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In Pakistan we do not appreciate the fact that we have lived beyond our means’ for far too long at our own peril. Ways and means as well as the room to manoeuvre do not exist anymore.

Secondly, the people have to be prepared to be ready for the pain. If the matter of living beyond our means is analysed then it shows that Pakistan has a history worse than India’s.

Nevertheless, there is always a terminal point which incidentally has arrived in Pakistan in 2023. Dr Manmohan Singh was and still is a politician. But his vision was different.

‘Learning From Others’–I

Principles of Reform

The principles of the reform agenda are well prescribed as under:

Macroeconomic stabilisation and fiscal adjustment alone cannot suffice.

“The thrust of the reform process would be to increase the efficiency and international competitiveness of industrial production…to utilise for this purpose foreign investment and foreign technology to a much greater degree than we have done in the past, to increase the productivity of investment, to ensure that India’s financial sector is rapidly modernised, and to improve the performance of the public sector, so that the key sectors of our economy are enabled to attain an adequate technological and competitive edge in a fast changing global economy.”

This is the most important part of his speech. It has been clarified that macroeconomic stabilisation is always a temporary phase. If fundamentals are wrong then any temporary repair cannot produce the desired results. If a country has to stand firm in this integrated world then it would have to:

a. increase the efficiency and international competitiveness of industrial production;

b. utilise foreign investment and foreign technology to increase the productivity of investment,

c. and to improve the performance of the public sector to attain an adequate technological and competitive edge in a fast changing global economy.

Pakistan’s industrial sector has failed to achieve this aim in all the segments. We have not used foreign investment and foreign technology to increase the productivity of investment.


This was, perhaps, the most important subject for India as it was a heavily regulated society with a huge public sector or State-Owned Enterprises.

“We have developed a well-diversified industrial structure. This constitutes a great asset as we begin to implement various structural reforms.

However, barriers to entry and limits on growth in the size of firms have often led to a proliferation of licensing and an increase in the degree of monopoly.

This has put shackles on segments of Indian industry and made them serve the interests of producers but not pay adequate attention to the interests of consumers.

There has been inadequate emphasis on reduction of costs, upgradation of technology and improvement of quality standards. It is essential to increase the degree of competition between firms in the domestic market so that there are adequate incentives for raising productivity, improving efficiency and reducing costs.

For example, at present, Non Resident Indians (NRIs) of foreign nationality are required to obtain specific permission under section 31 of the Foreign Exchange Regulation Act (FERA) to acquire residential property. It is now proposed to provide general exemption from this provision to such persons. However, rental income and proceeds from the sale of such housing will be non-repatriable”.

This is the biggest difference between India and Pakistan. In the first forty years after independence, India had developed a reasonable industrial base with a highly protective environment which only required deregulation and modernization.

Insofar as Pakistan is concerned, there is no industrial base except for a few sectors; therefore, the question of reform is effectively irrelevant. Furthermore, whatever industrial we have, it operates in a protected environment and is not capable of facing competition.

Protection to domestic industry/competition/basis of FDI

The policy objective to reforms and their interconnectivity is explained as under:

“The policies for industrial development are intimately related to policies for trade. There can be no doubt that protection was essential in the initial phase of our industrial development, so that we could go through the learning period without disruption. The past four decades have witnessed import substitution which has not always been efficient and has sometimes been indiscriminate.

“The time has come to expose Indian industry to competition from abroad in a phased manner.

“…the Government has introduced changes in import export policy, aimed at a reduction of import licensing, vigorous export promotion and optimal import compression.

“After four decades of planning for industrialisation, we have now reached a stage of development where we should welcome, rather than fear, foreign investment. Our entrepreneurs are second to none. Our industry has come of age.

Direct foreign investment would provide access to capital, technology and markets. It would expose our industrial sector to competition from abroad in a phased manner.

“Cost, efficiency, and quality would begin to receive the attention they deserve. We have, therefore, decided to liberalise the policy regime for direct foreign investment in the following manner.

“First, direct foreign investment in specified high priority industries, with a raised limit for foreign equity at 51 per cent, would be given prompt approval, if equity inflows are sufficient to finance the import of capital goods at the stage of investment and if dividends are balanced by export earnings over a period of time.

“Second, foreign equity up to 51 percent would be allowed for trading companies primarily engaged in export activities.

“Third, a special board would be constituted to negotiate with a number of large international firms and approve direct foreign investment in selected areas; this would be a special regime to attract substantial investment that would provide access to high technology and to world markets”.

There are two aspects to this part. Firstly, it has been acknowledged that the country is ready to remove protectionism. Not under the pressure of the WTO (World Trade Organisation) but as a sensible economic decision. Allowing foreign investment in various sectors is the other aspect.

Unfortunately, however, Pakistan, in both the cases or areas, acted in a hasty and an imprudent manner. There is compliance to the WTO without looking at the status of the national industrial base and its competitiveness.

Foreign Direct Investment (FDI) policies constitute the biggest disaster. We allow 100 percent foreign ownership in companies making ordinary FMCG products whereas India does not allow even 50 percent ownership in these sectors. They allow foreign investment only for the purpose of industrial growth. In short, it is a consideration of economic stability in India, whereas in Pakistan we consider purchase of already existing shares of listed companies as FDI.

Public sector in business:

“The public sector has made an important contribution to the diversification of our industrial economy.…the portfolio of public sector investments would be reviewed so as to concentrate the future operations of the public sector in areas that are strategic for the nation, require high technology for the economy, and are essential for the infrastructure.

“Public enterprises which are chronically sick and which cannot be turned around, will be referred to the Board for Industrial and Financial Reconstruction (BIFR), or to a similar high-powered body to be set up, for the formulation of revival or rehabilitation schemes; a social security mechanism will be created to fully protect the interests of the workers likely to be affected by the rehabilitation packages of the BIFR.

“Autonomy in management, and corresponding accountability, would be provided through a system of memorandums of understanding between the Government and public sector enterprises”.

The policies were more or less identical during the 2002-2020 period; however, the number of industries privatized in India in various modes was substantially higher than in Pakistan.

Importance of economic planning:

“The most important thing that comes out clearly is that we cannot realise our goal of establishing a just society, if we abandon the planning process. …future development depends crucially on how well the planning process is adapted to the needs of a fast changing situation.

“…without an intelligent and systematic coordinated resource use in some major sectors of our economy, development will be lopsided. It will violate deeply cherished values of equity and it will keep India well below its social, intellectual and moral potential.

“But our planning processes must be sensitive to the needs of a dynamic economy. Over-centralisation and excessive bureaucratisation of economic processes have proved to be counter-productive”.

(To be continued)

Copyright Business Recorder, 2023


Comments are closed.

TimeToMovveOn May 24, 2023 07:59am
Everything was fine with your article until you mentioned India. Now Pakistan people will not do it, even if it is good, simply because India does it.
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Tulukan Mairandi May 24, 2023 10:04am
In India, a competent Sikh or Christian or even Ahmadi is not prevented under the constitution from being elected a PM or FM or President. That's why Manmohan, a minority with <2% was FM and PM. The majority of Indians look at competency, not religion i.e. sane and secular. In Pakistan however, a minority is barred from holding PM or President office. Muslim only policy. Which explains why Pakistan is down the swamp.
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Salman Khan May 24, 2023 12:34pm
You are free to move to your hero country. Enough of this obsessive fanboy India related articles.
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Usman May 24, 2023 01:39pm
@Salman Khan, they are copycat intellectuals who instead of advocating those policies which are suitable for the country given it's own oppourtunities and limitations start advocating those policies which are irrelevant to the environment of nation.
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Mehboob Ali Lalani May 24, 2023 01:51pm
Our economy is killing under its own weight. Expenses is more and income is less. The country is suffering from debt hang over. We need to reforms holistically. We need to learn from the success stories of the others. Our singular focus should be on the economy.
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Muhammad Adnan Ghafoor May 24, 2023 03:51pm
@Sam, don't confuse your self, it not about any specific geographic group or clan. It all about some opportunist fighting for power on the cost of national misery. Stay safe stay way from these opportunist clan.
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Muhammad Adnan Ghafoor May 24, 2023 04:25pm
I will simply say unjust & biased analysis. A blur image. The projected dynamic and asking people for pain are just unreasonable from the author. Actually, we are going down the hill, because of great efforts of past 15 years Governments. The economic crisis is the gift of Political Governments in last 15 year. Taking Country external loan form US $36 billion -2008 to US$ 136 billion in 15 years i.e. from 26 % GDP to almost 100 %. And above all this loan was mainly used form non development purposes…..A huge crime with the beloved Country & peoples. This devilish action results in boom!!! Mother of all economic crisis, purposefully devaluation of PkR, against US $ i.e., from 56 to 306 in 15 year time. What a tragedy. This boom has taken beloved country in the tsunami of inflation. Worst form of inflation is Government governed inflation & the political Governments has plated their role to perfection. History reminds us time to time, that economies of only those counties blossom / grow which have loyal leader ship. In the case of Pakistan there unending drought in this field. What to say or what not to say Pakistan & people of Pakistan are in deep trouble. But Politician are on the moon & having fun. May Allah have mercy on us.
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K RAJ May 24, 2023 10:00pm
"We have lived beyond our means’ for far too long" What an understatement! To be precise, pak has lived beyond your means at other people's expense through loans and aid money. Pak economy is about the size of south Indian state Tamil Nadu, which has 1/3 the population of Pak. Imagine running a huge, bloated army, weapons you can't afford, all with borrowed money. Non-sustainable! @Salman Khan Very funny. Your national obsession is confronting India every day. We don't visit Bangladesh newspapers or bother about BD. The author carries the same false ideas about India that all Pakistanis share. You still don't like it!
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amigo May 25, 2023 12:08am
AoA: with due respect why we compare our selves to others. From 1947 to 2023 we had good & bad times. We are a developing nation and Insha Allah will flourish. Pakistan Zindabad...... پاکستان زندہ باد
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‘Learning From Others’—II

Additional advances to IT ITeS: 20pc concessionary tax rate on banks’ income proposed

PTI rejects budget

Rs450bn allocated to BISP

Rs1,809.5trn set aside for Defence

Rs207bn allocated to water, power sector development

Pharmaceuticals, drugs: Sales tax structure restored

Finance Bill 2023: Rate of GST on e-integrated textile retailers up 3pc

Trade leaders give mixed response

Rs97.098bn earmarked for education affairs, services

Public Sector Development Programme: Rs1,400m earmarked for 13 schemes of Ministry of Law & Justice