Regional Economic Cooperation - Pakistan vs India

8/9/2019 Regional Economic Cooperation - Pakistan vs India

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Regional EconomicCooperation Pakistan

vs. IndiaBy WaqasAnees
http://go2.wordpress.com/?id=725X1342&site=siyasipakistan.wordpress.com&url=http://pakistanledger.files.wordpress.com/2010/04/economic_cooperation_organization-green-eco-globe.png&sref=http://siyasipakistan.wordpress.com/2010/04/09/kyrgyzstan-turmoil-only-the-eco-can-save-central-asia/http://www.ecosecretariat.org/index.htmhttp://en.wikipedia.org/wiki/File:South_Asian_Association_for_Regional_Cooperation.png


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Pakistanvs.

India
http://en.wikipedia.org/wiki/File:Pakistani_Rupee.jpghttp://en.wikipedia.org/wiki/File:India_Money.jpg


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Economic overview

Indian economy is the 11th largest in the world by nominal GDPand the 4th largest by purchasing power parity (PPP),

128th by GDP per capita income ($ 2941), India is the 2nd fastest major economy in terms of GDP growth

rate, Monetary Policy: Multiple indicator approach

Pakistan is 27

th

largest by PPP

Pakistan is 132nd by GDP per capita income ($2661) Pakistan is the 67th fastest in the world.


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Indian Economic Policies1947-91

India was under social democratic-based policies from1947 to 1991.

Followed the premise of Fabian socialism The economy was characterized by:

extensive regulation, protectionism, public ownership,pervasive corruption and slow growth

Industries were nationalized in mid 1950s Elaborate licenses, regulations and the accompanying red

tape, commonly referred to as License Raj, wererequired to set up business in India between 1947 and

1990 India abolished feudalism through land redistribution by

1950 India saw the green revolution after 1965, achieving self-

sufficiency in food grains, through improved irrigation,

fertilizers, and high yielding variety of seeds


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The Hindu Rate ofGrowth*

The rate from 194780 was derisively referred to as theHindu rate of growth, GDP growth was around 3.5%from 1950s to 1980s, while per capita income averaged1.3%

India's growth rate was low by standards of developing

countries. At the same time, Pakistan grew by 5%,Indonesia by 6%, Thailand by 7%, Taiwan by 8% andSouth Korea by 9%.

The comparison with South Korea was stark: In 1947, South Korean per capita income was less than 2

times bigger than India's. By 1960, South Korean per capita income was 4 timesbigger than India's

By 1990, South Korean per capita income was 20 timeslarger.

* . .h e t e r m w a s c o i n e d b y I n d i a n e c o n o m i s t K N R a j


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Average Annual Income

Country 1947 1999India $439 $1,818

Pakistan $412 $1,760

China $619 $3,259

South Korea $770 $13,317

Taiwan $936 $15,720


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GDP Per CapitaComparisonAs a percentage of US GDP Per Capita

: :// . . / / .ource http www eldis org static DOC12473 htm
http://upload.wikimedia.org/wikipedia/commons/e/e6/Per_capita_GDP_of_South_Asian_economies_&_SKorea_(1950-1995).png


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1990: India faces a major balance-of-payments crisis, due to: The collapse of the Soviet Union, (India's major trading partner)

The first Gulf War, which caused a spike in oil prices

India asked for a $1.8 billion bailout loan from IMF, which in return

demanded reforms 1991: Manmohan Singhs response Economic Liberalization of

India End of license raj

End of public monopolies

automatic approval of foreign direct investment in many sectors

Since 1990s India has emerged as one of the fastest-growingeconomies in the developing world (2nd behind China in 2009,with a GDP growth of 9%)

As of 2009, about 300 million peopleequivalent to the entirepopulation of the United Stateshave escaped extreme

poverty

Indian Economic Policies 1991onwards


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Indian Monetary Policythru ages

1. Pre-monetary targeting (India independence to1984-85):

Till 1970s, inflation was mainly caused byagricultural failures. Therefore RBIs main effort

was towards selective bank credit managementand ensuring flow of credit to increase agriculturalproduction.

In 1970s inflation increased because of increase inmoney supply which rose to finance rise in

government expenditure. Inflation also rose because of the oil shocks in 1974

and 1979 which increased prices of oil in worldmarkets.

: . , o u r c e M r D e e p a k M o h a n t y R B I sE D


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2. Monetary targeting (MT, 1985-86 to 1997-98):

By early 1980s, there was some consensus in RBI thatinflation was rising because of a surge in moneysupply. Agriculture and oil shocks could not raise

inflation permanently. It was a sustained rise in money supply that led to rise

in inflation.

This led to RBIs monetary targeting framework inwhich RBI started targeting money supply. Under

this RBI made a projection for money supply for agiven year and tried to keep money supply aroundthe projected levels.

In 1993, the floating exchange rate system came intothe limelight.

From 1975 to 1992, the rupee exchange rate wasofficiall determined b the Reserve Bank of India


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3. Multiple Indicators approach (MI, 1998-99 onwards):

After reforms in 1991, it became difficult to look at therelationship between money supply and inflation.Financial liberalization led to more innovative

financial products. Earlier RBI could monitor money supply as banks were

the only financial intermediaries.

As non-banking sources of finance grew, monitoringmoney supply and thus inflation became difficult.

Hence, RBI adopted the multiple indicators approachwhich looked at variety of economic indicators totrack impact on inflation and economic growth.

RBI has kept the interest rates in check (currently at3.5%) in face of the continuing inflation of over

10%.


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GDP Comparison

:o u r c e: / / . . / / / / / / .t tp w ww a db o r g D o cu m en ts B oo ks K ey _I nd i ca to rs 2 00 9 p d f H i gh li g ht s p df

(

)

I

n

millions

$

PPP


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GDP Per CapitaComparison (USD)

: : / / . . / / / / / / .o u rc e h tt p w ww a d b o r g D o c u m en ts B oo k s K e y _ I nd i c at o r s 2 0 0 9 p d f H ig h li gh t s p d f


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GDP Growth ComparisonPercentage change on previous year



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Population GrowthPercentage change on previous year



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Economic Indicators

DP Breakup India PakistanServices . %62 50 . %53 30

Industry %20 %24

Agriculture . %17 50 %23

Indicators India PakistanGDP Growth . %7 40 . %4 10

Inflation . %10 16 . %11 70

Food Inflation . %16 87 . %14 50

Forex Reserves $280 Billion $14 Billion

Population belowpoverty line

. % ( )37 2 2010 %39

( )410 million 2010 ( )64 million 2010

Unemployment . %9 50 . %15 20

Gross external debt .$232 5 billion $50 billion

: - ,o u r c e E c o n o m i c S u r v e y r e p o r t 2 0 0 9 1 0 M O F


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India today

The Indian economy has been propelled by the liberalizationpolicies that have been instrumental in boosting demand aswell as trade volume.

The growth rate has averaged around 7% since 1997 and Indiawas able to keep its economy growing at a healthy rate evenduring the 2007-2009 recession, managing a 5.355% rate in2009 (India GDP Growth).

The biggest boom to the economy has come in the shape ofoutsourcing. Its English speaking population has beeninstrumental in making India a preferred destination forinformation technology products as well as business processoutsourcing.

In 2009 India purchased 200 Tons of Gold for $6.7 billion from IMFas a total role reversal from 1991China.

During fiscal year 2009-10, foreign exchange reserves increased


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Budget and Debt

Budget: revenues: $122.7 billion

expenditures: $223 billion (2009 est.) revenues: $153.5 billion

expenditures: $205.3 billion (2008 est.)

Public debt:

60.1% of GDP (2009 est.) 56.4% of GDP (2008 est.)

78% of GDP (2007 est.)

revenues: $23.21 billion

: / / . . / / .t t p w ww i n de xm u nd i c om p ak is t an p u bl ic _d e bt h tm l

India Pakistan


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Indian Sectors

Industry & Services India has excelled in IT industry due to increased

specialization, large pool of low cost /high skilled

English speaking resources In 2009, seven Indian firms were listed among the top15 technology outsourcing companies in the world.

In March 2009, annual revenues from outsourcingoperations in India amounted to US$60 billion and

this is expected to increase to US$225 billion by2020

It is considered to be an outsourcing heaven due to itshigh labor intensive market


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Agriculture India ranks second worldwide in farm output

Yields per unit area of all crops have grown since1950, due to:

special emphasis placed on agriculture in the five-year plans steady improvements in irrigation, technology, application of

modern agricultural practices

provision of agricultural credit and subsidies since Greenrevolution in India

India is the largest producer in the world of milk, fruit,

cashew nuts, coconuts, tea, ginger, turmeric andblack pepper

Second largest producer and the largest consumer ofsilk in the world

second largest producer of wheat, rice, sugar, cotton,

silk, peanuts and inland fish


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Balance Of Payments Since independence, India's balance of payments on

its current account has been negative

Exports have been consistently rising, covering 80.3%

of its imports in 200203, up from 66.2% in 199091.

India's growing oil import bill is seen as the maindriver behind the large current account deficitFDI India Pakistan

-2005 06 .$7 8bn .$ 3 5bn

-2006 07 .$19 5 billion .$ 5 1bn

-2007 08 $24 billion .$ 5 4bn

-2008 09 $35 billion .$ 3 7bn


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Trade Trade deficit of India fell by 28.2 per cent to US$ 76.2

billion in 2009-10 (AprilDecember)

From US$ 106 billion in the corresponding period of

the previous year. There have been significant changes in the

composition and direction of both exports andimports in this period.


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Trade

Trade India PakistanExports ( .)$155 billion 2009 est . ( .)$17 87 billion 2009 est

xport goods , ,software petroleum products,textile goods gems and

, ,jewelry engineering goods,chemicals leather

manufactures

( , ,textile goods garments bed linen, ), ,cotton cloths and yarn rice, ,leather goods sports goods

,chemicals manufactures carpets andrugs

ain export partners . %, . %,US 12 3 UAE 9 4 China. % ( )9 3 2008

. %, . %,United States 22 4 UAE 8 3 UK%, . %, . % (6 China 15 4 Germany 4 7 2006.)estImports .232 3 ( .)billion 2009 est .28 31 ( .)billion 2009 est

mport goods , , ,crude oil machinery gems,fertilizer chemicals

, ,Petroleum Petroleum products, ,Machinery Plastics Transportation, ,equipment Edible oils Paper and

, ,paperboard Iron and steel Tea

ain import partners . %,China 11 1 Saudi Arabia. %, . %, . %,7 5 US 6 6 UAE 5 1 Iran. %, . %,4 2 Singapore 4 2

. % ( )Germany 4 2 2008

. %, . %,China 14 7 Saudi Arabia 10 1 UAE. %, . %, . %,8 7 Japan 6 5 United States 5 3

%, . % ( .)Germany 5 Kuwait 4 9 2006 est

DI stock . ($156 30 billion 31 December.)2009 est

.$4 6 billion


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Trade

: & . & .o u r c e D G C I S M i n i s t r y o f C o m m e r c e I n d u s t r y G o I

l


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MutualTrade

ndia s trade withPakistan

: & . & .o u r c e D G C I S M i n i s t r y o f C o m m e r c e I n d u s t r y G o I


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FDI Inflows

: / / . . / / / / / / .t t p w ww a db o rg D o c um e nt s B oo k s K ey _I nd i ca to r s 2 0 09 p df H ig h l ig ht s p df


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Inward Remittances
http://en.wikipedia.org/wiki/File:Kochi_India_slums.jpg


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Issues

Poverty line Population size Corruption

Water allocation Governance Illiteracy Complex labor laws Economic Disparity
http://en.wikipedia.org/wiki/File:Kochi_India_slums.jpg


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Povertyline

: / / . . / / / / / / .t t p w w w a db o rg D o c um en t s B o ok s K ey _I nd i ca to r s 2 0 09 p df H ig h li gh t s p df


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Indian economic outlook

In 2003, Goldman Sachs predicted that India's GDP in currentprices will overtake France and Italy by 2020, Germany, UK andRussia by 2025 and Japan by 2035.

By 2035, it was projected to be the third largest economy of the

world (by nominal GDP), behind US and China.

the Indian GDP can be expected to grow around 8.5 +/- 0.25 percent, with a full recovery, breaching the 9 percent mark in2011-12.

The big question is Can the economy continue to deliver?Stable political conditions, healthier future prospects as well asa strong desire for growth makes this the ideal scenario for thepolicymakers to introduce a structured plan for drawing up aroadmap for Indias long term progress.


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Constraints to Pakistaneconomy

,Beyond statistics of human casualties the cumulativeeffects of the campaign of terror unleashed in Pakistan and

, .the country s fight against militancy have been enormous, ,Lives homes and incomes have been uprooted while

educational attainment for virtually a whole generation ofschoolgoing age in the affected areas of Pukhtoonkhwah

, .and FATA has been jeopardized or severely undermined

: -t a t e o f t h e e c o n o m y E c o n o m i c s u r v e y 2 0 0 9 1 0


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War onTerror

The additional expenditure incurred on security related andcivil relief operations since July 2007 has amounted to an

( . ).estimated US$ 4 billion 2 4 percent of average GDP

,In addition the cost of the humanitarian crisis spawned bythis conflict has been the displacement of over 3 million

, ,people at its peak resulting in a budgetary outlay of US$ 600million for the current fiscal year alone for relief and

.rehabilitation of the IDP population


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Energy Crisis

The effect of lower energy availability is estimated at theequivalent of . .02 5 .percent of GDP during 200910

:t a t e o f t h e e c o n o m y E c o n o m i c-

R ili f


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Resilience ofPakistan

Indicator 1999 2007 2008 2009GDP $ 75 billion $ 160 billion $ 170 billion $ 185 billion

GDP Purchasing( )Power Parity PPP

$ 270 billion .$ 475 5 billion $ 504 billion .$ 545 6 billion

GDP per CapitaIncome

$450 $925 ,$1 085 ,$1 250

Revenue collection .Rs 305 billion .Rs 708 billion .Rs 990 billion . .Rs 1 05 trillion

Foreign reserves .$ 1 96 billion .16 4 billion .$ 8 89 billion $ 14 billionExports .$ 7 5 billion .$ 18 5 billion .19 22 billion .$ 18 45 billion

Textile Exports .$ 5 5 billion .11 2 billion - -KHI stock exchange

( - )100 Index$ 5 billion at 700

points75 billion at,4 000 points $ 46 billion at,9 300 points .$ 26 5 billion at,9 000 points

Foreign DirectInvestment

$ 1 billion .$ 8 4 billion .$ 5 19 billion .$ 4 6 billion

&External DebtLiabilities

$ 39 billion .$ 40 17 billion .$ 45 9 billion .$ 50 1 billion

Poverty level %39 %2 %37 %39Literacy rate %45 %53 %53 %53

Developmentprograms

.Rs 80 billion .Rs 520 billion . .Rs 549 7 billion .Rs 621 billion

, / ,s i a n D e v e l o p m e n t B a n k E c o n o m i c S u r v e y o f P a k i s t a n I n d i a C I A w o r l d F a c t b o o k


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Pakistan challanges

A number of interlinked actions are needed in the comingyear:

Checking inflationthis involves limiting borrowing by the

government and the public sector.

Improve internal security situation

Resolve energy crisis

Adequate targeting of subsidies Check the import bill


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SAAR

C
http://en.wikipedia.org/wiki/File:South_Asian_Association_for_Regional_Cooperation.png


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Introduction

The South Asian Association for RegionalCooperation (SAARC) is an economic and politicalorganization of eight countries in Southern Asia.

It was established on December 8, 1985

Member countries are: Bangladesh Bhutan

Maldives

Nepal

Pakistan India

Sri Lanka

Afghanistan (since 2007)


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Objectives

The objectives of the Association as defined in the Charter are:

to promote the welfare of the people of South Asia and to improve their quality

of life;

to accelerate economic growth, social progress and cultural development in

the region and to provide all individuals the opportunity to live in dignity

and to realize their full potential;

to promote and strengthen collective self-reliance among the countries of

South Asia;

to contribute to mutual trust, understanding and appreciation of one another's

problems;

to promote active collaboration and mutual assistance in the economic, social,

cultural, technical and scientific fields;

to strengthen cooperation with other developing countries;

to strengthen cooperation among themselves in international forums on

matters of common interest; and


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SAFTA

SAFTA signed in Jan 2004, effective from 2006 Currently, the Sensitive Lists of products, Rules of Origin,

Technical Assistance as well as a Mechanism for Compensationof Revenue Loss for Least Developed Member States are undernegotiation.

Under the Trade Liberalization Program scheduled for completionin ten years by 2016, the customs duties on products from theregion will be progressively reduced.

The Least Developed Member States are expected to benefit fromadditional measures under the special and differentialtreatment accorded to them under the Agreement.

In the final five year phase ending 2012, the 20 percent duty willbe reduced to zero in a series of annual cuts.

China has shown intent of joining SAARC. Is it a good idea for theexisting members?


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Criticism

Not enough is being done to for rapid economic integrationof the region.

Apart from the fact that the recently approved South

Asian University and the creation of new rail lineslinking the region, people to people contacts andconnectivity of region needs to be strengthened.

Intra-Regional and World Trade of


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Intra-Regional and World Trade ofSAARC,1991 - 2006

:o u r c eM F D O T SD a t a b a s e


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Share of intra-regional trade tototal trade


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Indias hold on trade

istrib u tio n o fExports

istrib u tio n o fIm p o rts

SAARC


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SAARCTrade


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SAFTA Average Tariffs (%)


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Tariff rate comparison


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Trade Facilitation Comparison


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ECO
http://www.ecosecretariat.org/index.htm


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Introduction

Economic Cooperation Organization (ECO), is anintergovernmental regional organization established in1985 by Iran, Pakistan and Turkey for the purpose ofpromoting economic, technical and cultural cooperationamong the Member States

ECO is the successor organization of Regional Cooperation forDevelopment (RCD) which remained in existence since1964 up to 1979

In 1992, the Organization was expanded to include seven new

members, namely:

Afghanistan, Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan Uzbekistan


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The common objective is to establish a singlemarket for goods and services, much like the

European Union. ECO's secretariat and culturaldepartment are located in Tehran, its economicbureau is in Turkey and its scientific bureau issituated in Pakistan.


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Sustainable economic development of Member States; Progressive removal of trade barriers and promotion of

intra- regional trade; Greater role of ECO region in thegrowth of world trade; Gradual integration of theeconomies of the Member States with the world

economy; Development of transport & communications infrastructurelinking the Member States with each other and with theoutside world;

Economic liberalization and privatization; Mobilization and utilization of ECO region's material

resources;

Effective utilization of the agricultural and industrialpotentials of ECO region; Regional cooperation for drug abuse control, ecological and

environmental protection and strengthening of historicaland cultural ties among the peoples of the ECO region;and

Mutually beneficial cooperation with regional and

international organizations.

Objectives


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Structure

Directorates and


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Directorates andActivities

Trade and InvestmentTransport and Telecommunications Energy, Minerals and Environment Agriculture, Industry and Tourism Human Resources & Sustainable Development Project & Economic Research and Statistics International Relations

Directorate of Trade and


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Directorate of Trade andInvestment

While striving for the liberalization and promotion of trade andinvestment, the following strategy is being followed:

i) Removal of tariff and non-tariff barriers in the region,

providing a regulatory and enabling environment for trade ii) Develop a favorable regulatory investment framework for

optimum utilization of economic resources

iii) Increasing the interaction of private sector


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Major initiatives

ECO Trade Agreement (ECOTA)

ECOTA is the main vehicle for removal of tradebarriers and establishment of Free Trade Area in theregion by 2015.

ECO Agreement on Promotion and Protection of

Investment (APPI)

Afghanistan, Azerbaijan, and Turkey signedAgreement on Promotion and Protection of

Investment (APPI) The APPI envisages for common policy and common

action for attracting investment in the ECO region


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Projects of T&I

ECO-PIDE Study on the Trading Patterns in the ECO Region(Pakistan Institute of Development Economics)

ECO-UNIDO Project on Trade Capacity Building of ECO

Member States (United Nations Industrial DevelopmentOrganization)

ECO Trade and Investment; Network Web Portal:www.tradeeco.org.
http://www.tradeeco.org/http://www.tradeeco.org/


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Trade dependence is a measure of the importance of


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trade in the overall economy. It is measured by dividing thevalue of total trade (exports plus imports) by GDP andexpressing the ratio as a percentage.

. . / /i t s w o r l d b a n k o r g w it s w e b

ECO / SAARC


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ECO / SAARCeffectiveness

ECO/ SAARC effectiveness in economicstability of the region?

Case: Greece vs. Kyrgyzstan/ Pakistan Whats the difference?


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ThankYou

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Regional Economic Cooperation - Pakistan vs India