25 June 2004
The Finance Ministry of Pakistan came out with the Annual Economic Survey last week, and it offered both a huge surprise, and an explanation for an economic mystery that had developed over the last seven years. The mystery was how did India’s economy, measured on a per person (commonly called per capita) basis, become so much larger than Pakistan’s?
After the first 45 years of growth, Pakistan had enjoyed a faster rate of growth resulting in a higher per capita GDP (gross domestic product) than India. Since 1991, India has grown faster than Pakistan, but it started from far behind. However, about 1998, India’s statistics surged past Pakistan, and widened their lead through the next several years. By 2003, India had a GDP per capita of 500 dollars, while Pakistan, depending on the source, was about 450. Measured using an alternative technique that takes into account the lower costs of services and labor in poor countries (i.e. a haircut in Pakistan does not cost 15 dollars) to more accurately reflect purchasing power, India was listed as being way ahead at 2800 dollars versus only 1900 for Pakistan.