DESPITE their virtual isolation from each other for over half a century, the elites of both India and Pakistan are aspiring to a remarkably common future. That future seems to be defined uniquely in terms of one parameter: the rate of economic growth.

In India, which recently triumphed over its fixation of overcoming the “Hindu growth rate” that had tormented its economic planners in the past, are now dreaming of a 10 per cent growth rate, as a means of catapulting it to the coveted club whose current membership is confined to China and East Asia, notwithstanding some deceleration in their growth rates.

Pakistan’s economic managers, who have always day-dreamed of graduating into the “middle-income” group and have periodically declared the economy’s take-off, leaving the announcement of the “crash-landing” to successor governments, are again hoping to achieve their unrealized dream.

Although Pakistan’s long-term growth record has been considerably better, if more erratic, than India’s, its main driving force has been external rather than domestic impulses. Pakistan’s savings and investment rates have always lagged considerably behind India’s, necessitating a much larger proportion of external flows.

While Pakistan’s growth resurgence in the past three years, propelled by the massive infusion of external finance induced by the change in its political stance since 9/11, along with the uncritical adoption of the neo-liberal agenda is rather thinly based, India’s economic revival has a firmer, domestic-based foundation.

Nonetheless, the almost manic preoccupation with high growth rates is a shared attribute of the two neighbouring nation states, who remain at odds on many public policy issues, notwithstanding the tortured attempts to improve their official relations.

Indeed, the elites of both countries are busy putting more gloss on the “shine” of their respective economies that they presume would delude those living in the darkness of poverty and misery with their chauvinistic appeals as a new superpower or as the “enlightened” leader of a besieged faith.

How shining are the economies of India and Pakistan? Take Pakistan first, whose “success story” has been highlighted by the Newsweek, in its March 27 issue, which is studded with some incredible statistical inaccuracies, along with some revealing insights. Besides claiming that “in many ways the country has become the world’s most surprising economic success story”, the magazine quotes the prime minister as saying: “in the past three years we have seen the emergence of a middle class that is creating demand and driving a lot of the growth. Our per capita income has gone up to $800. Two years ago it was $400.”

One doesn’t know whether the Newsweek interviewers or the prime minister’s advisers who prepared his brief realized that this implies an annual growth rate of over 40 percent per annum in per capita incomes, which is a preposterous claim even for a short period of two years, unless the country’s coffers have been filled by a source known only to the prime minister.

Neither can the claim that the “emergence of middle class”, which normally takes decades rather than years in its formation, has been achieved during the last three years of Mr Aziz’s stewardship of the economy, can easily be swallowed by any one besides the regime’s sycophants. That the “middle class” is driving “a lot of growth” is true only in the sense that “growth” is synonymous with the growth of bank-credit financed automobiles, which are crowding metropolitan roads, with heavy associated environmental and business costs.

It is easy to point out other gaping holes in the story. Shahid Javed Burki, rightly points out that the magazine, following the script provided by the government, exaggerates the downward slide of the economy in the 1990s, without taking into account the various constraints, especially the sanctions against nuclear explosions, which limited the government’s room for manoeuvre.

The magazine, however, hits the nail on the head when it says that what really turned the country’s fortunes around was September 11 and quotes an emerging Lahore media, hotel and telecom tycoon and an ex-PPP legislator as saying: “The 9/11 attack was the best thing that ever happened to Pakistan.”

Another leading Lahore industrialist, who heads some of the country’s biggest joint-venture companies, including Coca-Cola and Nestlé, is quoted as saying “This is the best government we’ve had in the past 30 years.”

The interviews were astutely focused on the real beneficiaries of the present boom and of the regime that engineered it and their euphoria about the current boom is understandable.

How much of this razzle-dazzle is for real? The surrealistic growth picture painted by the con artists in P and Q blocks in Islamabad is beginning to fade away. The 8.5 per cent growth rate registered last year, seems to have been a blip rather than a steady trend, which the government has been claiming to be.

This year, the growth rate is likely to be 6-7 per cent, although the spin doctors in the Finance Division are doing their best to pressure the national accountants in the Statistics Division to produce as rosy a picture as possible by using various gimmicks, including change of bases, underlying benchmarks and deflation procedures. By frequently changing personnel more amenable to pressure, the government can still fix or doctor the numbers to suit its purpose.

As pointed out by the US weekly ,the government may be motivated in putting the gloss on its performance by the possibility of an impending election next year. An unnamed foreign banker is quoted as saying: “The government is running the [economy] like it’s heading for elections.” The rush to build controversial dams and other arcane projects in insurgency-affected areas of Balochistan and NWFP is indicative of the government’s intentions.

Unless the government builds a firewall of non-interference and transparency, its economic management and statistical machinery will remain suspect and lack credibility.

The highly-politicised way in which the government has handled the earthquake relief and reconstruction efforts clearly points towards its intentions in manipulating the forthcoming polls.

Even if one were to take the GDP growth numbers for 2004-2005 on their face value, the quality of growth inherent in them is far from impressive. Both the growth in agriculture and manufacturing were the result of low growth in these sectors for the past few years: in agriculture because of an extended period of drought and in manufacturing because of the existence of widespread existence of excess capacity in the large-scale manufacturing sector, which the liberalization of trade policies have been able to help remove.

However, this is unlikely to recur in the future, unless more productive capacity is created through new investment. The evidence for this is still weak, despite the spiralling of the stock market index.

A rather disconcerting feature of the growth pattern in the last five years has been the lack of any significant structural transformation in the economy, which is the most robust sign of sustainable growth.

The share of agriculture in GDP is still well over 20 per cent, having declined from 26.2 per cent in 1990-91 to 23.1 per cent in 2004-05, an average yearly decline of less than a per cent during the 5-year period. In 2005-04, the year which is being celebrated as Pakistan’s best year of growth, agriculture’s share in GDP remained almost static.

The share of manufacturing did rise from 14.8 to 18.3 per cent, with the large-scale manufacturing sector’s share rising from 9.2 to 12.6 per cent, largely due to better capacity utilization during the period. However, large-scale manufacturing is known for its low elasticity of employment and, therefore, results in largely “jobless growth”.

The Indian growth experience in the past five years has been broadly similar, with two notable exceptions. India’s agricultural growth has been marked slower than Pakistan’s (India’s four per cent against Pakistan’s 5-6 per cent), while the growth in manufacturing has been about the same (about 10 per cent), but the service sector in India has grown almost twice as fast as in Pakistan(India’s 12 per cent, against Pakistan’s six per cent).

As a result, the Indian economy relies much less on the agricultural sector and much more on the knowledge-intensive service sector, because of its better record in human development and investment in human capital.

Pakistan, however, continues to rely on its large agricultural sector while its industrial sector is much less diversified and its service sector consists largely of low-skilled labour with low productivity.

While both India and Pakistan continue to be enamoured of high growth rates and India seems to have an edge in achieving that goal, both countries have continued to have a cavalier attitude towards the problem of equitably distributing the fruits of growth.

However, India does have a democratic political system which helps to some extent intermediate the problem of ensuring a better distribution of the fruits of growth, but it can’t be satisfactorily solved until growth and distribution are treated as an integrated whole, rather than as disjointed issues, as continues to be the case in both countries.

How can the goal of high growth be reconciled with the objective of a more balanced and equitable development? Past efforts to do so, often initiated by the World Bank and IMF to repair the damage done by their earlier more market fundamentalist policies, have failed to have a desirable effect on the pattern of development, except in the most superficial terms.

In a recently published book, Development with Dignity, the noted Indian economist, Amit Bhaduri, has succinctly presented a more integrated and realistic strategy for development which aims to syncretize the objectives of growth and distribution through fashioning institutions and policies in a more effective and durable way. I hope to discuss his contribution and its likely applicability in Pakistan on another occasion.