India and Pakistan might be tracking different trajectories, from politics (democracy vs army rule, secularism vs theocracy) to economics (rapid growth vs mediocre growth), and from social trends to international postures (Security Council aspirant vs exporter of terrorism). Pakistan’s GDP growth next year is slated to be only 4.2 per cent, about half India’s; and inflation is expected to be much higher at 12 to 13 per cent. But beneath these obvious differences, there is a surprising similarity on the key issues. For instance, both countries had among the highest tariff levels in the world before both began their economic reform programmes at roughly the same time — launching tariff cuts, privatisation, fiscal correction and other familiar initiatives. Even Bangladesh had a contemporaneous switch in policy, and the adoption of similar economic reforms, sometimes with greater success than India.
So when it comes to the latest Pakistan budget, it is not surprising to see similar issues come to the fore. The fiscal deficit for the year beginning July is slated to be 4 per cent of GDP (India’s is 4.6 per cent). Subsidies have overshot budgets, and tax revenue is to be 13 per cent of GDP (tracking India’s 12.6 per cent). Like India, tight expenditure control is being tried (growth of just 4.6 per cent). Even more uncannily, the income tax exemption ceiling across the border is Rs 3.5 lakh, while it is Rs 1.8 lakh in India; if you adjust for exchange rate differences, the two levels are almost exactly the same. And if you allow also for the differences in the size of the two economies, the disinvestment targets are similar too.
There is more. India made a killing on 3G licences last year, Pakistan hopes to do the same in its new year. Infrastructure investment (power and water) gets pride of place in both countries. Finally, if there is scepticism about Pranab Mukherjee achieving his broad targets, there is an equal scepticism in Pakistan about its new fiscal numbers. Commentators are frustrated by similar sets of issues: power sector reforms, proper electricity pricing, reducing the losses of state-owned enterprises, and controlling the subsidies on petroleum products. In one area, though, Pakistan is clearly ahead: it has already got a Goods and Services Tax. The other big difference is that India is bridging its deficit using local resources; Pakistan is depending to some extent on American money being made available. Still, you could summon a Hindi film scriptwriter; he’d give you a story about twins separated at birth!
