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Pakistan Economy – A Post Independence Historical Review

India and Pakistan won independence in August 1947, following a nationalist struggle lasting nearly three decades. Both the countries were born with similar issues and somehow with similar economic conditions, it took almost a decade to stabilise themselves post independence.

Pakistan economy in mid 60s started gaining support from US and other western capitalist powers, resulting in a massive programme of industrialization and privatization. Under the dynamic leadership of General Ayub Khan, Pakistan’s economic strategy was so successful that South Korea ended up copying its Second five year plan in a bid to develop Seoul as much as Karachi in a short period of time. Sigh!!

Time, when Pakistan lost its way to economic growth.

India, on the contrary in 1960’s was quite chaotic. India & Pakistan fought two wars in a short span of time, there was a massive currency devaluation in 1966, further weakened the Pakistan Economy, more inward policies were drafted and executed and the new leadership under Indira Gandhi turned out to be even more anti capitalist with higher taxes, more licenses to open businesses and draconian trade restrictions.


Pakistan economy continued to grow impressively till 1971, but after the 1971 war and independence of East Pakistan, the new leadership under Zulfikar Ali Bhutto made the same mistakes that Indira Gandhi was making. When bad policies and shortsightedness are mixed, economic growth programmes get hampered.

That’s what happened in 1970s in both India and Pakistan. However, apart from making the same mistakes in terms of nationalisation of industries and drafting inward looking policies, Bhutto made another big mistake of using Islam as a political tool. Till 1971, the politics in Pakistan was under the tight grip of the military that refrained from abusing the massive power of religion over masses. The occasional whiskey loving, flamboyant Bhutto began using religion to mobilise the masses. It became the forefront of economic policy making. In fact, he introduced the vague term “Islamic socialism. “

Being secular, India in 1970’s though going through a political crisis after the imposition of state emergency, never took an extreme stand against or in favor of any religion, and as a state remained neutral.

Bhutto administration in Pakistan went on till 1977. It was in this year that he overthrown by his own General Zia ul Haq who established military dictatorship in Pakistan again. Under this new leadership, economic growth started improving and it seemed Pakistan Economy is going to shine again.

Unfortunately, this high growth rate under Zia was due to a number of reasons that ranged from external foreign aid to even remittances from overseas Pakistanis who had migrated abroad in 1970’s for better opportunities. In fact, Zia’s market oriented policies hardly had an impact due to his primary agenda of full fledged Islamisation.

Pakistan’s flourishing music and film industry which was thriving in 1960’s-’70’s, barely managed to make 10 films a year in ‘80s, a series of sharia laws were imposed, restricting men and women of several individual liberties. Even tourism got affected due to Pakistan’s support to mujahideen movement in Afghanistan.

Pakistan which was emerging as a progressive nation on global map, was greatly affected by these so called ‘programs and reforms’ done by Zia administration, wrong decisions and policies put a great strain on country;s economic development, led to a decline in the importance of education.



Even the textbooks in Pakistani schools were rewritten to promote Islamic ideology. In fact by the end of his regime, Pakistan was battling its worst economic crisis since independence. Classic symptoms of stagflation were seen as Inflation rose and growth rate started falling. Even liberalisation and privatisation programmes in 1990’s did not help much. It was only for a brief period under Shaukat Aziz’s administration that growth rate started showing signs of revival in 2000s. But 2008 global crisis even halted that.

Pakistan Economy, currently under a tight grip of terrorism, overbearing influence of clergy and a nexus between this clergy and military, hasn’t been able to grow and develop at the pace and swiftness at which it was growing in 1960s. A large part of this problem is due to the unstable political environment that has prevailed in the country since its very inception.

Brain drain in 1970’s and 1980’s also affected the country, the state education programme being underfunded and poorly managed, not able to churn out an entire class of educated citizens when the country needed them the most in 1990s.


Pakistan Economy is still trying to recover from the damage done by the extremist ideology in 1980’s, hoping to tap the full potential of its open market reforms and globalisation reforms.

The country’s economic growth showed some signs of revival with more jobs in the country and the booming stock market (KSE100 has been one of the best performing indices in the recent past), but it’ll take more than just that for the country to grow and prosper again. The real test lies ahead as the youth can either choose to get educated and work for a bigger and better Pakistan or be influenced by religious fundamentalists and work towards destroying the future of every Pakistani.