India is seven times bigger than Pakistan both in population and in size. From 1960 to 1990, Pakistan was in a dominant position because its economy was stronger than that of India, growing at an average of 6 percent while Indian growth was less than 3 percent. It was during this period that insurgency in India was widespread. Kashmiri freedom fighters and Sikh militants kept the Indian armed forces busy and the Indian economy continued to bleed. Indian military might at that time was five times than of Pakistan, but the size of its economy was three times that of Pakistan. Its per capita income was half than that of Pakistan. Poverty was much higher in India than in Pakistan.
The situation has changed in the past 25 years. India is not only militarily strong, but has also become a major global economy. Its current GDP growth rate is the highest in the world. In fact, its average growth rate in the past one decade has been twice the average growth rate of Pakistan. This is the reason that it is now in the driving seat in the region. It is funding insurgency in Pakistan which bleeds Pakistan’s economy. It is adding ten times more to its GDP every year than what Pakistan adds annually. Because of its huge size, the higher growth in India is widening the economic gap with Pakistan. If Pakistan wants to restore its economic dominance it will have to grow three times at the pace at which India is currently growing. This is an uphill task as no country has ever grown consistently at average of 21 percent per annum.
Our politicians should realize the gravity of the situation and forge complete unity on the economic policies to ensure consistency of those policies. We may not be able to catch up economically with India in the near future, but we could at least grow at the same pace or a little higher than the pace of Indian economic growth. That will, at least, ensure that the economic gap between the two countries would not widen further.
It is because of our economic weakness that the Indian media and its trade bodies continue to advise their government that instead of diplomacy India should use its economic strength to trigger a change in Pakistan. The Indian government seems to be heeding its advice.
It is high time for Pakistani planners and entrepreneurs to take a cue from recent measures taken by the Indian government to squeeze Pakistan economically. The government, on its part, should listen to the genuine grievances of the private sector and, if convinced, should issue necessary orders forthwith. The current practice of reaching an agreement with the private sector in the presence of the bureaucracy and delaying orders should be stopped. The bureaucracy leaves loopholes in such orders that create more issues than solutions.
An established Indian monthly, Sawarajya, in its June 2016 edition has urged the Indian government to ban cotton exports to Pakistan that fetch only $381 million, but require substantial rail subsidy for cotton exported from Gujarat. Incidentally the Indian cotton exporters have refused to honour confirmed letters of credit established by Pakistani spinners either through Wagah or by sea.
The magazine also asked the Indian government to extend an interest subvention scheme for textile exports to cotton yarn and merchant exporters. The Indian government has declared Pakistan as a target market for textile exports and provides additional subsidies ranging from 3-7 percent on Indian textiles exported to Pakistan. The writers also pressed the Indian government to provide subsidies to the Indian entrepreneurs who desire to acquire textile companies in Vietnam and Uzbekistan, which compete with Pakistan for cotton exports.
The India cabinet announced in mid-June various additional incentives for textile exporters that include an increase in subsidy under the amended TUFS (technology up-gradation fund scheme) from 15 percent to 25 percent for the garment sector and enhanced duty drawback coverage for exporters that will include state levies that were not refunded before.
An official press release said that this move (enhanced duty drawback) is expected to cost the exchequer Rs5,500 crore but will greatly boost the competitiveness of Indian exports in foreign markets. The cabinet hoped that the steps will lead to a cumulative increase of $30 billion.
The Centre has also decided to bear the entire employer’s contribution of 12 percent under the EPF Scheme (up from 8.33 percent being borne at present) for new employees of the garment industry, earning less than Rs15,000 per month, for the first three years. This will cost the exchequer an estimated Rs1,170 crore (Indian Rs11.7 billion) over the next three years.
Responding to a long-pending demand from the industry on increasing overtime hours, the Centre has decided to raise the cap to eight hours per week in line with the International Labour Organization (ILO) norms. This would nearly double the overtime hours from the current cap of 50 hours per quarter of a year.
Fulfilling another major demand of the industry, the government has introduced fixed term employment in the sector. “A fixed term workman will be considered at par with permanent workman in terms of working hours, wages, allowanced and other statutory dues,” an official Indian release said.
The Sawarajya article further asked India to continue extending MFN (most favored nation) to Pakistan, irrespective of Pakistan’s stance to provide the same to India. The writers rightly pointed out that it does not make any difference to Indian trade. At the same time, it provides India with a propaganda tool to show to the world that it believes in a prosperous Pakistan through enhanced trade. It asked India to erode the competitive edge of Pakistan’s economy through various measures, strictly prohibiting export of power to alleviate Pakistan’s crippling power shortages. Beef export should be banned to trigger social unrest in the country.
One unethical measure proposed is to export all items where there is high tariff in Pakistan to Afghanistan where duty is zero. This the writers say would promote smuggling from Afghanistan to Pakistan and hurt its economy and revenues. The magazine further hoped that smuggling could finance separatists in Balochistan – whose representatives can handle distribution into Pakistan.
The media also advised India to cooperate with Afghanistan to complete hydel projects on the Kabul-Kunar river system. Kabul-Kunar contributes 16 percent of the total Indus river water available to Pakistan. Sawarajya also suggested ways to stop flow of remittances to Pakistan through a well-planned move to replace Pakistani workers in the Gulf with Indian expatriates.
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