Another floundering economy: Pakistan
Feb 22, 2023
Another floundering economy: Pakistan
Pakistan has begun to experience what persisted over many years owing to its political miscalculations and economic mismanagement. Recently it crossed all thresholds. Recently the world witnessed the Sri Lankan economic crisis. Pakistan is facing a significant rise in inflation amidst the tumbling foreign reserve and moving to the brink of debt default.
Pakistan has restricted industrial production and consumption. It has also, over the years, not worked on developing means to substitute its imports while it was expanding economically. Its reliance on imports made it vulnerable to shocks, which it could not absorb. With a population of 220 million, it is struggling with its massive external debts, making it nurse a tottering economy.
Pakistan’s outlook is grim. Its currency is falling against the US dollar like nine-pins, fuelling a significant increase in commodity prices and resulting in deeper poverty and hunger. People are wandering around with absolutely no food. Electricity is frequently interrupted. The unemployment rate is at a peak. Consistent slip in its currency value taking its economy into a disaster.
What is the takeaway for India, then?
We Indians are happy to see Pakistan fall. But I say a restless Pakistan will be a heavier threat to us. Unfortunately, it appears that India might face similar circumstances shortly.
The foundation of the Indian economy is better compared to that of any other nation. Since the economy is globalised, all major economies can align themselves with others over time, sharing the impact among all. In India, a few corporations control the economy instead of the government. So when they fall into trouble for any reason, Indians will also face the same challenge.
Corporate entities always work to increase the value of their shares. According to reports, these companies are engaged in many unethical activities to increase their share value. And thus, the cost of their equity has risen significantly. Therefore, if any large corporations fail for any of these reasons, the Indian economy too will suffer. It is a bubble that can burst, however, only to a certain extent.
What will happen in such a scenario?
What happened in Pakistan might not occur in India because of the population. The Indian economy is still strong because of domestic reasons.
But there are other reasons why the economic crisis might happen in India:
Massive government investment that was not planned.
The average person shoulders that burden.
The ratio of poor to rich is drastically changing; as a nation. India might be rising still, but not every Indian.
When supply surplus meets demand deficit, over-production will discourage business activities.
If unplanned development and investments happen, the economy will undoubtedly suffer. Until that point, the government will influence the people. However, there is a limit to how much the general public can take. There is a chance that they will act at some point.
Growth, however, has slowed down compared to earlier. The way that we define growth has also changed. By treating everyone as a member of the family, growth is impossible. The government supports only a small number of corporate entities. For that reason, business activities are concentrated.
How can people spend money if they are unable to earn it? The result is rising unemployment. Thus people experience a financial crisis. Thus, they are unable to spend money. So, while it might not be today, we can anticipate this in a few years.
One of the reasons India will face an economic crisis is that the Indian people can no longer be saved once technology has begun to influence them. Previously, because of our culture, we tended to save. India was always in “safe mode” whenever there was a recession.
Today, one individual, one business, or one government can be oppressive, but it does not work like that. Rather, it is entirely dependent on people, or more recently, on customers. When production is high and customers are unable to purchase a product, demand falls.
In addition, there is a chance that the conflict with China will also have an effect. The cause is complete globalisation.
A failing nation could be a threat in terms of cross-border terrorism and can also cause immense refugee problems, as we saw during the Bangladesh liberation war with West Pakistan in 1971. Then an estimated 10 million people fled East Pakistan (present-day Bangladesh) and took refuge in India, mainly in West Bengal and the Northeast region. The refugees put a tremendous strain on resources and infrastructure.
To avoid repeating Pakistan’s mistake in India, we must not write down Pakistan’s problem so non-seriously. We should exercise caution because two neighbours with many similarities have reason to believe when one catches a cold the other may begin to sneeze.
Every event impacts the world, no matter how small or where it occurs. It is part of a wider web of interconnectedness that transcends national boundaries. It is like the domino effect, and people will therefore experience the same issue not just in India but in many other large countries, and this fact must be understood soon.