Chapter – 10

Comparative Development Experiences of India

and its Neighbours
We will be comparing the development strategies and the state of economic growth and its
sectors of India and its neighbouring state i.e. Pakistan and China.

Type of Economy
 India is the largest democracy of the world also with the elements of secular and liberal
Constitution.
 Pakistan has the militarist political power structure of economy.
 China had the command (socialist) economy and has recently only started moving towards a
democratic system and more liberal economic restructuring.

Year of Independence
 India became independent nations in 1947.
 Pakistan became independent nations in 1947.
 People’s Republic of China was established in 1949.

First Five Year Plan

All three countries had started planning their development strategies in similar ways.
 India announced its first Five Year Plan for 1951–56.
 Pakistan announced its first Five Year Plan, now called the Medium Term Development Plan,
in 1956.
 China announced its First Five Year Plan in 1953.

Current Five Year Plan

 Until March 2017, India has been following Five Year Plan- based development model.
 Pakistan, since 2013, is working on the basis of 11th Five Year Development Plan (2013–18)
 China is now working on 13th Five Year Plan (2016–20).

India and Pakistan adopted similar strategies, such as creating a large public sector and raising
public expenditure on social development. Till the 1980s, all the three countries had similar growth
rates and per capita incomes.

Basis India Pakistan China

Type of Economy Democratic Military Command
Year of Independence 1947 1947 1949
First 5 Year Plan 1951 1956 1953
Current 5 Year Plan NA 11th 13th

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Comparative Development Experiences of India and its Neighbours

HISTORICAL BACKGROUND OF CHINA

After the establishment of People’s Republic of China under one party rule, all critical sectors of
the economy, enterprises and lands owned and operated by individuals were brought under
government control. Basically, it was a socialist economy.

1. Great Leap Forward (GLF) campaign - In 1958, a Programme named ‘The Great Leap
Forward (GLF)’ campaign was initiated by Mao to modernize China's economy.
 The aim of this campaign was to transform agrarian economy into a modern economy
through the process of rapid industrialization.
 Under this Programme, people were encouraged to set up industries in their backyards.
 In rural areas, communes were started. Under the Commune system, people collectively
cultivated lands. In 1958, there were 26,000 communes covering almost all the farm
population.
 GLF campaign met with many problems. A severe drought caused havoc in China killing
about 30 million people.

2. Great Proletarian Cultural Revolution - In 1965, Mao introduced the Great Proletarian
Cultural Revolution (1966-76), under which students and professionals were sent to work
and learn from the countryside. However, when Russia had conflicts with China, it withdrew
its professionals, who had earlier been sent to China to help the industrialization process.

3. Reforms Introduced in China

 The present day fast industrial growth in China can be traced back to the reforms
introduced in 1978 China introduced reforms in phases.
 In the initial phase, reforms were initiated in agriculture, foreign trade and investment
sectors.
- In agriculture commune lands were divided into small plots which were allocated
(only for use and not as ownership) to the individual households.
- They were allowed to keep all income from the land after paying stipulated taxes.
 In the later phase, reforms were initiated in the industrial sector.
- Private sector firms and township and village enterprises (enterprises which were
owned and operated by local collectives) were allowed to produce goods.
- At this stage, enterprises owned by government (known as State Owned Enterprises
or SOEs), were made to face competition.

 Dual pricing in the Reforms Process - The reform process also involved dual pricing.
This means fixing the prices in two ways:
 Farmers and industrial units were required to buy and sell fixed quantities of inputs
and outputs on the basis of prices fixed by the government.
 For other transactions, the inputs and outputs were purchased and sold at market
prices.

 Special Economic Zones (SEZ): In order to attract foreign investors, special economic
zones were set up.

Year Event
1958 Great Leap Forward (GLF) campaign
1965 Great Proletarian Cultural Revolution
1978 Economic Reforms

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Comparative Development Experiences of India and its Neighbours

HISTORICAL BACKGROUND OF PAKISTAN

 Mixed Economic System: Pakistan follows the mixed economy model with co-existence of
public and private sectors.

 Introduction of various Policies: In the late 1950s and 1960s, Pakistan introduced a variety
of regulated policy framework for growth of domestic industries. The policy combined tariff
protection for manufacturing of consumer goods, together with direct import controls on
competing imports.

 Green Revolution: In case of agriculture, the introduction of Green Revolution and increase
in public investment in infrastructure led to a rise in the production of food grains. This
changed the agrarian structure dramatically.

 Importance to Role of Public Sector in early 1970s: In the early 1970s, nationalisation of
capital goods industries took place.

 Importance to Role of Private Sector in late 1970s: In the late 1970s and 1980s, there
was a shift in the government policy, when it adopted the policy of denationalisation.
Government encouraged the private sector and also offered various incentives to them. All
this created a conducive climate for new investments.

 Financial Support during late 1970s: During this period, Pakistan also received financial
support from: (i) Western nations; and (ii) Remittances from emigrants to the Middle-east.
This helped the country in stimulating economic growth.

 Reforms: In 1988, reforms were initiated in the country.

Year Events
Late 1950s and 1960s Policy for growth of domestic industries
Early 1970s Nationalisation of Capital goods
Late 1970s and 1980s Denationalisation of Capital goods and financial support.
1988 Economic Reform

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Comparative Development Experiences of India and its Neighbours

DEMOGRAPHIC INDICATORS

Estimated Annual
Density
Population Growth Fertility
Country (per sq. Sex Ratio Urbanisation
(in Rate of Rate
km)
millions) Population
India 1352 1.03 455 924 2.2 34

Pakistan 212 2.05 275 943 3.6 37

China 1393 0.46 148 949 1.7 59

Demographic Indicators, 2017-18

1. Population - Out of every six persons living in the world, one is an Indian and another
Chinese. The population of Pakistan is very small and accounts for roughly about 1/10 th
population of China or India.
China is the most populous country in the world with 1393 million people and India is the
second most populated country with 1352 million people. Pakistan population is very less
with 212 million people.

2. Annual Growth Rate of Population - The population growth as being the highest in
Pakistan, followed by India and China.
The reason is one child norm introduced in China in the late 1970s as the major reason for
low population growth. But it had other implications also. For instance, after a few decades,
in China, there will be more elderly people in proportion to young people. This led China to
allow couples to have two children.

3. Density - Though China is the largest nation and geographically occupies the largest area
among the three nations, its density is the lowest as the population growth rate is lowest
compared to India and Pakistan due to one child policy norm.

4. Sex Ratio - The reason is one child norm introduced in China also led to decline in its sex
ratio. The sex ratio is lower and biased against in all the three countries and all the three
countries preferred having a son.

5. Fertility Rate – It is calculated as the number of children borne by a woman in a

reproductive age (15-45 years) on an average. Fertility rate is also low in China and very high
in Pakistan.

6. Urbanisation - Urbanisation is high in China with 56%, Pakistan with 39% and India having
33% of its people living in urban areas. The degree of urbanisation depicts the standard and
quality of living of people of a particular country. Higher degree of urbanisation reveals
higher industrialisation and development of tertiary sector in the economy.

Thus to sum up, although China is the larges t populated country but its other demographic
indicators are stronger than those of both India and Pakistan. It would not be wrong to expect a
decline in China’s population in the coming decades due to implementation of various policy
measures and also due to low annual growth rate of population.

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Comparative Development Experiences of India and its Neighbours

GROWTH INDICATORS
GROWTH RATE OF GROSS DOMESTIC PRODUCT (GDP)

DATA as per 1980-90

 China’s GDP (PPP) is $22.5 trillion. (It had the 2nd largest GDP in the world.)
 India’s GDP (PPP) is $ 9.03 trillion. (India’s GDP is about 41% of China’s GDP.)
 Pakistan’s GDP is $ 0.94 trillion. (Pakistan GDP is roughly about 11% of India’s GDP.)

COUNTRY 1980-90 2015-17

India 5.7 % 7.3 %
Pakistan 6.3 % 5.3 %
China 10.3% 6.8%
Annual Growth of Gross Domestic Product (%), 1980–2017

 When many developed countries were finding it difficult to maintain a growth rate of even 5%,
China was able to maintain near double-digit growth for one decade (1980-1990) of 10.3%.
 In the 1980s, Pakistan was ahead of India, China was having double-digit growth and India
was at the bottom.
 In 2015–17, there has been a decline in Pakistan and China’s growth rates, whereas, India
met with moderate increase in growth rates.
 The reform processes introduced in Pakistan and political instability over a long period was
the reasons behind the declining growth rate in Pakistan.
 The successful implementation of India’s economic reform and its economic policy in recent
years led to its increase in growth rate.

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Comparative Development Experiences of India and its Neighbours

SECTORAL SHARE OF GROSS VALUE ADDED AND EMPLOYMENT

Contribution to GVA Distribution of Workforce

Sector
India Pakistan China India Pakistan China
Agriculture 16 24 7 43 41 26
Industry 30 19 41 25 24 28
Services 54 57 52 32 35 46
Total 100 100 100 100 100 100

Sectoral Share of GVA and Employment (%) in 2018–2019

AGRICULTURAL SECTOR
 In China, due to topographic and climatic conditions, the area suitable for cultivation is only
about 10% of its total land area. The total cultivable area in China accounts for 40% of the
cultivable area in India.
 Until the 1980s, more than 80% of the people in China were dependent on farming as their
sole source of livelihood. Since then, the government encouraged people to leave their fields
and pursue other activities such as handicrafts, commerce and transport.
 In 2018–19, the proportion of workforce reduced to 26% and its contribution to the GVA in
China is 7%.

 The contribution of agriculture in GVA of India was 16% but the proportion of workforce was
very high of 43%.

 In Pakistan, the contribution of agriculture in GVA was 24% and about 41% of people work in
agriculture.

MANUFACTURING & SERVICE SECTOR

 In China, manufacturing contribute to GVA at 41% with 28% of the workforce. The
proportion of workforce engaged in manufacturing in India and Pakistan were low at 25% and
24% respectively. The contribution of industries to GVA is at 30% in India and 19% in
Pakistan.

 In the normal course of development, countries first shift their employment and output from
agriculture to manufacturing and then to services. This is what is happening in China. In
India and Pakistan, the shift is taking place directly to the service sector. Thus, in both India
and Pakistan, the service sector is emerging as a major player of development. It contributes
more to GDP and, at the same time, emerges as a prospective employer.

 In all the three countries, the service sector contributes the highest share of GVA. China
contributes 52%, where as in India and Pakistan, it is the service sector contributes 54% and
57%.

 In the1980s, Pakistan was faster in shifting its workforce to service sector than India and
China. In the 1980s, India, Pakistan and China employed 17%, 27% and 12% of its workforce
in the service sector respectively. In 2019, it has reached the level of 32%, 35% and 46%,
respectively.

The sectoral share of output and employment also shows that in all three economies, the industry
and service sectors have less proportion of workforce but contribute more in terms of output.

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Comparative Development Experiences of India and its Neighbours

TREND ANALYSIS OF THE GROWTH IN DIFFERENT SECTORS

1980-90 2014-18
Country
Agriculture Industry Service Agriculture Industry Service
India 3.1 7.4 6.9 3.1 6.9 7.6
Pakistan 4 7.7 6.8 1.7 4.8 5.0
China 5.9 10.8 13.5 3.1 5.3 7.1

Trend in Output Growth in different sectors, 1980-2018. (%)

 From 1980-90 to 2014-18, the growth of agriculture sector, which employs the largest
proportion of workforce in all the three countries, has been declining. However, India still
manages to keep a stable growth rate of 3.1% during this period.

 In the industrial sector, China, which has maintained a near double-digit growth of 10.8%
rate on 1980s, began to show a decline in the recent years and reached 5.3%, whereas for
India and Pakistan growth rate has declined to 6.9% and 4.8% respectively..

 In case of service sector, China’s growth rate declined from 13.5% to 7.1%, though it is still
the highest growth rate of all the sectors. In India also, there was positive and increasing
growth from 6.9% to 7.6%. However, Pakistan’s growth rate declined from 6.8% to 5% from
1980-2018.

 Thus, China’s growth is mainly contributed by the manufacturing and service sectors and
India’s growth by the service sector. During this period, Pakistan has shown deceleration in
all three sectors.

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Comparative Development Experiences of India and its Neighbours
INDICATORS OF HUMAN DEVELOPMENT

Items India Pakistan China

Human Development Index (Value) 0.647 0.56 0.758

Rank 129 152 85

Life Expectancy at Birth 69.4 yrs 67.1 yrs 76.7 yrs

Mean Years of Schooling (% age 15 and above) 6.5 5.2 7.9

Gross National Income per capita (PPP) $ 6,829 $ 5,190 $ 16,127

People Below Poverty Line (at $3.2 a day PPP) 60.40% 46.40% 7.0%

Infant Mortality Rate (per 1000 live births) 29.9 57.2 8.5

Maternal Mortality Rate (per 1 lakh births) 174 178 27

Population using at least basic Sanitation (%) 60 60 75

Population using at least basic drinking water
93 91 96
Source (%)
Percentage of Undernourished Children 37.9 37.6 8.1

Some Selected Indicators of Human Development, 2015–2018

 Human Development Index - HDI is an important indicator to study the human development.
Higher value of HDI shows the higher level of growth and development of a country.
 In 2018, HDI for India, Pakistan & China was estimated to be 0.647, 0.56 and 0.758
respectively.
 According to their HDI, global ranks accorded were found to be 129, 152 and 85
respectively.

 Life Expectancy at Birth - Life Expectancy refers to the average number of years for which
people are expected to live. A higher life expectancy indicates longer and more active average
lifespan.
China has the highest life expectancy of 76.7 years. India and Pakistan have the life
expectancy of 69.4 and 67.1 years respectively.

 Infant Mortality Rate - Infant Mortality Rate refers to a number of infants dying before
reaching one year of age per 1000 live births in a year.
Low IMR shows better health and sanitation facilities as most of the infants die due to
unhygienic and insanitary environments.
It is lowest in China and highest in Pakistan.

 People Below Poverty Line - People below the poverty line are the people who do not even
have that level of income and expenditure, which is necessary to meet specified minimum levels
of calorie intake. People below poverty line are 60.4%, 46.4% and 7.0% for India, Pakistan
and China respectively.

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Comparative Development Experiences of India and its Neighbours
 Maternal Mortality Rate - Both India and Pakistan have not been able to save women from
maternal mortality. In China, for one lakh births, only 27 women died, whereas in India and
Pakistan, maternal mortality rate is 174 and 178 respectively.

 GNP Per Capita - Higher ranking of China in HDI is mainly due to higher GDP per capita. In
2016, China’s GDP per capita was estimated to be US $ 16,127, while it was just US $6,829
for India and US $ 5,190 for Pakistan.

o Hence, we can see that China is moving ahead of India and Pakistan. This is true for many
indicators - income indicator such as GDP per capita, or proportion of population below
poverty line or health indicators such as mortality rates, access to sanitation, literacy, life
expectancy or malnourishment.

o Pakistan is ahead of India in reducing proportion of people below the poverty line and also its
performance in sanitation.

LIBERTY INDICATORS
Although Human Development Indicators are all extremely important indicators but these are
not sufficient. Along with these, we also need liberty indicators.

It acts as a measure of the extent of democratic participation in social and political

decision-making.
Some of the liberty indicators are:-
 Measures of the extent of Constitutional protection given to rights of citizens.
 Measures of the extent of Constitutional protection of the Independence of the Judiciary and
the Rule of Law.

Without including these, the construction of a human development index may be said to be
incomplete and its usefulness limited.

DEVELOPMENT STRATEGIES — AN APPRAISAL

CHINA
China had reforms initiated in 1978. However, China did not have any compulsion to introduce
reforms as dictated by the World Bank and International Monetary Fund to India and Pakistan.

Pre Reform Period

 There had been massive extension of basic health services in rural areas.
 Through the commune system, there was more equitable distribution of food grains.
 In 1978, the then government of China was not satisfied with the slow pace of economy and
lack of modernisation and the Maoist rule. They felt that Maoist vision of economic
development based on decentralisation, self-sufficiency and barring of foreign technology,
goods and capital had failed.
 Despite extensive land reforms, collectivisation, the great leap forward and other initiatives,
the per capita grain output in 1978 was the same as it was in the mid-1950s.
 As a result, a number of reform measures were introduced in 1978.

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Post Reform Period
 The various reform measures lead to rapid growth in China. 
 Each reform measure was first implemented at a smaller level and then extended on massive
scale. 
 Development of infrastructural facilities in the areas of education and health, land reforms,
long existence of decentralised planning and existence of small enterprises helped positively
in improving the social and income indicators. 
 Agricultural reforms (handing over plots of land to individuals for cultivation) brought
prosperity to a vast number of poor people. It created conditions for the subsequent
phenomenal growth in rural industries and built up a strong support base for more reforms.

PAKISTAN
In Pakistan the reforms took place in 1988. The reform process lead to worsening all the
economic indicators. As compare to 1980s, the growth rate of GDP and its sectoral constituents
decreased in the 1990s. The proportion of poor in 1960s was more than 40% with decline to 25%
in 1980s and started rising again in 1990s.

The reason for the slowdown of growth and re-emergence of poverty in Pakistan's economy are:
 Agricultural growth and food supply situation was based on good harvest and not on
institutionalised process of technical change. When there was a good harvest, the economy
was in good condition, when it was not, the economic indicators showed stagnation and
negative trends.

 Foreign exchange is an angel component for any country and it is always preferred to build
foreign exchange reserves through export of manufactured goods. However, in Pakistan, most
of the foreign exchange earnings came from remittances from Pakistani workers in the Middle
East and the exports of highly volatile agricultural products.

 There was growing in dependence on foreign loans on the one hand and increasing difficulty
in paying back the loans on the other.

However, during the last few years, Pakistan has recovered its economic growth and has been
sustaining. As per annual plan of 2018-19, the GDP registered a growth of 5.5% in 2017-18,
highest when compared to the previous decade. While agriculture recorded growth rate far from
satisfactory level, industrial and service sectors grew at 4.9% and 5.2% respectively. Many
macroeconomic indicators also began to show stable and positive trends.

Various Regional Groups

Regional and economic groups are formed by nations to strengthen their economies by close
cooperation and by knowledge sharing.

Some important Global Economic Groups are:-

 SAARC - South Asian Association for Regional Cooperation
 BRICS - Brazil, Russia, India, China and South Africa
 ASEAN -  Association of Southeast Asian Nations
 European Union
 G-8
 G-20

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CONCLUSION
India, China and Pakistan have travelled more than five decades of development path with
various results. Till the late 1970s, all of them were maintaining the same level of low
development. The last three decades have taken these countries to different levels.

INDIA
 Indian economy performed moderately, but majority of its people still depends on
agriculture. 
 Infrastructure is lacking in many parts of the country. 
 It is yet to raise the standard of living of more than one-fourth of its population that lives
below poverty line.

PAKISTAN
 Political instability, over dependence on remittances and foreign aid along with volatile
performance of agricultural sector are the reasons for the slowdown of the Pakistan
economy. 
 In the recent past, it is hoping to improve the situation by maintaining high rates of GDP
growth. 
 Many macroeconomic indicators began showing positive and higher growth rates reflecting
the economic recovery.

CHINA
 In China, the lack of political freedom and its implications for human rights are major
concerns. 
 However, in the last three decades, it used the 'market system without losing political
commitment' and succeeded in raising the level of growth along with elevation of poverty.
 China uses the market mechanism to create additional social and economic opportunities. 
 By retaining collective ownership of land and allowing individuals to cultivate land, China has
ensured social security in rural areas. 
 Public intervention and providing social infrastructure brought positive results in human
development indicators in China.

A Handbook on Indian Economic Development Study Circle

Comparative Development Experiences of India and its Neighbours

A Handbook on Indian Economic Development Study Circle