Poverty has long plagued both India and Pakistan, two neighbours with shared histories and many would argue intertwined fates. Yet, as the years have unfolded, their economic trajectories have diverged.
For those with an interest in political economy such as myself, the trajectory both countries have taken paint a fascinating picture of contrasting choices and outcomes. Pakistan, despite its slower economic growth, which has seen many ebbs and flows, has on average outperformed India in what I feel are key areas such as achieving lower inequality, generating household assets more equitably, and ensuring greater happiness among its citizens.
I understand that to take this position is controversial given the current atmosphere where India is presented as beacon of growth and Pakistan in many ways a basket case of failed growth. My study of economic and social data, however, compels me to go beyond what is in the news regarding both the countries and to bring out what is borne by data even if it contradicts the dominant narrative.
In some ways this article is prompted by the view taken by Pakistani economists (for full disclosure I am not an economist by training) who often adopt a pessimistic view of the country's economic progress, focusing on its slower GDP growth compared to India. However, this perspective may overlook an important nuance: Pakistan’s more modest growth rate has coincided with lower inequality and a stronger capacity for asset generation and generally higher wellbeing as measured by happiness index.
In many ways, one could argue that the quality of economic growth in Pakistan has been better than India in achieving socially compatible objectives and goals. I am in no way suggesting that Pakistan does not have its set of challenges (there is no shortage of people who have pointed them in media and academia). What I am however suggesting is that Pakistan’s growth trajectory has followed its own local logic and that logic has delivered in terms of lower inequality (despite growth – an anomaly in usual economic trajectories countries have followed) , higher assets generation (when it comes to comparison with India) and most importantly wellbeing as measured through happiness and its various indicators .
Since the 1980s, India has experienced remarkable economic growth. Reforms in the early 1990s unlocked its potential, driving its GDP upward and lifting millions out of poverty. By 2021, only about 12.92 per cent of Indians lived in poverty, a massive reduction from 54 per cent in 1980. This progress was fueled by industrial expansion, urbanisation and technological innovation. However, with rapid growth came a downside: inequality surged. India’s Gini coefficient, a measure of income inequality, rose from approximately 31 in 1983 to 36.3 in 2021, underscoring the uneven distribution of wealth and emphasising Pakistan’s relative success in maintaining economic fairness.
Pakistan's journey, in contrast, has been marked by slower progress. In 1980, around 40 per cent of Pakistanis lived in poverty. By 2021, that figure had declined to approximately 21 per cent. Unlike India’s industry-driven boom, Pakistan's poverty reduction has leaned heavily on agriculture-led growth, remittances from overseas workers, and government support programmes such as the Benazir Income Support Program.
Another hallmark of this growth has been small businesses. Latest estimates by Gallup Pakistan suggest around four million to five million such small and micro businesses have enjoyed relatively low regulation environment, worked under the radar and in many ways evaded taxes but created prosperity for their families.
While its GDP growth has lagged behind India’s, Pakistan has maintained a more stable level of inequality. Pakistan’s Gini coefficient has fluctuated slightly but remained relatively stable at around 30.7, reflecting its success in preventing extreme wealth disparities. This stability
has in many ways largely protected Pakistani society from the negative effects of fast modernising societies which lead to a breakdown of social cohesion, and a general atomisation of society.
A crucial factor underlying Pakistan’s economic trajectory is what I call lower equilibrium. Unlike India, where aspirations for upward mobility and rapid growth are more pronounced, Pakistan has settled into a lower equilibrium. This means that many Pakistanis may be less receptive to the disruptive effects of high growth, which can exacerbate inequality and create a sense of instability.
In a lower equilibrium, economic expectations are modest, and communities often rely more on informal support systems rather than formal financial structures. This resilience contributes to social stability and overall contentment. Rather than pursuing aggressive growth at the risk of rising inequality, Pakistan has prioritised a more gradual and equitable form of progress.
Moreover, Pakistan's economic structure is characterised by the dominance of small and medium-sized enterprises (SMEs) rather than large multinational corporations. Unlike India, which has developed a robust industrial sector with large conglomerates, Pakistan's exports are driven by a dispersed network of smaller firms. This lack of export concentration means there is no overwhelming reliance on a few dominant industries, contributing to a more resilient, albeit slower-growing, economy. While this fragmentation limits the potential for rapid large-scale industrial expansion and achieving efficiency and higher productivity, it also mitigates the risks of market monopolisation and enhances economic inclusivity. In many ways, the economic pie has not expanded as much as India but people in general have learnt to share the pie and enjoy it more.
Household asset ownership offers a unique lens into economic wellbeing. Recent surveys suggest that Indian households generally own more assets than their Pakistani counterparts, especially in urban areas. India’s Household Asset Index (HAI) stands at 64.2 compared to Pakistan’s 53.4 in urban regions. In rural areas, the gap persists, with India’s HAI at 47.2 versus Pakistan’s 37.6. However, the disparity in asset ownership is notably smaller than the income gap. India’s per capita income is 57 per cent higher than Pakistan’s, but its asset ownership advantage is only 11 per cent. Similarly, India's Gini coefficient is 18.2 per cent higher than Pakistan's, reflecting greater income inequality. These comparisons highlight Pakistan's more equitable economic environment, where even with lower growth, wealth is more evenly distributed.
While GDP growth is often used as the primary measure of progress, wellbeing and happiness offer a more comprehensive view of development. Despite its lower economic growth, Pakistan consistently ranks higher than India in global happiness index rankings. According to the 2024 World Happiness Report, Pakistan ranked 108th with an average life evaluation score of 4.6, significantly higher than India's 126th position with a score of 4.0. Factors such as stronger community bonds, cultural cohesion and informal support networks contribute to this trend.
The report highlights that 72 per cent of Pakistanis report having someone to count on in times of trouble, compared to 60 per cent of Indians. Fifty per cent of Pakistanis expressed satisfaction with their freedom to make life choices, while in India only 43 per cent reported the same. In terms of generosity, 30 per cent of Pakistanis donated to charity in the past month compared to 21 per cent of Indians. These numbers emphasise Pakistan's success in fostering a more connected, supportive and happier society.
The contrasting experiences of India and Pakistan offer valuable lessons. Rapid economic growth can indeed lift millions out of poverty, but without inclusive policies, inequality can soar, creating a sense of relative poverty.
Ultimately, Pakistan’s trajectory may hint towards a home-grown economic model — a model where growth is not pursued at all costs, but rather balanced with social stability and equitable wealth distribution. Pakistani economists and in general its intellectual class have tried their best to steer the nation towards the path taken by likes of South Korea (high growth, high inequality, and the bouquet of good and bad that comes with modernity).
For seven decades, Pakistan has failed to fulfill that dream. Instead of taking the burden on themselves or putting it on government, perhaps there is a need for reflection that Pakistani society does not want a high growth, high inequality, state led, high tax and high service delivery model. Could the difference in Pakistan’s performance on the economic indicators vis a vis peer nations (such as India or even Korea) be explained by a difference in social values?
As a nation we need to look deeper to see if there is an indigenous growth model that is better attuned to the aspirations of the Pakistani public.
The writer has a master’s in international politics from SOAS, London, and is the executive director at Gallup Pakistan.
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