Speaker 1: August fifteenth marked the seventieth anniversary of independence for India
Speaker 1: and Pakistan Happy birthday or not. Accompanying independence was the
Speaker 1: partition of colonial India into the two countries, with Pakistan
Speaker 1: intended as a homeland for the subcontinent's Muslim population. The
Speaker 1: sectarian basis of the carve up has been well documented
Speaker 1: a much discussed, along with the divergent political history of
Speaker 1: the two countries, including conflicts between the two. Yes, I
Speaker 1: know there are now three countries, Bangladesh having broken away
Speaker 1: from Pakistan in nineteen seventy one. We're going to take
Speaker 1: a different tack. What were the economic underpinnings of independence
Speaker 1: of partition and how have the countries fared economically since then?
Speaker 1: And to what extent does their separation at birth explain
Speaker 1: their economic performance. Welcome to Benchmark, a show about the
Speaker 1: global economy. I'm Daniel moss I write about global economics
Speaker 1: for Bloomberg View in New York, and I'm Scott Landman
Speaker 1: and economics editor with Bloomberg in Washington. Well. To help
Speaker 1: us work through the economics of partition, we have two
Speaker 1: guests in very different parts of the world with different perspectives.
Speaker 1: Here in New York. We have our colleague Faris Khan,
Speaker 1: a senior editor on the Corporate Finance team at Bloomberg News,
Speaker 1: whose family left India for Pakistan as part of an
Speaker 1: economic and commercial strategy. Our second guest is Nissa Jari, Asia,
Speaker 1: editor for Bloomberg View and author of Midnight's Furies, The
Speaker 1: Deadly Legacy of India's Partition. He joins us from Bangkok.
Speaker 1: Nisset and Faris, welcome to the show. Great to be here, Thanks, terrific.
Speaker 1: India is perceived be booming and Pakistan is perceived to be,
Speaker 1: shall we say, economically challenged. Anything wrong with this picture?
Speaker 1: I'd say that picture is broadly correct, but of course
Speaker 1: it can be exaggerated. You know, in Pakistan isn't doing
Speaker 1: as badly as many would sink. In India isn't doing
Speaker 1: as well as some of its champions would like to
Speaker 1: would like to argue. I mean, if you look at
Speaker 1: where Pakistan is today, they've they've emerged from i MF
Speaker 1: bailout package. The stock mark has been doing relatively well.
Speaker 1: Growth is hovering around four or five percent, which isn't,
Speaker 1: you know, as high as India, but it's but it's
Speaker 1: enough to put the economy on a fairly positive path.
Speaker 1: On the flip side, you look at India, Uh, they've
Speaker 1: sort of lost their ranking as the as the fastest
Speaker 1: growing big economy in the world um after the shock
Speaker 1: of demonetization last fall and after the introduction of this
Speaker 1: new GST tax this summer. They're still struggling to get
Speaker 1: private and smith going. They're still struggling with a bad
Speaker 1: loans problem, and above all the struggling to create jobs
Speaker 1: even though they will have vast and growing population. Faris
Speaker 1: any thoughts, I would agree with what nest It is saying,
Speaker 1: but I would add certainly when it comes to Pakistan,
Speaker 1: there has been recently a positive science from the economy,
Speaker 1: but the recent ousting of the Prime Minister of Pakistan,
Speaker 1: the former primis and Navasharif, after he got ensnared in
Speaker 1: a corruption scandal does not really bode wealth for stability
Speaker 1: in that country. And that speaks to the biggest problem
Speaker 1: in Pakistan is that it goes it has been constantly
Speaker 1: trapped in a period of stru guilty where the military
Speaker 1: and the civil institutions are wine for power in the
Speaker 1: military usually ends up with the upper hand and whatever
Speaker 1: economic gains, social gains that countries sees keep on getting
Speaker 1: eroded by the struggle between these various factions. Were the
Speaker 1: fates of the two kinds trees sealed in partition? I mean,
Speaker 1: where they have they been on this kind of predetermined
Speaker 1: course or were there things that happened in the intervening
Speaker 1: years that have sort of set these plans on course
Speaker 1: and the economies and the directions that they've been going. No,
Speaker 1: I think you know, it's important to remember that, Um,
Speaker 1: this hasn't been the course that both countries have followed
Speaker 1: since partition. I mean early on, um, you know, India
Speaker 1: devalue the routbe in and Pakistan didn't. And that stronger currency,
Speaker 1: combined with the commodity boom that was sparked by the
Speaker 1: Korean War, allowed Pakistana accumulated surpluses which they needed to industrialize.
Speaker 1: So for the next three decades its economy average growth
Speaker 1: around six percent, you know, double what what India was
Speaker 1: managing at the time when it was under central planning.
Speaker 1: It was only after India liberalized in that it's economically
Speaker 1: economic fortunes of the two countries really reversed. UH and
Speaker 1: India started to fulfill its potential and and and take
Speaker 1: advantage of all the advantages that did have, including it
Speaker 1: the size of its population, the size of its market,
Speaker 1: and so on. So it wasn't inevitable that India would
Speaker 1: be the economic superpower, but certainly it had inbuilt advantages
Speaker 1: that Pakistan did not. I agree. I mean, there was
Speaker 1: a saying when I was growing up in Pakistan in
Speaker 1: nineteen eighties that in Pakistan you have more rich people
Speaker 1: and a poor government, while in India you have a
Speaker 1: rich government and poor people. And I think that has
Speaker 1: sort of reversed when India went through the path of liberalization.
Speaker 1: Pakistan did certainly see some strong periods of growth in
Speaker 1: the nineteen sixties because of the economic macroeconomic policies was pursuing,
Speaker 1: but those games were never made into permanent games because
Speaker 1: whatever growth you might see would also be accompanied by
Speaker 1: a lot of political instability, which again aid into those games.
Speaker 1: And finally, after a strong period growth in the nineteen sixties,
Speaker 1: the country entered the nineteen inties in a state where
Speaker 1: basically the country were dismembered. So let's get back a
Speaker 1: little bit in time here. First, tell us some more
Speaker 1: about your family's business and why Pakistan looked better white acting,
Speaker 1: so my my family was not in business per se.
Speaker 1: Most of my father's side who came to Pakistan did
Speaker 1: not came right in the aftermath of partition. It was
Speaker 1: not that they were forced to leave where they were
Speaker 1: in North India what is non North India. Immediately after partition,
Speaker 1: a lot of Muslims from North India and others as
Speaker 1: other parts of India came to Pakistan. Not so much
Speaker 1: that they were fleeing oppression in India, but there were
Speaker 1: a lot of opportunities for them in the new state
Speaker 1: of Pakistan Pakistan. When Pakistan was created, the kind of
Speaker 1: institutions that the British left or existed India, there were
Speaker 1: fewer of them in Pakistan terms of civilian infrastructure, government infrastructure.
Speaker 1: So there was a great a man in the new
Speaker 1: state for people to come in and man these new positions,
Speaker 1: and North Indian Muslim especially who were also some of
Speaker 1: the biggest advocates of Pakistan. For them, it was natural
Speaker 1: for them now to come and take over those jobs
Speaker 1: that they could be jobs as bureaucrats in the new
Speaker 1: in the in the new State Bank of Pakistan, in
Speaker 1: the new airport structure, in the new educational institutions. So
Speaker 1: they were the big boom, uh, and you needed people,
Speaker 1: so many of my relatives came to take over those jobs.
Speaker 1: My father, he came to Pakistan in the early nineteen sixties,
Speaker 1: much later. Again for him, it was that his sisters
Speaker 1: were already there and there were still a lot of
Speaker 1: jobs available in Pakistan but not enough people. So naturally
Speaker 1: it was to his advantage to leave Indian and come
Speaker 1: to Pakistan. My mother came later when she married my
Speaker 1: dad in the nineteen seventies. So fairest did they actually
Speaker 1: get to enjoy the fruits of those economic upper communities?
Speaker 1: Are they still doing that today? I mean what kind
Speaker 1: of work exactly? Um? Were they and have they been?
Speaker 1: So my father took on a differences. First he was
Speaker 1: working for an airline, then he joined Pakistan Radio, and
Speaker 1: then he became a producer in Pakistan television and this
Speaker 1: is all in one decade, uh, and then he moved
Speaker 1: into public relations after that. Yes, so they certainly did
Speaker 1: enjoy um the boom that wasn't taking place in Pakistan
Speaker 1: well into the sixties and the seventies, and to some
Speaker 1: extent the nineteen eighties. My parents were what you can
Speaker 1: describe as the very small part of the very small
Speaker 1: urban upper middle class educated professionals who were in Karachi
Speaker 1: or Lahore Islamban uh and they definitely benefited, but the
Speaker 1: state and the country at large, I don't think was
Speaker 1: enjoying the same levels of growth. Uh my my. There
Speaker 1: she moved to Pakistan and right after, right before the
Speaker 1: seventy one war, so her first experience after six months arriving,
Speaker 1: and she's an academic, it was that six months after
Speaker 1: coming to Pakistan, there's a war between the two countries
Speaker 1: and she could not longer be in touch with her
Speaker 1: own parents for I guess it was a couple of years.
Speaker 1: So it was a little bit of trauma involved for
Speaker 1: her at that time, and and she focused on her
Speaker 1: academic career in Pakistan at that time. But so so
Speaker 1: they were part of the upper middle class group in Karachi.
Speaker 1: So Pakistan began to fall behind after this very promising start.
Speaker 1: And nestaid, how much of that can be attributed to
Speaker 1: these on off periods of military rule and why doesn't
Speaker 1: the military play any significant role in India's political life
Speaker 1: by comparison, Well, for a couple of reasons. UM's take
Speaker 1: your second question. First, Uh, you know this, this is
Speaker 1: a notable difference between the two countries that there's never
Speaker 1: been a coup in India and Um, part of it
Speaker 1: goes back to the fact that India at partition had stronger,
Speaker 1: more well established and better staffed institutions. Um, they were
Speaker 1: inheriting the machinery of the raj Um, they had people
Speaker 1: in place, people have been working these jobs for for
Speaker 1: quite a long time. And Uh, you know, the military
Speaker 1: had always adhere to civilian rule there in Pakistan. On
Speaker 1: any other hand, you had faced a situation where you
Speaker 1: really felt after the riots of partition, and which remember
Speaker 1: something like fourteen million people across the border from one
Speaker 1: side to the other, nearly a million people may have died. Uh,
Speaker 1: you had a real sense in Pakistan that India posed
Speaker 1: an existential threat, that it had never accepted partition and
Speaker 1: didn't want Pakistan to exist and hope to reabsorb it
Speaker 1: one day. And then the other important thing is that
Speaker 1: the founder of Pakistan, Muhammad Ali Jinna, die barely a
Speaker 1: year after independence. So you had a situation where you
Speaker 1: had sort of weak and confused civilian leadership. The army
Speaker 1: was the strongest and most professional institution in the country,
Speaker 1: and it was natural for people to look to them
Speaker 1: for stability UM and that was a role they claimed
Speaker 1: for themselves UM and so they you know, that led
Speaker 1: to one of the first coups uh and and subsequent
Speaker 1: ones as well. They've they've also portrayed themselves as the
Speaker 1: defenders of Pakistan's sovereignty against this threat from next door
Speaker 1: in India. UM And, as Farah said earlier, that's right.
Speaker 1: The constant back and forth between civilian and military rule
Speaker 1: UM works against stability UM and discourages investment. I mean,
Speaker 1: you see what's happened to Pakistan and just since nine
Speaker 1: eleven with the degree of violence that they've had to
Speaker 1: deal with UM that that scares people off UH and
Speaker 1: it makes it hard to UM for for investors to
Speaker 1: see a long term future. UH. There has Pakistan suffered
Speaker 1: and is its current predicament in part explained by its
Speaker 1: long land border with Afghanistan. Now, you mentioned post nine eleven,
Speaker 1: but Afghanistan has been going through periods of tumult long
Speaker 1: before that. Does that have anything to do with what's
Speaker 1: going on here? It's certainly it's certainly adds to the
Speaker 1: challenge of Pakistan. I mean having a border that was
Speaker 1: always contested by Avuhanistan because if you remember, the border
Speaker 1: that defines the boundaries of Indian Pakistan was first of
Speaker 1: all created under the Raj and the Aflan government then
Speaker 1: and subsequent Aguan governments have always questioned the legitimacy of
Speaker 1: the border. So that has added to this constant paranoia
Speaker 1: and in Pakistan that we are surrounded by people who
Speaker 1: don't really recognize our right to exist. If you have
Speaker 1: India on one side that perhaps wants to re absorb
Speaker 1: us and correct the tragedy of partition, and then we
Speaker 1: have Afghanistan on the other side, which questions the legitimacy
Speaker 1: of the border, and uh therefore has has strong interest
Speaker 1: on the borderland straddling the border between the two countries.
Speaker 1: So it does add to the instability. What at its
Speaker 1: worst has done has it has constantly fueled the paranoia
Speaker 1: that has strengthened the Hannah the military in terms of
Speaker 1: positioning itself that we are the only ones who can
Speaker 1: defend you as we are sounded by people who don't
Speaker 1: want us to exist. Let's talk about India's economy for
Speaker 1: a moment here. That country is reporting numbers that would
Speaker 1: would make it the fastest growing major economy in the world,
Speaker 1: even faster than China. And yet at the same time
Speaker 1: it has legendary bureaucratic issues. Uh. They just had a
Speaker 1: major issue this past year where they scrapped a huge
Speaker 1: amount of currency. We did a whole separate podcast on that.
Speaker 1: You have a Prime Minister Narendra Modi, who is uh,
Speaker 1: you know, taking the country in new direction and even
Speaker 1: fanning sectarian flames in a way. How does this altbode
Speaker 1: for the future of India's economy. Can it really keep
Speaker 1: up the growth that's made it so special? It really depends.
Speaker 1: I mean, I think some of the growth numbers are
Speaker 1: a little suspect because if you look deeper down at
Speaker 1: other numbers like private investment for instance, Um, they are
Speaker 1: they're extremely worrying. Uh. And as I mentioned later, in
Speaker 1: jobs in particular, you've got, you know, a need to
Speaker 1: create something like a million jobs a month just to
Speaker 1: absorb the people entering the workforce. And you don't have
Speaker 1: an established and major manufacturing sector, which is really the
Speaker 1: only way to absorb that number of people. Uh. That
Speaker 1: the Modi government has tried to establish this Make an
Speaker 1: India program, but it hasn't really amounted to much. They
Speaker 1: haven't been able to change, in particular the laws that
Speaker 1: make it harder for companies to hire and fire, which
Speaker 1: is why so many of them remain so small UH.
Speaker 1: And that's that's preventing growth in the manufacturing sector. And
Speaker 1: then you've got UM. You know, part of the problem
Speaker 1: with the stall and investment is that you have a
Speaker 1: major overhang of bad loans uh in in the state
Speaker 1: bank sector that still hasn't been dealt with UM and
Speaker 1: that is preventing banks from lending, is preventing borrowers from
Speaker 1: from wanting to take on more debt uh. And unless
Speaker 1: you solve all these problems, I don't think it'll be
Speaker 1: you'll be able to sustain the kind of gaudy top
Speaker 1: line GDP numbers that the government likes to boast about Cyrus.
Speaker 1: Does Pakistan have an economic future or even a futures? Yes,
Speaker 1: and yes, I absolutely do think that Pakistan both than
Speaker 1: economic future and a future UM. But it's not going
Speaker 1: to be an easy struggle for those who want to
Speaker 1: write Pakistan's coores. But I certainly have a lot of
Speaker 1: faith in many people in Pakistan who do see the
Speaker 1: struggles for what they are. But it's it's going to
Speaker 1: be a long slog, and I think it's going to
Speaker 1: test the patients of both Pakistani's and Pakistan's neighbors and
Speaker 1: Pakistan's friends and attractor of the world. I mean, this
Speaker 1: is the country that's close to populations already well over
Speaker 1: two hundred million, it may almost double in three decades,
Speaker 1: the country that is a major, significant military power with
Speaker 1: nuclear weapon. This is a country that's really not going
Speaker 1: away anywhere. This is a country that can both offer
Speaker 1: a lot of opportunities and offer tremendous challenges to its neighbors.
Speaker 1: This is a country that India, for instance, rather would
Speaker 1: have succeed on its own rather than splinter into more
Speaker 1: and more chaos. But God, that is going to really
Speaker 1: also affect in their daground to the detriment of India.
Speaker 1: So so it's it's going to be long slog. It's
Speaker 1: going to require a lot of reform in the country
Speaker 1: is going to reform. It's going to require a lot
Speaker 1: of patients from Pakistan's neighbors. Failed Pakistan is unacceptable. Gentlemen,
Speaker 1: Thank you both, and again happy seventieth Benchmark will be
Speaker 1: back next week and until then you can find us
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Speaker 1: as well as Apple Podcasts, pocket Casts, and Stitcher. While
Speaker 1: you're there, take a minute rate and review the show
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Speaker 1: know what you thought of the show. You can follow
Speaker 1: me on Twitter at Moss Underscore, Eco Scott at Scott's
Speaker 1: Landman Faris how do they find you? They can find
Speaker 1: me at f Khan thirty three at Bloomberg dot There
Speaker 1: and listen and on it are at out Nettajari. Benchmark
Speaker 1: is produced by Sarah Patterson. The head of Bloomberg Podcast
Speaker 1: is Alec McCabe. See you next time,