Why India & Pakistan are still grappling with Poverty? Why India and Pakistan?

I am from Pakistan, but India and Pakistan were once one country and share a huge history, which is still having effects on the economy of both the countries. According to World Bank's website, GDP per capita of India in 2011 was 1,509 US Dollars, and during the same period GDP per capita of Pakistan was 1,189 US Dollars. Keeping in view the current security situation of Pakistan, and the ballads of India as the poster child of high growth, the difference in GDP is not a lot. Another argument is that India is massive as compared to Pakistan, so if India has managed this GDP per capita on a much wider scale, and that's a success in itself, but china has managed a GDP per Capita of 5,445 US Dollars over a huge area and population.Why these differences? I will focus on India and Pakistan here because they of their shared history and same independent dates and resources, though India got the Lion share of resources when it was partitioned. As was required in the Assignment, I will focus on two important historical events on both the countries. Now lets consider the British Raj Era 18581947, and how decisions taken in that era are still the reasons of Poverty of Indian Subcontinent. (In Acemoglu, Johnson, and Robinson, henceforth AJR, (2001), they advanced the hypothesis that the mortality rates faced by Europeans in different parts of the world after 1500 affected their willingness to establish settlements and choice of colonization strategy. Places that were relatively healthy (for Europeans) werewhen they fell under European controlmore likely to receive better economic and political institutions. In contrast, places where European settlers were less likely to go were more likely to have extractive institutions imposed. They also posited that this early pattern of institutions has persisted over time and influences the extent and nature of institutions in the modern world. On this basis, they proposed using estimates of potential European settler mortality as an instrument for institutional variation in former European colonies today. In places like South Africa and America, British fared much better and had low mortality rates, so these places received better economic and political institutions, and we can see the results of the British policies, a Superpower America and a developed Nation in Africa. In the case of Indian Subcontinent, the British mortality rates were high, so they set up extractive institutions here, and to a certain extent, both India and Pakistan are still controlled by the same bureaucratic structure and Zameendari system. Zameendars were given controls over huge Agriculture land, and in return they had to pay the British huge amounts of money. Zameendars were just the middleman, they used to extract everything from the poor farmers, even to the extent that farmers didnt even get enough to eat and this system was the cause of many Famine. The famous Famine of Bengal of 1940s still haunts people, and Amartya Sen (The only Nobel Prize winning Economist from Indian Subcontinent) often talks about the horrors of famine as he is from Bengal.

After the independence from British, the first Prime Minister of India suspended the Zameendari system, which resulted in early economic success of India as the resources of the country were better allocated to the masses. On the other hand, Muslim League the main Muslim party which fought for the partition and which is the founding party of Pakistan was composed of a huge number of wealthy Muslim nawabs and Zameendars. Land reform was not in their interest, so to date the economic, social and political arena is dominated by the extremely wealthy landlord with huge ramifications for the economic progress of the country. Apart from this institution debacle which Britain created, there are other actions which Britain took during that period, and which still have a huge impact on the economies of both the countries. The biggest problem is that Britain partitioned the country on religious bases, which destabilized the whole region for good. Pakistan and India fought two full fledge wars in 1965 and 1971: This resulted in an Arms race between both the countries, and that took its toll on almost all other sectors. India and Pakistan still have huge military budgets, which are a big drag on the economic growth of both the countries. Because of this animosity between the two countries, the trade between the two countries is minute, and this has huge ramifications. Indian products come to Pakistan via the Gulf after paying huge transportation costs and the taxes as well. Recently, some progress has been made on the trade as India and Pakistan formally started talks about opening trade between the two countries, but that is just a stunt to appease the public. The politicians in pakistan are mostly Industrialist and are running huge empires, most of which have almost a monopoly status or oligopoly status at worst. If they flood the market with better Indian products which cost less as well, they will go bankrupt so this is not going to happen in near future. The only car brands available in pakistan are Toyota and Honda, and Government has literally shut the entry of any other carmaker by imposing a tax of 400 percent on any car which you import. This is how things work in Pakistan. I have covered all the requirements of the assignment in the above paragraphs, and now I would like to end this article with some concluding remarks. India and Pakistan have huge potential, both the countries are resource rich, have young populations, and are equipped with almost every required ingredient to become Developed Nations. So why arent they delivering as per their potential. Economic history has taught us how nations grew i.e the example of Industrial Revolution, the Marshal plan which helped Europe to rebuilt after world war two, and the recent example of Chinas rise. Apart from that The great depression of the thirties, and the German hyperinflation also taught us a lesson or two. Inspite of all the evidence of history we have failed time and again in averting depressions, and also in bringing out a huge part of the world out of Poverty. So history cannot teach us everything, and perhaps normative economics is much harder than positive economics. This is what the some great Development Economists have to say

about this issue. Romer: subcontract a part of your country to people who know how to do it. Collier: Invade when needed. Easterly. Freedom: Leave countries and people alone. Let them nd their own way. Acemoglu and Robinson: need an accident, a revolution (french revolution, British glorious revolution are favorite examples): may be middle east is escaping now? May be not? Here again the only thing on which all of them have consensus is only the dispute. But the future is hopeful inspite of all this, never in the history of the world we were so well connected with each other, never in the history of the world we had so much information about everything which can use for our purposes, never in the history of the world it was so easy to take such an amazing course online and thats for free too. This is empowering masses, and only the empowered masses can take their rights from the privileged few. This started in Middle East and has spread all the way to Brazil, its not the matter of how, its only a matter of when this will take over the whole world.

References: Robinson, James A, Daron Acemoglu, and Simon Johnson. 2001. The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review 91: 1369-1401 World bank Open data Services