Chapter 8 — Comparative Development Experiences of India and Its Neighbours

Chapter 8 compares the developmental experiences of India, China, and Pakistan. It examines their historical policy choices, demographic trends, sectoral GDP and employment data, and human development indicators to assess why the three neighbours — despite similar starting points — have reached very different levels of development today.

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. Till the 1980s, all three countries had similar growth rates and per capita incomes.

The Great Leap Forward (GLF) was a campaign initiated by China in 1958 to industrialise the country on a massive scale. People were encouraged to set up industries in their backyards, and 26,000 rural communes were started. The campaign failed due to a severe drought that killed about 30 million people, and Russia withdrawing its professionals who had been helping with industrialisation.

China's 1978 reforms began in agriculture, foreign trade, and investment. Commune lands were divided into small plots allocated to individual households, who kept income after paying taxes. Later, private sector firms and township and village enterprises were allowed to produce goods, state-owned enterprises faced competition, dual pricing was introduced, and special economic zones were set up to attract foreign investors.

China has the second-largest GDP (PPP) of $35 trillion in the world. India's GDP (PPP) is $15 trillion — about 42 per cent of China's GDP. Pakistan's GDP is $1.5 trillion, roughly 10 per cent of India's GDP.

China leads with an HDI of 0.797 (rank 78), life expectancy of 78 years, infant mortality of 4.8 per 1,000 live births, and practically zero population below the poverty line. India's HDI is 0.685 (rank 130) with infant mortality at 25.5 and maternal mortality at 103 per lakh births. Pakistan has the lowest HDI at 0.544 (rank 168), with infant mortality at 51 and maternal mortality at 154 per lakh births.

China introduced the one-child norm in the late 1970s, which scholars identify as the major reason for its very low annual population growth rate of −0.10% and fertility rate of 1.2. However, the policy also led to a decline in the sex ratio (proportion of females per 1,000 males). It also created an imbalance where there would be more elderly people than young, which later led China to allow couples to have two children.

Scholars cite several reasons: Pakistan's agricultural growth depended on good harvests rather than institutionalised technical change, so poor harvests led to economic stagnation. Most foreign exchange earnings came from remittances from Pakistani workers in the Middle-east and exports of volatile agricultural products, combined with growing dependence on foreign loans. Political instability over a long period is also cited as a major reason.

Liberty indicators are measures of freedom and rights that the chapter argues should complement standard human development indicators. Examples include the extent of democratic participation in social and political decision-making, constitutional protection of citizens' rights, independence of the judiciary, and rule of law. The chapter notes that without including these, the human development index is incomplete and its usefulness limited.

In 2022, services contribute the highest share of GDP in all three countries (India 54%, China 54%, Pakistan 55%). Agriculture employs 43% of India's workforce but contributes only 18% of GVA, while China's 23% agricultural workforce contributes just 8% of GVA. China's industrial sector is strongest, contributing 38% of GVA with 32% of the workforce, compared to India's 28% and Pakistan's 21%.

Pakistan followed a mixed economy model. In the late 1950s and 1960s it used import substitution-based industrialisation with tariff protection for consumer goods. The Green Revolution brought mechanisation and increased food grain production. In the 1970s, capital goods industries were nationalised. Then in the late 1970s–1980s, the policy shifted to denationalisation and private sector encouragement, aided by remittances from emigrants to the Middle-east and financial support from western nations. Reforms were initiated in 1988.

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The chapter mentions SAARC, the European Union, ASEAN, G-8, G-20, and BRICS as examples of regional and global economic groupings that nations are forming to strengthen their domestic economies and understand developmental processes of their neighbours.