IN terms of economic independence, the country surely started on the wrong foot at the time of partition. For once, Pakistan was not at fault. Political choices rightly took precedence over economic options and India did its best to force our hand whichever way it could. In a manner of speaking, the sea was at its roughest when we set sail.
Having said that, the Muslims of the subcontinent, historically speaking, had found themselves drawing the short straw when it came to the field of economics. It is difficult to say for sure whether Emperor Jahangir, the fourth Mughal ruler, was innocent or naïve when he welcomed Sir Thomas Roe as Ambassador of King James I to his court. His obsession with the pleasures of life probably prevented his senses from even imagining the damage he was to inflict upon the subcontinent with this one decision in 1615.
Britain had acquired trading rights and had established factories. Shah Alam II sacked his revenue collectors to be replaced by low-ranking officials of the East India Company. In 1835, the British started exporting cheap Indian labour to other parts of its massive colonial empire – from as close as Mauritius to the far-off Fiji Islands in South Pacific and to Trinidad in the Caribbean.
An East India Company official is believed to have said this in the 1840s: “… little court disappears; trade languishes; the capital decays; the people are impoverished … the Englishman flourishes and acts like a sponge drawing up riches from the banks of the Ganges, and squeezing them down upon the banks of the Thames”.
Pakistan started its journey when the British Empire was already on a slide and India was able to flex its economic muscles freely.
Even if one takes it as a bit of exaggeration, which, in fact, was not the case, much wrong was happening under the mighty nose of the Muslim leaders who had the fate of the subcontinent in their hands back then. And the lack of understanding of the rulers about the ways of the commercial, corporate economics of the times they were living in was one of the major reasons behind the plight of the community under their rule.
The industrial revolution in Britain was built on the pyre of the resources of South Asia. Under the guise of trade, what Aurangzeb Alamgir had managed in terms of tax collections, estimated at over Pound Sterling 100 million, was quietly stashed away to the Royal Court in London. The decline of the commercial power of the subcontinent had thus begun.
History records that the seriously rich Nizam of Hyderabad had to pay a whopping monthly salary of £5,000 to the British commander to protect him. To make the Nizam poor, the British lent him money at 24 per cent per annum. He paid by giving up territories to the British. Ironically, Western forces today do pretty much the same thing, albeit in a more legally organised manner, but that is a matter for some other day.
In one of his books, Shashi Tharoor has mentioned that each year over £18 million were remitted to Britain by undivided India. He has quoted Comte De Châtelet, the French Ambassador to the Royal Court in London, thus: “There are few kings in Europe richer than the directors of the English East India Company.”
In the post-1857 existence, Hindus and Parsis dominated the Indian business scene in the early 1900s. Jamshedji Tata, who started to flirt with business in 1883, was finally able to set up iron and steel production in 1912. The Muslims of what is now Kerala had developed a decent shipbuilding industry, but when their nationalism came to the fore, the British decimated their businesses.
After World War II ended in 1945, the sun had begun to set on the British Empire. In undivided India, the Raj had exploited both the majority community and the minorities, mainly Muslims. The Muslims had begun to realise their plight, not just as a political minority, but also as a victimised economic minority. This deep-seated sense of political and economic exploitation of the Muslims led Quaid-i-Azam Mohammad Ali Jinnah to propose the creation of a separate Muslim homeland – now recorded in history as the Lahore Resolution.
This declaration did not come easy. Mr Jinnah and his diehard and dedicated stalwarts diligently pursued the idea of a Muslim homeland. Sir Muhammad Iqbal conceptualised the need for a separate Muslim homeland and it was the Cambridge student, Chaudhry Rehmat Ali, who coined the proposed state’s name as ‘Pakistan’.
The partition council made responsible for the division of asset and liability between India and Pakistan got into such trivialities, like how the office pencils and rubbers should be shared from the stocks, and, to make a complete mockery of the exercise, heated and lengthy debates ensued on how the ‘ducks’ imported from the United Kingdom at a cost of £250 by the government of Huseyn Shaheed Suhrawardy should be distributed. For a single job in east Bengal, which was to become East Pakistan, two or more Muslim nominees from west Bengal had been posted, resulting in utter confusion in the administrative machinery.
The division by the Reserve Bank of India (RBI) was messy. Common currency lasted till September 1948. At the time of partition, cash on hand at RBI was Rs400 crores of which Pakistan’s share was worked out at a dismal low of Rs75 crores. India remitted only partially as working funds about Rs25 crores, before partition. The remaining Rs55 crores became hostage in the wily hands of the likes of Sardar Vallabhbhai Patel and Jawaharlal Nehru, who demanded took the stand that the amount was repatriable only upon the settlement of all political issues. Mohandas Gandhi fasted against this decision. His fast, real or farce, was of no avail to Pakistan. To date, Pakistan’s claim of Rs490 million, now valued at over Rs6 billion, is valid against India.
In the aftermath of a violent independence that saw several thousand civilians killed on both sides of the communal divide, both the dominions began to learn the ropes of economic management.
While India almost immediately embraced a socialist-type economic setup, largely due to Nehru’s tilt towards a centrally-planned economy, Pakistan caved in to the demands of a capitalist economy. The federal structure of Pakistan was the motivating force for this direction.
India, by the mid-1950s, had done away with the feudal landowning system, largely due to Patel’s intervention, while unfortunately we could not do much in this regard. This has significantly hampered Pakistan’s economic growth.
India, under Nehru, embarked with enthusiasm on its economic model away from the concept of market economy. It helped India to grow and develop its own industrial base. Over Pakistan, India had the advantage of inheriting a large number of industries and production units. In true Soviet style, there were successive five-year economic plans that aimed at improving not merely the per-capita income, but also to seek higher investment and a push towards enhancing the industrial base. The first plan had a target of 11 per cent growth, but it actually achieved 18pc. The second plan up to 1961 was still better with a growth rate of 21pc.
While India had a firm and continuous rule of Nehru for the first 17 years of independence, the Quaid lasted just one year, and that too in frail health. Pakistan’s five-year plans kept floundering due to political upheavals across the 1950s. Our growth rates were in single digits; they still are.
Under the Marshall plan, Pakistan received massive aid to bolster its economy. This aid became ultimately an opium, leading us to become perennial borrowers in international markets, making us lose economic respectability in the comity of nations.
The decade of 1960s was a comparatively better time for Pakistan’s economy largely because there was continuity of governance and policies. The national economy did much better, but, in my opinion, the belief that one country or the other took our economic blueprint and implemented it at its end is not quite true.
Since then, we have tried quite a few approaches and patterns for growth. Some have worked better than the rest. Hopefully the China Pakistan Economic Corridor (CPEC) will turn out to be the game-changer it is expected to be. It does have great economic promise for the upliftment of trade, commerce and industry.
Whatever we do going ahead, we would do well to remember, and keep in mind, a slogan that was quite popular in Ronald Reagan years. “It’s the economy, stupid!” The slogan is worth getting enshrined in our political economy. No nation can afford to forget that political independence is meaningless without economic independence.
The writer is a Senior Banker.