GREATER integration between India and Pakistan, including economic integration, seems to have been put on hold by recent events at the Line of Control. This is in spite of the fact that the countries were on the brink of reversing the recent slide, seen in Table 1, in the (already small) relative importance of bilateral trade. Pakistan’s concerns of a trade imbalance with India seem borne out by the data. Indeed, as Table 2 suggests, the major exports from Pakistan to India are primary goods. Both countries send cotton to each others’ textile industries (different varieties are grown) but India’s chemical industry has the lion’s share of exports to the neighbour.
More generally, how have the two economies been doing comparatively of late? As Table 3 shows, stock market investors in the two countries have made strikingly similar returns of late – indicating, perhaps, the shallowness of both equity markets and the importance of foreign funds. The magnitude of foreign institutional investment in India, however, dwarfs that in Pakistan, as Table 4 reveals. Meanwhile, as Table 5 shows, the annualised gains and losses of the currencies versus the US dollar tracked each other until fairly recently, when the rupee suddenly demonstrated greater volatility in returns.
The macro numbers of both countries are also instructive. India’s growth slowdown notwithstanding, there is a big difference between the neighbours’ recent growth rates, as Table 6 shows. But Pakistan’s inflation, startlingly high through the early part of the Asif Ali Zardari presidential term, has now been brought down to levels comparable to India, as Table 7 shows. And, Pakistan’s government appears to have had more success than India’s in controlling the fiscal deficit, as Table 8 shows.(Click here for table)
