 "Forget India, how Pakistan can't even beat the economies of these two Indian states")
What was once a regional contest between two South Asian neighbours has now become a stark mismatch — not just between India and Pakistan — but even between Pakistan and a few Indian states.
Pakistan’s economic position, once ahead of key Indian states like Maharashtra and Tamil Nadu, has deteriorated to the point where its national economy is now smaller than some individual Indian state economies.
Latest figures compiled from international financial institutions, including the International Monetary Fund (IMF), the World Bank and India’s central banking data, point to a dramatic shift.
Pakistan’s GDP, which hovered around $132 billion in 2004–05, is currently estimated between $338 billion and $373.08 billion depending on the data source and fiscal timing. While Pakistan’s overall economy has roughly tripled over two decades, the pace of growth has significantly lagged behind that of Indian states.
In contrast, Maharashtra’s economy has grown from $92 billion in 2004–05 to a staggering $490 billion in 2023–24, while Tamil Nadu has expanded from $48 billion to $329 billion in the same period.
These figures reflect a transformation not only in scale but in the underlying structural strength of India’s subnational economies.
How Maharashtra and Tamil Nadu have outpaced Pakistan
According to the most recent estimates, Maharashtra’s Gross State Domestic Product (GSDP) stands at Rs 42.67 lakh crore, or approximately $490 billion.
Tamil Nadu, India’s second-largest state economy, has reached a GSDP of Rs 31.55 lakh crore, translating to about $329 billion.
These numbers indicate that Maharashtra’s economy is now nearly 45% larger than Pakistan’s entire GDP, while Tamil Nadu’s GSDP is nearly equivalent to it.
The contrast becomes even more stark when comparing growth trajectories. In 2004–05, Pakistan’s GDP was almost 1.5 times Maharashtra’s. Tamil Nadu, at that time, had a GSDP that was just 37 per cent of Pakistan’s.
Today, those figures have flipped, with Tamil Nadu now virtually matching Pakistan and Maharashtra pulling far ahead.
Both Indian states have been key beneficiaries of industrialisation, infrastructure development, and economic liberalisation policies. Maharashtra, India’s most economically advanced state, hosts the country’s financial capital, Mumbai, and is a hub for services, manufacturing and foreign investment.
Tamil Nadu, meanwhile, is renowned for its robust automotive, electronics and textiles sectors. Government initiatives like ‘Make in India’ and state-led investment drives have further propelled these economies.
How Pakistan relies on IMF bailouts
A key feature of Pakistan’s economic story is its prolonged dependence on multilateral financial assistance. The IMF recently approved a second disbursement of $1.02 billion to Pakistan under the Extended Fund Facility (EFF).
This was part of a $3 billion short-term package extended to the country to avert a balance-of-payments crisis. The disbursement came at a critical juncture when Pakistan was on the brink of sovereign default.
This bailout marks Pakistan’s 25th arrangement with the IMF since becoming a member of the institution in 1958. Despite repeated interventions, the country has struggled to implement sustainable reforms to stabilise its fiscal and external accounts.
The IMF’s latest conditions require Pakistan to maintain a primary budget surplus of 1.6 per cent of GDP and raise approximately Rs 2 trillion in fiscal space over and above non-interest expenditures.
The Federal Board of Revenue (FBR) has been tasked with achieving a tax collection target of Rs 14.3 trillion, amounting to 11 per cent of the GDP. The IMF has acknowledged that Pakistan met several performance benchmarks in recent months, including reporting a federal primary surplus of Rs 3.5 trillion, surpassing the target of Rs 2.7 trillion.
Nonetheless, these adjustments have come at the cost of severe fiscal tightening and increased public hardship, amid already high inflation and currency devaluation.
How Pakistan economy continues to face headwinds
Pakistan’s macroeconomic environment continues to face serious stress. The latest IMF data shows that Pakistan’s economy grew by just 2.6 per cent in the fiscal year, well below the levels required to generate jobs and improve living standards for its population.
Compounding the problem are chronic issues like political instability, spiralling inflation, declining investment, and a precarious balance-of-payments position.
Gross foreign exchange reserves stood at $10.3 billion at the end of April 2025, up modestly from $9.4 billion in August 2024.
The IMF projects reserves to reach $13.9 billion by June 2025, but even this would leave Pakistan highly vulnerable to external shocks or commodity price fluctuations.
The size of Pakistan’s federal budget also remains uncertain. Government plans suggest a ceiling of less than Rs 18 trillion, factoring in revised defence requirements. This figure reflects both fiscal constraints and the increasing burden of debt servicing.
How Pakistan is prioritising defence over its people
In a move that raised eyebrows among economists, Pakistan increased its defence spending by 16.4 per cent for FY25, allocating $7.37 billion (approximately Rs 60,655 crore). This rise comes even as the country’s external debt stands at nearly 42 per cent of GDP.
Between 2019 and 2023, approximately 82 per cent of Pakistan’s military imports came from China . However, heavy military spending amid economic turmoil has raised questions about fiscal priorities and long-term sustainability.
For context, India’s defence allocation for FY26 is $81.72 billion (Rs 6.72 lakh crore), reflecting a 4.7 per cent increase from the previous year. China, too, has upped its military budget by 7.2 per cent, bringing it to over $245 billion (around Rs 20.16 trillion).
However, both India and China fund these budgets from significantly larger and more stable economies.
How India is pipping Pakistan among investors as well
The perception among global investors has also shifted. According to a recent Bank of America (BofA) survey, India has emerged as the most preferred investment destination in Asia, overtaking Japan.
This reflects growing international confidence in India’s reform trajectory, demographic advantage and consumption-driven growth model.
In contrast, Pakistan’s standing in the global investor community remains fragile. Political turbulence, economic mismanagement, and security concerns have made it a less attractive destination for capital.
A recent diplomatic incident, in which Kyrgyzstan recalled its envoy from Pakistan following disputes related to an India-linked business forum, has highlighted the broader international complications Pakistan faces.
Pakistan’s current economic size is no longer even close to competing with India. The reality is starker: it is struggling to match the scale of some of India’s most prosperous states.
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