As nations born from the same partition, India and Pakistan have charted distinct economic courses in recent years, leading to a stark divergence in their poverty levels. While India has witnessed a significant decline in poverty, Pakistan grapples with a concerning rise, painting a tale of two economies with vastly different trajectories.
India has experienced a remarkable reduction in extreme poverty. According to recent World Bank data, the extreme poverty rate in India plummeted from 27.1% in 2011-12 to just 5.3% in 2022-23. This translates to approximately 269 million people being lifted out of extreme poverty in a little over a decade. The number of individuals living in extreme poverty in India has decreased from 344.47 million to 75.24 million during this period. This decline has been observed across both rural and urban areas, with rural extreme poverty falling from 18.4% to 2.8% and urban extreme poverty reducing from 10.7% to 1.1% over the same timeframe. This progress has occurred even with the World Bank raising its poverty threshold to $3 per person per day, offering a more realistic view of deprivation and development across countries. Some experts suggest that with a headcount ratio of poor below 3%, India is close to eliminating extreme poverty.
Several factors have contributed to India's success in poverty reduction. Experts commend the reforms and inclusive growth measures undertaken in the last decade. India is also on track to becoming the fourth largest economy in the world by the end of 2025-26. The decline in poverty also reflects the country's progress in reducing multidimensional poverty. The Multidimensional Poverty Index (MPI) in India has dropped from 53.8% in 2005-06 to 16.4% by 2019-21, and further declined to 15.5% in 2022-23.
Conversely, Pakistan's economic landscape presents a less optimistic picture. Pakistan's economy is projected to grow by 2.7% in the fiscal year ending June 2025, which is slightly higher than the 2.5% growth in the previous year. However, this falls short of the government's initial target of 3.6%. The IMF expects a 2.6% growth in FY25 and 3.6% in FY26. While the Pakistan Economic Survey 2024-25 highlights macroeconomic stabilization and modest growth, it also acknowledges challenges. The survey reports real GDP growth of 2.68% for FY 2025, with the services sector leading at 2.91%, followed by industry at 4.77%, and agriculture at a modest 0.56%. Inflation has dropped significantly, and the fiscal deficit has narrowed. However, these positive indicators are overshadowed by the persistent issue of poverty. Recent reports indicate that nearly 45% of Pakistanis live below the poverty line. This situation is compounded by rising debt and the need for stringent reforms demanded by the IMF.
The upcoming budget for 2025-26 is expected to be shaped by IMF conditions tied to a $7 billion Extended Fund Facility and a $1.4 billion Resilience Facility. The government faces the difficult task of balancing fiscal targets with the need to stimulate growth. Agriculture posted a meagre 0.56 per cent growth, marked by a sharp decline in major crops, while large-scale manufacturing contracted, underscoring the economy's exposure to external shocks and its heavy dependence on remittances and foreign funding.
The contrasting trajectories of India and Pakistan highlight the impact of different economic policies and priorities. While India has focused on inclusive growth and poverty reduction, Pakistan has struggled with economic instability and rising poverty levels. The two nations, born from the same soil, now present a study in contrast, underscoring the complex interplay of economic factors and their impact on the lives of their citizens.
