India and Pakistan: Two Diverging Economies with Shared Lessons

In global policy and business discourse, India is often celebrated as South Asia’s economic success story. Its ambitions to become a $5 trillion economy, coupled with rapid technological growth and an expanding middle class, frequently dominate headlines. By contrast, Pakistan is often framed as economically stagnant or perpetually in crisis. But this black-and-white portrayal oversimplifies the story.

A more nuanced analysis reveals that while India’s growth is impressive, it faces deep-rooted structural challenges. At the same time, Pakistan, often dismissed in comparisons, demonstrates notable financial discipline and resilience in the face of adversity. Comparing the two countries on key financial indicators reveals not just differences—but surprising similarities and complementary insights.

India’s public debt has crossed $2 trillion—roughly 80% of its GDP—reflecting ambitious spending policies aimed at fostering long-term growth. This scale of debt underscores India’s confidence but also brings risks, especially in times of global instability. Pakistan, though managing a much smaller economy, carries a public debt of around $265 billion, about 70% of its GDP. While the ratio is lower, Pakistan’s debt strategy is more conservative, shaped by years of fiscal pressure and IMF-backed discipline.

These contrasting approaches speak volumes: one country pushes aggressive growth, the other prioritizes survival and gradual recovery. Both choices come with trade-offs. India may see quicker results but faces higher risks. Pakistan may progress more slowly, but with greater financial control.

Indian consumers today borrow more than ever before—household debt stands at approximately 17% of GDP. This points to financial inclusion and access to credit, but it also raises alarms about potential defaults and rising household liabilities. In Pakistan, household debt is under 2% of GDP, indicating limited credit availability. While this shields the economy from household-level shocks, it also shows an underdeveloped consumer finance market.

India’s deeper financial markets foster consumption but increase vulnerability. Pakistan’s consumer restraint, though often due to necessity, lends financial stability at the grassroots level.

India’s vast informal sector makes accurate economic assessment difficult. Despite strong headline GDP figures, a large portion of work remains undocumented. Revisions and disputes over India’s official data—even by figures such as former Chief Economic Adviser Arvind Subramanian—highlight the complexity of measuring real economic output. Some estimates suggest official growth figures may be overstated by as much as 2.5% annually.

Pakistan’s economy also includes informality, but its smaller scale and more cautious growth narrative make its reporting appear more transparent to investors and multilateral institutions. While both countries must address informality, India’s rapid growth narrative should be balanced with greater statistical integrity.

Economic growth is never evenly spread. In India, developed states like Maharashtra and Tamil Nadu contrast sharply with lagging regions such as Bihar and Uttar Pradesh. This imbalance challenges the idea of broad-based prosperity. In Pakistan, while regional economic gaps are smaller, disparities between provinces such as Punjab and Balochistan persist. Averages at the national level often mask localized economic inequality in both countries.

India’s post-pandemic fiscal position remains stretched, with widened deficits and increased borrowing costs. The Reserve Bank of India has warned that fiscal sustainability may become a future challenge. Pakistan, by comparison, is following a strict fiscal correction path with support from the IMF. While unpopular, austerity measures are designed to rebuild trust with lenders and stabilize the economy.

India faces the challenge of balancing ambition with discipline. Pakistan’s task is to maintain discipline while unlocking sustainable growth.

The dominant narrative of India’s rise and Pakistan’s stagnation needs refining. India’s achievements are undeniable, but so are its fragilities. Pakistan’s resilience, though less publicized, deserves greater recognition. Both countries are navigating different strategies based on internal pressures, external expectations, and historical constraints.

India’s $5 trillion dream depends not just on numbers, but on reforms, regional equity, and governance. Pakistan, meanwhile, is trying to secure long-term stability through slow but steady reforms. The global community would do well to assess both countries with a balanced lens—not through hype or gloom, but with attention to the substance behind the statistics.

Ultimately, economic success in South Asia isn’t a zero-sum game. India and Pakistan, though on divergent tracks, share common challenges: inequality, climate vulnerability, informality, and regional imbalance. Recognizing these parallels could foster more cooperation, smarter investment, and better policymaking in a region full of potential yet struggling for cohesion.