the relationship hardly ever rates a mention.
We know that the rise of fundamentalism and bigotry have throughout history been tied to economic decay and crises. The best example of this is the rise to power of the Nazis in Germany during the economic collapse of the Weimar republic. The rise of Islamic fundamentalism in Pakistan has gone hand-in-glove with its economic decline. This is important not just to Pakistan but to India. As we all know, fundamentalism has spilled over our borders principally through terrorism.
The facts are pretty bleak. Pakistans economic growth rate is an abysmal 2.5% compared to Indias, which is approaching double digits. Pakistans debt-to-GDP ratio is over 60%. Pakistans ratio of tax-to-GDP is below 10% and many of the nations elite pay no tax at all. In fact, only 2 million Pakistanis, mostly salaried professionals and civil servants, out of a population of 180 million pay taxes. This is just the tip of the iceberg.
One can debate whether Pakistan is a failing state but its clearly a failing economy.
To put it graphically: the Pakistani economy is like a sick patient kept alive by being constantly pumped full of drugsmoney poured in by the U.S. and international organizations such as the World Bank and International Monetary Fund. If this money were cut off, the economy would go into cardiac arrest.
Given this bleak picture, its astounding that the current government reversed a relatively minor reform that raised fuel prices to regain the support of a coalition partner, putting in jeopardy the most recent loan package from the IMF.
How does India fit into this picture? And can two nuclear-armed rivals with a fraught relationship meaningfully engage in trade and commerce with each other?
Trade is one of the engines of growth and development but in the case of Pakistan, this potentially important link with India is virtually missing. At present trade is roughly $2 billion a year.
Pakistan accounts for less than 1% of Indias trade and India less than 5% of Pakistans trade. Contrast this to the bilateral trade relationship following independence, when 70% of Pakistans trade was with India while more than 60% of Indias exports went to Pakistan.
According to Mohsin Khan of the Peterson Institute, economists estimate a normal trading relationship would be five to 10 times larger than the current amount.
There is also an estimated $2 billion to $3 billion a year in trade that takes place unofficially through third countries, especially the United Arab Emirates.
If this could be normalized as bilateral trade, it would occur at a much lower cost and therefore greater economic gain.
Id argue that we must at least try to improve our economic relationship even if the political relationship is still frosty. The great exemplar here is the European Union, which was built on the premise that binding neighbors together economically was a prerequisite for ensuring peace and prosperity for all. We in India have yet to fully absorb this lesson. A prosperous Pakistan will not only be good for Pakistanis themselves but also good for us in India.
Its time for the liberal commentators on both sides of the border to stop wringing their hands about the demise of a secular liberal democracy, because Pakistan hasnt been that for some time, if it ever was.
While the support that the Indian intelligentsia has offered their counterparts in Pakistan following the assassination is heart-warming, its not consequential in the big picture. Liberals in Pakistan may fight on but its time for us in India to accept that Pakistan is an Islamic state with Islamic values and laws.
The crux here is that trade and commerce know no religious boundaries. We must work towards building a stronger bilateral relationship on that basis.
India Journal: Why Pakistan Needs India Now - India Real Time - WSJ
Another assassination and another lament by commentators on both sides of the India-Pakistan border about the spiraling downward of Pakistani society further into the abyss.
The tragic assassination of Punjab Governor Salmaan Taseer has been taken by many as a sign of the ascendancy of fundamentalist Islam and the danger this poses to the Pakistani state, to say nothing of the repercussions for India.
But what has been missing from the commentary? Striking by its absence is any reference to the dire economic straits that Pakistan now finds itself in.
While elites in Pakistan and India decry the demise of political liberalism in Pakistan, they miss out the flipside, which is the lack of commitment to a much-needed liberal economic policy. Apart from the on-again, off-again export of onions from Pakistan to Indiawhich is designed to solve an Indian problemthe economic side of the relationship hardly ever rates a mention.
We know that the rise of fundamentalism and bigotry have throughout history been tied to economic decay and crises. The best example of this is the rise to power of the Nazis in Germany during the economic collapse of the Weimar republic. The rise of Islamic fundamentalism in Pakistan has gone hand-in-glove with its economic decline. This is important not just to Pakistan but to India. As we all know, fundamentalism has spilled over our borders principally through terrorism.
The facts are pretty bleak. Pakistans economic growth rate is an abysmal 2.5% compared to Indias, which is approaching double digits. Pakistans debt-to-GDP ratio is over 60%. Pakistans ratio of tax-to-GDP is below 10% and many of the nations elite pay no tax at all. In fact, only 2 million Pakistanis, mostly salaried professionals and civil servants, out of a population of 180 million pay taxes. This is just the tip of the iceberg.
One can debate whether Pakistan is a failing state but its clearly a failing economy.
To put it graphically: the Pakistani economy is like a sick patient kept alive by being constantly pumped full of drugsmoney poured in by the U.S. and international organizations such as the World Bank and International Monetary Fund. If this money were cut off, the economy would go into cardiac arrest.
Given this bleak picture, its astounding that the current government reversed a relatively minor reform that raised fuel prices to regain the support of a coalition partner, putting in jeopardy the most recent loan package from the IMF.
How does India fit into this picture? And can two nuclear-armed rivals with a fraught relationship meaningfully engage in trade and commerce with each other?
Trade is one of the engines of growth and development but in the case of Pakistan, this potentially important link with India is virtually missing. At present trade is roughly $2 billion a year.
Pakistan accounts for less than 1% of Indias trade and India less than 5% of Pakistans trade. Contrast this to the bilateral trade relationship following independence, when 70% of Pakistans trade was with India while more than 60% of Indias exports went to Pakistan.
According to Mohsin Khan of the Peterson Institute, economists estimate a normal trading relationship would be five to 10 times larger than the current amount.
There is also an estimated $2 billion to $3 billion a year in trade that takes place unofficially through third countries, especially the United Arab Emirates.
If this could be normalized as bilateral trade, it would occur at a much lower cost and therefore greater economic gain.
Id argue that we must at least try to improve our economic relationship even if the political relationship is still frosty. The great exemplar here is the European Union, which was built on the premise that binding neighbors together economically was a prerequisite for ensuring peace and prosperity for all. We in India have yet to fully absorb this lesson. A prosperous Pakistan will not only be good for Pakistanis themselves but also good for us in India.
Its time for the liberal commentators on both sides of the border to stop wringing their hands about the demise of a secular liberal democracy, because Pakistan hasnt been that for some time, if it ever was.
While the support that the Indian intelligentsia has offered their counterparts in Pakistan following the assassination is heart-warming, its not consequential in the big picture. Liberals in Pakistan may fight on but its time for us in India to accept that Pakistan is an Islamic state with Islamic values and laws.
The crux here is that trade and commerce know no religious boundaries. We must work towards building a stronger bilateral relationship on that basis.
India Journal: Why Pakistan Needs India Now - India Real Time - WSJ
