Of the arguments in favour of free trade with India, one that needs consideration is access to scale. Currently, Pakistan's businesses operate in an economy about an eighth the size of India's. This restricted market has meant the inability to grow their businesses beyond a certain point. Let us demonstrate this.

Each year the Karachi Stock Exchange (www.kse.com.pk) picks its top 25 companies. This is the latest list, along with the market capitalisation of each firm. (Market capitalisation is the value of company, based on its share price). These figures are from Bloomberg.

Siemens Pakistan: Rs804 crore
Rafhan Maize Products: Rs2,579 crore
Nestle Pakistan: Rs15,872 crore
Unilever Pakistan: Rs6,589 crore
Fauji Fertiliser: Rs10,889 crore
Colgate-Palmolive: Rs2,555 crore
Pakistan Petroleum Ltd: Rs24,848 crore
Attock Petroleum Ltd: Rs2,410 crore
Millat Tractors Ltd: Rs1,891 crore
Clariant Pakistan Ltd: Rs532 crore
Al-Ghazi Tractors Ltd: Rs885 crore
Shell Pakistan Ltd: Rs1,397 crore
Unilever Pakistan Foods Ltd: Rs6,589 crore
Engro Corporation Ltd: Rs7,624 crore
Security Papers Ltd: Rs160 crore
Pakistan Tobacco Ltd: Rs2,517 crore
Atlas Battery Ltd: Rs193 crore
Fauji Fertilizer Bin Qasim Ltd: Rs3,643 crore
Muslim Commercial Bank Ltd: Rs16,460 crore
Service Industries Ltd: Rs230 crore
Bank Al Habib Ltd: Rs2,395 crore
Laksons Tobacco Ltd: Rs1,510 crore
Dawood Hercules Ltd: Rs3,505 crore
Oil & Gas Development Company Ltd: Rs470 crore
Eye Television Network Ltd: Rs367 crore
These 25 firms together are worth Rs116.9 lakh crore, or about US$13.3 billion.

Earlier this year, America's Forbes magazine put out a list of the world's 1210 billionaires. Of these 55 are Indian, including two Muslims, Azim Premji and Yusif Hamied. No Pakistani is on the list.

Forbes lists Azim Premji's wealth as $16.8 billion. This is 147 lakh crore Pakistani rupees. With his personal wealth, Premji, who is India's third richest man, could buy out Pakistan's top 25 firms and still be on Forbes's list of billionaires.

The question is why Pakistan does not have big businesses. The answer is access to big markets. The answer is not a lack of talent. This is because talent on the subcontinent is almost exactly coterminous with caste. In India, and also in Pakistan, commerce is dominated by a few communities.

In India, businesses are built by the Vaish caste. These include the north and west Indian Vaish, who are called Baniya/Vaniya, and other mercantile communities that are not strictly Vaish, but display the same pragmatism and skills. One such community in Punjab, both Hindu and Muslim, though mainly Hindu is called Khatri. This is a corruption of the word Kshatriya, and Punjabi Khatris include names like Sethi.

Of the Forbes list of 55 Indian billionaires, a total of 25 are Hindu Baniyas, who are less than 1 percent of India's population. If we include the other Gujarati mercantile communities like Khoja and Parsi, then those from trading castes inundate the others on the list.

Azim Premji is an Ismaili Khoja, the same community as Quaid-e-Azam. Khojas are converted from a mercantile Hindu caste called Lohana, and retain the same sharp trading skills as Hindu Lohanas. Incidentally, BJP's LK Advani is a Sindhi-speaking Amil from the Lohana caste. It is strange to think of him and Jinnah as being from the same community, but it is true.

The partition of India was to a large extent a partition of castes. Most trading castes are Hindu, but some are Muslim and Pakistan has a wealth of them in Karachi and a few in Punjab (such as the Khatris from Chiniot).

The firms these businessmen run have been stunted by a lack of access to India's market. They understand this market culturally and will do quite well in it, if allowed to.

There are arguments in Pakistan against trade with India. One is fear of being swallowed by the Baniya, another is the decision not to normalise till the matter of Jammu and Kashmir is sorted out. Some might think the second valid. But the first, as Premji shows, is untrue. Unless they trade freely with India, we know that Pakistan's talented businessmen will find scale difficult to achieve.

Aakar Patel is a director with Hill Road Media, Mumbai

Comments (6 comments)

Seems like a very flawed analysis - take japan , when it had a poulation of under 50m it still had world dominant companies. Malaysia does, S.Korea does. No the answer is not scale, the answer is how u do business. The seth mentality in Pakistan is what holds back the growth, plus the fact that most of the companies are highly inefficiently run and would be an easy target for indian companies.Neither do government's policies help. the spending on infrastructure is laughable and how one expects to compete on a global scale with no power, roads or sensible faiclities beats me. Maybe over time we will learn after getting a beating so that is about the only rationale one can think of for concluding that a larger market will help.

Posted: Monday, October 03, 2011 by zafars from dallas

Dear, what is about trade between Pakistan and India in this, except regurgitating the number of billionaires in India versus Pakistan. Do you know who was the richest person in 17th century in world? Ever heard of Mian Mansha? and another point, in Pakistan rich never declare their incomes! Documentation is a real problem here. As to Muslims and Hindus as Baniyas and Muslims not being experts in finance, remember the mid 140's budget prepared by Late Liaquat Ali khan....do not play old cliches please, let both people come nearer through rational ideas and the limits of capacities on both side.

Posted: Monday, October 03, 2011 by Mahmood Akhtar Mahmood from Pakistan

sad, that mad politics keep us apart. unfounded fears of the generals who dream and dream that their enemy is India is keeping free flow of culture, business people etc. pl tell your generals we cannot take over any country. we are your brothers. we want to visit you as free as possible.

Posted: Sunday, October 02, 2011 by balachandran from chennai

dear Pakistani friends- remember china has over 150 billion dollars annual trade with taiwan- it shows that even countries which are not the best of friends can engage in trade-which is mutually beneficial. India/pakistan trade can exceed 10 billion dollars easily if we dismantle artificial borders of distrust and hatred. Once you see that millions of families are benefitting by trade then the chances of a war become less. unless the pak army keeps on bringing up the kashmir issue. Please understand that the kashmiris do not wish to join the pakistanis. They might opt for some form of autonomy, but no merger with a country such as the present pakistan. Also ask yourself why did we have this partition. was it necessary? Now muslims of the sub-continent have become weakened. there are 150 million muslims in each of bangladesh, india and pakstan approximately. together they would be over 450 million muslims in SAARC. That would be enough to win most of the elections- and bring a muslim PM and rule the sub-continent. Even now the people of india, pakistan, bangladesh can ask for a re-unification like in germany and undo the partition in an arab- spring type of campaign.

Posted: Friday, September 30, 2011 by Salman from mumbai

Vaish, Lohanas, Khatris... Patel does a good job of regurgitating caste stereotypes that were popular 30 years ago. Unfortunately, the article lacks original research. If that had been included, it would have included data on companies that have been established and grown since the 1980s, including Infosys, HCL, Bharati Shipyard, Dr. Reddy's, Fortis, Biocon... most of which were established by middle-class, educated professionals. Rather than worry about market access, Pakistan would be better off investing in its educational infrastructure to effectively compete against the rest of the world, including India. The caste of Pakistani muslim businessmen has nothing to do with their ability to compete against today's Indian companies.

Posted: Friday, September 30, 2011 by Santosh from USA

Dear friend,its a sensible proposal but have u noticed that most of ur good qualities are because of ur Vedic history and most of ur bad habits are because of ur Arabic addictions! The day will come tur society will look at mirror and clean the dirt from its lovely Ariyan face! All that is required is modern education and constructive technology. Pakistanis were the backbone of Vedic civilization. Remember u guys had the world's best university (Takshsheela) when the entire west to live on hunting. Revive that culture of education and u'll regain ur lost identity. All the best

Posted: Friday, September 30, 2011 by Arjun from India