Experiences of Capitalism in India and Pakistan

Abstract

The objective of this study is to examine the economic policies and socio-economic changes which have taken place in South Asia for the last six decades. However, my focus will be mainly on India and Pakistan to try to examine how capitalism has been developing differently in these two countries. It seems to me that this study is important because the proponent of free-market polices (i.e. mainstream economists) ignore the poverty issues and emphasise mainly growth rates and unquestionably assume that ‘trickle down’ would solve poverty problems. We should also not forget that India is home to the largest number of poor in the world, and as such is an obvious test case for whether pro-market reforms work or not. The ruling elites cite high GDP (gross domestic products) growth rates as indicative of economic development and consequently the well-being of the people.

Growth is seen as a panacea and in order to achieve higher economic growth rates both countries had earlier adopted import-substitution-industrialization (ISI) and later on neo-liberal (i.e. ‘free market’) economic policies. The study will also analyse the impact of neo-liberal economic reforms on socio-economic situation both in India and Pakistan and its impact on reducing poverty. In Pakistan these reforms were launched in 1988, while in India in 1991 under the IMF supervision. As a result both economies have witnessed an upsurge in GDP growth rates (especially in India). Despite the high GDP growth rates for the last two decades in India, for example, over all employment has not been growing. The service sector, which witnessed a rapid economic growth, accounts for a much smaller share in employment relative to their contribution to GDP. The study finds that capitalism has failed to remove poverty and inequality despite its long history of penetration in South Asia under colonial and neo-colonial regimes and in spite of being backed by the new technology and increased amounts of credits. The experience of Pakistan clearly illustrated this fact. There is a lack of discussion about the presence of a large proportion of people living in sub-human conditions and lack of overall and holistic development of human being.