Interesting economic comparison of India & Pakistan

[Roybot]

FDI is important for economic growth, but I think you are overestimating how important it is.

The USA receives the largest amount of FDI, yet their economy is currently growing at only 0.8%.

Makes you wonder why people are still investing in American market?

 

[muse]

I don't how fair such comparisons are - after all, we are not comparing apples to apples, so to speak - because of the size of India's population, the spread of a single unit of currency over the size of that population in relation to the same in Pakistan, will always present skewed data

 

[Patrician]

FDI is important for economic growth, but I think you are overestimating how important it is.

The USA receives the largest amount of FDI, yet their economy is currently growing at only 0.8%.

FDI is a very important indicator of investor confidence.

FDI is an impetus to growth; a measure of likelihood of growth.

FDI does not guarantee growth.

I hope you know the difference between 'likelihood' and 'guarantee'.

 

[rollindays]

Consider two companies, Apple and Nokia.

Apple has $10,000 of liquid assets. (comparable to forex reserves in case of a country)

Nokia has $5,000 of liquid assets.

Apple has $2,000 out of $10,000 in the form of cash in its current account and $8,000 in the form of Gold.

Nokia has $3,000 out of $5,000 in the form of cash in its current account and $2,000 in the form of Gold.

Does that mean that Nokia is richer than Apple?

Hell no!

It just means that Nokia has more of its liquid assets in the form of cash than does Apple. In simple terms, Nokia has pocket change in the form of quarters. Apple has in bills of $100.

I hope you now understand the difference.

I understand it perfectly, but I don't understand why you would think this is necessarily the case with India & Pakistan though. It is understandable that India will have more overall cash than Pakistan, as it is 5 times larger in land size with 7 times the population of Pakistan, so yes, it will be richer, but you've got to look at things in the proper perspective.

Debt-GDP ratio is ambiguous and does not give a clear picture always.

Debt-GDP ratio can, though, indicate the prosperity of the citizenry of the country but that too not always.

I'm glad you agree that debt-GDP ratio indicates prosperity of the citizenry of the country.

Watch closely. You have intervals of $2.67 trillion in the graph.

India's forex reserves are around $320billion.

Pakistan's forex reserves are around $19 billion.

But since the interval is itself sooooooooooo large, hence, both India and Pakistan fall in the same interval.

Actually, India's Forex reserves were $284.1 billion for December 2010, whereas Pakistan's were $16.1 billion.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2188rank.html

While India is far better than Pakistan on the forex reserves count, India's external debt is $237.1 billion, whereas Pakistan's external debt is $57.2 billion. As a result of which, India's Forex - external debt comes out to be 284.1 - 237.1 = $+47 billion

Pakistan's result comes out to be 16.1 - 57.2 = $-41.1 billion

No doubt India has done better than Pakistan there, & this is not a comparison. But it isn't a huge difference. My point is, the US has foreign exchange reserves of only $143 billion, less than half of India's if you consider India's forex reserves to be $320 billion, whereas its external debt is $14,590 billion. In other words, the US has a net balance of $-14,447 billion (-14.447 trillion). Similar is the case with most countries in Europe. Does that mean that Europe & the US are faring worse than India or Pakistan?

GDP per capita is at most a measure of human indicators. It only tells that the average Pakistani produces more than an average Indian does.

It does not show, though, that Indians collectively produce far more than do Pakistanis.

The more the GDP, the more that trade volume.

The more the trade volume, the more influence a country exercises over another.

Take the case of China, India and Japan, for example.

China has far more trade with Japan than does India. Hence, China exercises far greater influence on Japan than does India.

Again, I was trying to point to you that Pakistan does far better than India on most human indicators, which I'm glad you agree with.

India's size being far greater than that of Pakistan is merely an excuse.

That does not change the fact that India DOES invite far greater FDI than does Pakistan.

More FDI means more money to grow.

India has more money to grow and hence, India has far better chance of growing and growing fast than does Pakistan.

So, India has 5 times the land area of Pakistan, as well as 7 times its population. Both of these are important factors when it comes to the FDI. If you give both these factors an equal weight, for the sake of rough calculations & estimations, the average of these two comes out to be 6. And India's FDI is about 6 times that of Pakistan as well, meaning things are pretty much at par. Where is the excuse?

 

[RiazHaq]

The World Bank Poverty Report on India came out in January 2011 and it compares India and Indian states with other developing nations.

Here it is:

It shows that India's poverty rate of 27.5%, based on India's current poverty line of $1.03 per person per day, is more than 10 percentage points higher than Pakistan's 17.2%. Assam (urban), Punjab and Himachal Pradesh are the only three Indian states with lower poverty rates than Pakistan's.

http://www-wds.worldbank.org/extern...d/PDF/574280PUB0Pers1351B0Extop0ID0186890.pdf

http://www.riazhaq.com/2010/08/63-years-after-independence-india.html

 

[Vibs]

Great analysis on this thread all round. Was interesting to see the different arguments. My 2 cents are that these statistics are merely numbers that can be represented in any way possible theoretically. Eventually it's the investor sentiment and ground realities that are real indicators of the economic status of a nation. From where I stand, India does have a considerable advantage in the global economic forum as compared to Pakistan.

 

[rollindays]

Great analysis on this thread all round. Was interesting to see the different arguments. My 2 cents are that these statistics are merely numbers that can be represented in any way possible theoretically. Eventually it's the investor sentiment and ground realities that are real indicators of the economic status of a nation. From where I stand, India does have a considerable advantage in the global economic forum as compared to Pakistan.

There is no doubt that India has got much bigger 'guns' than Pakistan, but it also has bigger problems, especially on the human indicators front, in my opinion. There is a reason why many Pakistani citizens aren't flipping out. Depends if you want to look at the glass half full or half empty. My two cents.

 

[Vibs]

There is no doubt that India has got much bigger 'guns' than Pakistan, but it also has bigger problems, especially on the human indicators front, in my opinion. There is a reason why many Pakistani citizens aren't flipping out. Depends if you want to look at the glass half full or half empty. My two cents.

India does have a long way to progress on the human indicators front. Hopefully,economic growth will try and correct that. If Pakistan does fare better (as your data indicates) it's good for Pakistan. But trust me both countries would like to focus on GDP growth rather than GNH growth through human indicators like Butan does (Gross National Happiness!!!!).

 

[Patrician]

The World Bank Poverty Report on India came out in January 2011 and it compares India and Indian states with other developing nations....]

Mr. Haq, I hope you do know that Pakistan's poverty is increasing while India's poverty is decreasing.

 

[muse]

There is no doubt that India has got much bigger 'guns' than Pakistan, but it also has bigger problems, especially on the human indicators front, in my opinion. There is a reason why many Pakistani citizens aren't flipping out. Depends if you want to look at the glass half full or half empty. My two cents.

Agree completely - While it's absolutely true that India is generally a safer investment than Pakistan and as a result greater amounts of FDI flow into India as compared to Pakistan, India's problem are of a scale to equal it's immense population.

But there is also another issue realetd with FDI - and that is the rate of savings - can somebody address that issue -

 

[Creder]

my friend today India talks and world listen, Pakistan bleeds and they dont even bother to nod...Our economy is tanked, aur khappay khappay kero

 

[Vibs]

Agree completely - While it's absolutely true that India is generally a safer investment than Pakistan and as a result greater amounts of FDI flow into India as compared to Pakistan, India's problem are of a scale to equal it's immense population.

But there is also another issue realetd with FDI - and that is the rate of savings - can somebody address that issue -

Rate of saving of both countries are being affected by inflation. Although down played in India,it has actually been affected for the past few years. But Pakistan's isn't really great either. India's fall of the rater of savings is sort of put off by the economic growth, but if inflation continues it can affect the FDI as return on investment would go down due to rising costs.
The Government of India is trying to rectify this by making borrowing more difficult and controlling inflation at the risk of slowing down growth.
I cannot give much analysis on Pakistan's side of the story.

 

[Maritimer]

Pakistan and India have more or less similar economic problems. But in recent years, India's growth story has widened the gap between the two countries. Some observations from recent trends;

1) While per-capita incomes have remained more or less equal for the two countries, Pakistan appears to have scored better in income distribution indicators. Pakistan has had only one census in the last 30 years, hence the population data is not reliable for calculating the per-capita income.
2) India's private sector has created massive wealth during the last decade or so. Reliance Industries alone has a market capitalization($53 billion) that is more than the market cap of all Pakistani companies ($34 billion) listed in KSE. Total market cap for India's listed companies in Bombay Stock Exchange is $1336 billion.
3) Services exports ($131 billion) have played a crucial role in India's growth story balancing the huge crude oil import bill ($110 billion) that India pays each year. On the other hand, Pakistan's services sector is exporting only about $4 billion.
4) Pakistan has very high inflation and interest rates, making it difficult for consumers to spend and for businesses to borrow. India faces similar problems, but is in a comparatively better position.
5) On the debt front, both countries have similar public debt to GDP ratios, but Pakistan's external debt ($60 billion) has grown alarmingly since 2008 and has been kept afloat by IMF loans to shore up the forex reserves ($18 billion, of which IMF portion can't be used). For India, the forex reserves at $318 billion can comfortably cover the entire external debt of $306 billion.
6) India has built itself a variety of industries ranging from automobile, steel, cement, software, media and entertainment. Pakistan seems to be stuck with its traditional textile and sugar industries.
7) Better tax collection and privatization has helped India in cutting fiscal deficit to 4.6%, but Pakistan has failed in raising taxes and runs a deficit of 6.2% which becomes unsustainable at high interest rates and low GDP growth.

The numbers are off my hat and are available on internet, pls correct me if they are way off the mark.

 

[rollindays]

Current account balance 2011:

Rank Country Value Date of Info
1 China $272,500,000,000 2010 est.
2 Japan $182,300,000,000 2010 est.
3 Germany $162,300,000,000 2010 est.
4 Russia $68,850,000,000 2010 est.
5 Norway $60,230,000,000 2010 est.
6 Saudi Arabia $52,030,000,000 2010 est.
7 Switzerland $49,350,000,000 2010 est.
8 Netherlands $46,690,000,000 2010 est.
9 Singapore $40,440,000,000 2010 est.
10 Taiwan $39,000,000,000 2010 est.
11 Kuwait $38,200,000,000 2010 est.
12 Korea, South $36,350,000,000 2010 est.
13 Malaysia $34,830,000,000 2010 est.
14 Nigeria $27,770,000,000 2010 est.
15 Venezuela $22,070,000,000 2010 est.
16 Sweden $21,680,000,000 2010 est.
17 Qatar $20,110,000,000 2010 est.
18 Hong Kong $18,070,000,000 2010 est.
19 Azerbaijan $15,960,000,000 2010 est.
20 Libya $15,530,000,000 2010 est.
21 Denmark $14,350,000,000 2010 est.
22 Thailand $12,290,000,000 2010 est.
23 Iran $9,760,000,000 2010 est.
24 Philippines $8,575,000,000 2010 est.
25 Indonesia $8,532,000,000 2010 est.
26 Austria $8,012,000,000 2010 est.
27 Brunei $7,024,000,000 2008 est.
28 Kazakhstan $6,993,000,000 2010 est.
29 Argentina $6,976,000,000 2010 est.
30 Israel $6,269,000,000 2010 est.
31 Uzbekistan $5,588,000,000 2010 est.
32 Finland $4,696,000,000 2010 est.
33 Algeria $3,959,000,000 2010 est.
34 Bangladesh $3,734,000,000 2010
35 United Arab Emirates $3,409,000,000 2010 est.
36 Luxembourg $3,396,000,000 2010 est.
37 Trinidad and Tobago $3,363,000,000 2010 est.
38 Turkmenistan $3,081,000,000 2010 est.
39 Oman $2,724,000,000 2010 est.
40 Iraq $2,715,000,000 2010 est.
41 Angola $2,089,000,000 2010 est.
42 Latvia $1,620,000,000 2010 est.
43 Lithuania $1,231,000,000 2010 est.
44 Timor-Leste $1,161,000,000 2007 est.
45 Chile $1,033,000,000 2010 est.
46 Bolivia $878,000,000 2010 est.
47 Burma $652,000,000 2010 est.
48 Syria $649,000,000 2010 est.
49 Ukraine $603,000,000 2010 est.
50 Gabon $591,000,000 2010 est.
51 Bahrain $589,000,000 2010 est.
52 Cote d'Ivoire $534,000,000 2010 est.
53 Egypt $270,000,000 2010 est.
54 Estonia $265,000,000 2010 est.
55 Bhutan $164,000,000 2008 est.
56 British Virgin Islands $134,300,000 1999
57 Cook Islands $26,670,000 2005
58 Suriname $24,000,000 2007 est.
59 Palau $15,090,000 FY03/04
60 Comoros $8,000,000 2007 est.
61 Guinea-Bissau -$6,000,000 2007 est.
62 Tuvalu -$11,680,000 2003
63 Kiribati -$21,000,000 2007 est.
64 Tonga -$23,000,000 2007 est.
64 Laos -$23,000,000 2010 est.
65 Samoa -$24,000,000 2007 est.
66 Micronesia, Federated States of -$34,300,000 FY05 est.
67 Iceland -$42,000,000 2010 est.
68 Anguilla -$42,870,000 2003 est.
69 Vanuatu -$60,000,000 2007 est.
70 Sierra Leone -$63,000,000 2007 est.
71 Dominica -$72,000,000 2007 est.
72 Sao Tome and Principe -$73,000,000 2010 est.
73 Central African Republic -$77,000,000 2007 est.
74 Cuba -$87,000,000 2010 est.
75 Gambia, The -$90,000,000 2010 est.
76 Zambia -$99,000,000 2010 est.
76 Papua New Guinea -$99,000,000 2010 est.
77 Lesotho -$125,000,000 2010 est.
78 Burundi -$136,000,000 2010 est.
79 Grenada -$138,000,000 2007 est.
80 Solomon Islands -$143,000,000 2007 est.
81 Saint Vincent and the Grenadines -$149,000,000 2007 est.
82 Belize -$151,000,000 2010 est.
83 Saint Kitts and Nevis -$163,000,000 2007 est.
84 Mauritania -$184,000,000 2007 est.
85 Namibia -$187,000,000 2010 est.
86 Saint Lucia -$199,000,000 2007 est.
87 Kyrgyzstan -$210,000,000 2010 est.
88 Antigua and Barbuda -$211,000,000 2007 est.
89 Eritrea -$212,000,000 2010 est.
90 Liberia -$224,000,000 2007
91 Mongolia -$228,700,000 2009 est.
92 Barbados -$254,000,000 2007 est.
93 Bahamas, The -$283,200,000 2009 est.
94 Cape Verde -$286,000,000 2010 est.
95 Guyana -$311,000,000 2010 est.
96 Malawi -$315,000,000 2010 est.
97 Niger -$321,000,000 2007 est.
98 Macedonia -$328,000,000 2010 est.
99 Tajikistan -$330,000,000 2010 est.
100 Peru -$333,000,000 2010 est.
101 Togo -$339,000,000 2010 est.
102 Seychelles -$351,000,000 2010 est.
103 Djibouti -$352,000,000 2009 est.
104 Maldives -$370,000,000 2009 est.
105 Swaziland -$374,000,000 2010 est.
106 Uruguay -$377,000,000 2010 est.
107 Paraguay -$391,000,000 2010 est.
108 Malta -$403,000,000 2010 est.
109 Zimbabwe -$414,200,000 2010 est.
110 Guinea -$434,000,000 2010 est.
111 Mali -$446,000,000 2007 est.
112 Nepal -$449,000,000 2010
113 Burkina Faso -$486,000,000 2010 est.
114 Rwanda -$489,000,000 2010 est.
115 Fiji -$507,000,000 2007 est.
116 Botswana -$552,000,000 2010 est.
117 Moldova -$565,000,000 2010 est.
118 Congo, Republic of the -$569,000,000 2010 est.
119 Benin -$582,000,000 2010 est.
120 Slovenia -$598,000,000 2010 est.
121 Madagascar -$600,000,000 2010 est.
122 Hungary -$631,000,000 2010 est.
123 Ecuador -$692,000,000 2010 est.
124 Haiti -$781,000,000 2010 est.
125 Uganda -$784,000,000 2010 est.
126 Panama -$813,000,000 2010 est.
127 Nicaragua -$819,000,000 2010 est.
128 Cameroon -$826,000,000 2010 est.
129 Bosnia and Herzegovina -$887,000,000 2010 est.
130 El Salvador -$907,000,000 2010 est.
131 Cambodia -$918,000,000 2010 est.
132 Mauritius -$949,000,000 2010 est.
133 Jordan -$975,000,000 2010 est.
134 Mozambique -$1,028,000,000 2010 est.
135 Senegal -$1,046,000,000 2010 est.
135 Serbia -$1,046,000,000 2010 est.
136 Honduras -$1,048,000,000 2010 est.
137 Montenegro -$1,102,000,000 2007 est.
138 Belgium -$1,129,000,000 2010 est.
139 Armenia -$1,138,000,000 2010 est.
140 Albania -$1,245,000,000 2010 est.
141 Guatemala -$1,345,000,000 2010 est.
142 Jamaica -$1,382,000,000 2010 est.
143 Tunisia -$1,389,000,000 2010 est.
144 Georgia -$1,404,000,000 2010 est.
145 Kenya -$1,414,000,000 2010 est.
146 Costa Rica -$1,469,000,000 2010 est.
147 Congo, Democratic Republic of the -$1,470,000,000 2007 est.
148 Equatorial Guinea -$1,477,000,000 2010 est.
149 Tanzania -$1,523,000,000 2010 est.
150 Bulgaria -$1,528,000,000 2010 est.
151 Sri Lanka -$1,784,000,000 2010 est.
152 Ghana -$1,871,000,000 2010 est.
153 Slovakia -$1,930,000,000 2010 est.
154 Yemen -$2,181,000,000 2010 est.
155 Ethiopia -$2,232,000,000 2010 est.
156 Croatia -$2,312,000,000 2010 est.
157 Afghanistan -$2,475,000,000 2009 est.
158 Cyprus -$2,500,000,000 2010 est.
159 Sudan -$2,595,000,000 2010 est.
160 Chad -$2,600,000,000 2010 est.
161 Pakistan -$2,641,000,000 2010 est.
162 Kosovo -$2,716,000,000 2010 est.
163 Ireland -$3,191,000,000 2010 est.
164 Dominican Republic -$3,862,000,000 2010 est.
165 New Zealand -$4,504,000,000 2010 est.
166 Belarus -$5,062,000,000 2010 est.
167 Colombia -$5,946,000,000 2010 est.
168 Czech Republic -$5,956,000,000 2010 est.
169 Lebanon -$6,972,000,000 2010 est.
170 Mexico -$7,000,000,000 2010 est.
171 Morocco -$7,922,000,000 2010 est.
172 Romania -$7,934,000,000 2010 est.
173 Vietnam -$9,622,000,000 2010 est.
174 Poland -$12,330,000,000 2010 est.
175 South Africa -$16,510,000,000 2010 est.
176 Greece -$17,100,000,000 2010 est.
177 Portugal -$19,030,000,000 2010 est.
178 India -$26,910,000,000 2010 est.
179 Australia -$35,230,000,000 2010 est.
180 Turkey -$38,820,000,000 2010 est.
181 Canada -$40,210,000,000 2010 est.
182 United Kingdom -$40,340,000,000 2010 est.
183 Brazil -$52,730,000,000 2010 est.
184 France -$53,290,000,000 2010 est.
185 Italy -$61,980,000,000 2010 est.
186 Spain -$66,740,000,000 2010 est.
187 United States -$561,000,000,000 2010 est.


http://www.photius.com/rankings/economy/current_account_balance_2011_0.html

 

[RiazHaq]

Nominal per capita incomes in both India and Pakistan stand at just over $1200 a year, according to figures released in May and June of 2011 by the two governments. This translates to about $3100 per capita in terms of PPP (purchasing power parity).

Nominal per capita income of Indians grew by 17.9 per cent to Rs 54,835, or $1218, in 2010-11 from Rs 46,492 in the year-ago period, according to the revised data released by the government in May, 2011 as reported by Indian media.

In June 2011, Economic Survey of Pakistan reported that the nominal per capita income of Pakistanis rose 16.9 percent to $1,254 in 2010-11, up from $1,073 in 2009-2010.



Neither of these figures are adjusted for inflation which has been running in high single digits in India (about 9%) and double digits in Pakistan (about 14%).

Looking at the increase in nominal per capita income alone can be quite misleading in judging the health of any economy. Other indicators, such as real GDP growth and investments, show that the state of Pakistan's economy is very poor. The nation's GDP grew only 2.4% in real terms in 2010-2011. Domestic investment dropped to a 40-year low of 13.4% of GDP, and foreign direct investment (FDI) declined by 29 percent to $1.232 billion during July-April 2010-11 from $1.725 million in the same period a year earlier.

In addition to improved security environment, Pakistan has an urgent need for serious economic reform, greater social justice and better governance. Unless the PPP government acts to improve this situation, no amount of foreign aid, external loans and other help will suffice. The first step in the process is for the ruling elite to lead by example by paying their fair share of taxes and adopting less extravagant personal lifestyles to get Pakistan's fiscal house in order.

Haq's Musings: India and Pakistan Per Capita GDPs at $3,100 in 2010-11