Comparative Development Experiences of India and Its Neighbours

Written and reviewed by Devendra Dubey, Mathematics & Commerce faculty at UniDrill (M.Sc. Mathematics, Osmania University · 10 years teaching). Based on NCERT Economics Class XI (Indian Economic Development), Chapter 8.

Three countries, one starting line

India and Pakistan became independent in 1947. The People's Republic of China was established in 1949. All three began as largely agrarian economies with low incomes. Yet today their economies, their people's health and their jobs look very different. How did countries that started so close together end up so far apart?

That is the question of this chapter. It does not ask you to pick a winner. It asks you to compare what each country did, when it did it, and what the numbers show. If you can read the tables confidently and match each country to its year, you can answer almost every question on this chapter.

Why compare neighbours at all?

In a world of open trade, developing countries compete not only with rich countries but also with each other, and many are joining regional and global groupings such as SAARC, the European Union, ASEAN, G-8, G-20 and BRICS to strengthen their economies. Comparing close neighbours shows what different policy choices produce when the starting conditions are similar. The three countries also had different political set-ups: India is a democracy with a secular and liberal Constitution, Pakistan has had a mixed economy with military involvement in politics, and China is a command economy that has more recently moved towards a more liberal economic structure.

The timeline you must know

The chapter notes that Pakistan is now on its 12th plan (2018 to 2023) and China on its 14th (2021 to 2025), while India ended the Five Year Plans in March 2017.

How each country developed before its reforms

China: command first. After 1949 all critical sectors, enterprises and the lands of individuals were brought under government control. The Great Leap Forward (1958) aimed at industrialising the country on a massive scale. Backyard industries were encouraged, and about 26,000 communes, in which people cultivated land collectively, covered almost all the farm population. A severe drought followed, causing about 30 million deaths, and Russia withdrew its professionals who had been helping China. Mao then introduced the Great Proletarian Cultural Revolution (1966 to 1976), under which students and professionals were sent to work and learn in the countryside.

Pakistan: a mixed economy. Public and private sectors existed side by side. In the late 1950s and 1960s Pakistan followed a regulated import substitution policy, using tariff protection and direct import controls. The Green Revolution brought mechanised farming and a rise in foodgrain output. In the 1970s capital goods industries were nationalised, and in the late 1970s and 1980s the policy turned towards denationalisation and encouraging the private sector, with support from western financial aid and remittances from Pakistanis working in the Middle East. Reforms were initiated in 1988.

India: the pre reform years are the subject of the earlier chapters on the Indian economy before and after 1950, and the reforms that began in 1991 are the subject of the liberalisation chapter.

China's reforms of 1978: the sequence

China's reforms were phased. They began with agriculture and foreign trade and investment, and only then reached industry.

Per capita grain output in 1978 was no higher than in the mid 1950s. That stagnation is what prompted the reforms. China's reforms were self initiated, whereas India introduced its reforms in 1991 and Pakistan in 1988 with the involvement of the World Bank and the IMF.

Two views. For the exam: China's lead in human development rests on its pre reform investments in education, health, land reform, decentralised planning and small enterprises, which prepared the ground for the reforms. Another reading: scholars differ on how much weight to give pre reform investments and how much to the market reforms of 1978. Most agree that both mattered, because the reforms were piloted on a small scale before they were extended. Why it matters: an assertion saying that China's advantage came only from post 1978 reforms is the kind of statement CUET marks wrong.

The demographic comparison

How to read this table: Pakistan's population is roughly one sixth of India's or China's, but it has the highest growth rate (1.96%) and the highest fertility rate (3.4). China has the lowest density (150) and the lowest growth, which is negative, and it is the most urbanised.

The one child norm, introduced in China in the late 1970s, is credited with the low growth rate. It also had costs: a fall in the sex ratio and an ageing population, which later led China to allow couples to have two children.

Pause and predict: a country has a fertility rate of 3.4 and a growth rate of 1.96%. Which of the three is it, and will its population grow faster or slower than India's?

Check your answer: Pakistan. Its growth rate (1.96%) is more than double India's (0.81%), so its population will grow faster even though it starts from a much smaller base.

Output: size and growth

China has the second largest GDP in the world at purchasing power parity (PPP), at 35 trillion US dollars, against India's 15 trillion and Pakistan's 1.5 trillion.

$$\dfrac{\text{India's GDP}}{\text{China's GDP}} = \dfrac{15}{35} \approx 0.43$$

India's GDP at PPP is therefore about 43% of China's, and Pakistan's is about 10% of India's.

Two things stand out. In the 1980s China grew nearly twice as fast as India, and Pakistan grew faster than India. By 2015 to 2017 and in 2024 India's growth was ahead of both. In 2017 to 2018 Pakistan's GDP grew by 5.5%, the highest in that decade, with industry growing by 4.9% and services by 6.2%.

Beyond the textbook. For the exam: a higher GNI per capita at PPP means a higher income level. In reality: PPP adjusts incomes for what money actually buys in each country, so it is a fairer comparison than converting incomes at exchange rates alone. Why it matters: an income of 9,047 US dollars at PPP does not mean 9,047 US dollars at the exchange rate. Always check the word "PPP" before comparing.

Sectors: where output and jobs sit

The next table is the one CUET likes best, because it asks you to separate two things: a sector's share of output (GVA) and its share of workers.

Worked example: relative output per worker. Divide a sector's share of GVA by its share of the workforce. A value below 1 means that sector earns less per worker than the average in the economy. A value above 1 means it earns more.

$$\text{Relative productivity} = \dfrac{\text{Share of GVA}}{\text{Share of workforce}}$$

In all three countries agriculture earns less per worker than the average, because it employs a larger share of people than the share of output it produces. The common wrong step is to read "43% in agriculture" as a share of output. It is a share of workers, while the share of output is the 18%.

The structural shift. In the classical pattern the economy shifts from agriculture to industry and then to services. China followed that pattern. India and Pakistan shifted directly from agriculture to services. In China's case, growth in 1980 to 1990 was led by industry (10.8%) and services (13.5%). In India, growth has been led by services.

Pause and predict: which of the three countries shows the smallest gap between industry's share of GVA and its share of the workforce, and what does that suggest?

Check your answer: India (28% and 26%, a gap of 2 points). It suggests that industry in India provides jobs roughly in line with the output it produces, while agriculture employs far more people than its share of output.

Human development: beyond income

China leads in every row. India is ahead of Pakistan in every row except the equal poverty figure. The Human Development Index combines three things: income, health and education.

Liberty indicators. The chapter points out that HDI leaves out something important: the extent of democratic participation in social and political decision making, the extent of constitutional protection of citizens' rights, and the extent of protection of the independence of the judiciary and the rule of law. These are the liberty indicators, and they are not part of the HDI.

Two views. For the exam: HDI measures income, health and education, and liberty indicators such as democratic participation, rights and the rule of law are not included in it. Another reading: some scholars argue that development should be judged by the freedoms people enjoy, so such indicators should count. Others point out that they are harder to measure and compare across countries, which is one reason common indices rely on income, health and education.

What the chapter concludes

The chapter's appraisal draws these points.

For Pakistan, the chapter notes that growth in agriculture depended on good harvests and not on an institutional process of technical change, and that foreign exchange earnings rested on remittances from the Middle East and on volatile exports of agricultural goods.

Exam traps

60-second revision

Where this chapter connects

• Previous: Environment and Sustainable Development discusses the limits that growth in each of these countries must stay within.
• Related: Liberalisation, Privatisation and Globalisation: An Appraisal covers India's 1991 reforms in detail, and Indian Economy 1950 to 1990 covers the planning period that preceded them.
• Related: Employment: Growth, Informalisation and Other Issues explains the workforce shares used in the sector table.