MICRO ECONOMIC INDICATORS NOT SO ENCOURAGING

SHAMIM AHMED RIZVI,
Bureau Chief, Islamabad

Aug 20 - 26, 2007

The critics of the present government cannot deny the fact that there has been significant economic growth in Pakistan over the last few years with a robust average of 7.5 over the last 4 years between 2003-07. Per capita income has almost doubled during this period.

These are all admitted facts at the macro level covering about 20 to 25 of the population. A vast majority of about 75 percent is suffering from the adverse effects of additional wealth. The economic managers of this country should also admit the fact that economic indicators on micro level are not so encouraging. Not only the independent economists in this country, even the international donor agencies are not prepared to accept the government's claim that poverty level has gone down by over 10 percent during this period. Ever-rising cost of living in the form of inflation is adding to the magnitude of poor and poverty in the country. The donor agencies as well as the independent economists in the country are of the view that old formula of one US dollar a day to measure poverty level has lost its meaning in view of the alarming increase in prices of Kitchen items (according to a survey about 120 percent since July 2001 & July 2007). Now it should be calculated at $ 2 a day and all those living in less than that should be counted as below poverty level. As such an employed person with a 5 members family must earn $ 10 day to be counted as poor of out of 'below poverty level'. On this basis, about according to a latest survey about 38 percent in rural areas and 23 percent in urban areas are living below poverty level against Government estimates of 30 & 26 respectively.

INCOME LEVEL

The degree of income inequality determines the level of poverty in a given society. While probing into the causes of these inequalities, one comes to know of factors responsible for uneven opportunities, which multiply the number of have-nots. Constraints are imposed through various developed and underdeveloped capital market conditions to impede capital accumulation at the national level. At the individual level, gender disparity, economic, social and cultural factors cause inequality of opportunities. Resultantly, in the low-income developing countries, the gap between rich and poor continues to be widened.

At individual level, inequality of opportunities begins with family origins and is reinforced region-wide disparity in social and economic sector opportunities available to rural and urban population. In addition to one's inaccessibility to health and educational facilities, some of the causes of inequalities are; cattle rusting, domestic violence, corruption, isolation and lack of awareness on policy issues affecting their day-to-day life. Consequently, children of rural poor as well as less developed urban area families, despite having access to formal education develop skills much more slowly, thus economic opportunities remain out of their reach.

In almost all the less-developed countries, the poor have no say in the policy making and the representatives at the various tiers of assemblies/governments never bother to consult the poor regarding their socio-economic needs and thus the concept of self reliance remains an unachievable goal and the poor remain passive recipients of the state's benevolence, in one form or the other.

Despite the poverty reduction strategies in force in developing countries, inequalities of opportunities continue to persist because of the peculiar economic, socio-culture and political environments causing immense harm to natural process of human development, which is a key to overall development process. Participation of the various civic groups and the poor need to be encouraged as it would promote transparency and accountability in the whole system. At the same time, the masses would become aware of their rights and the denial of which, they would resist.

In order to arrest the growing inequalities, the policy makers ought to bring in policies and measures that would help in the uplift of have-nots. At domestic level they need to invest in human resources, create just and fair environment an attribute of freedom, embodied in true democracy to enable the poor to have an access to justice for preserving their rights to property / resources.

Poverty is a term that does not lend itself to precise definition. But as a broad generalization, we might say that a household lives in poverty when its basic needs exceed its available means of satisfying them. This definition applied to poverty may be based on absolute needs or in terms of that are relative to the basic needs of the households or (individual) as determined by society. The poor are heterogeneous group. However, poverty is concentrated among the poorly educated, the aged, and households headed by women.

However, if we analyse comparative figures of Pakistan's GDP growth and the growth in the rate of poverty, it will show that our GDP growth rate does not seem to be favourable to our poor and deprived strata of our society. Instead, as shown in the following economic indicators of GDP growth and rate of poverty, it is crystal clear that our economic growth is heavily titled in the favour of high-income groups and seems likely to continue until drastic measures are not taken in favour of the poor.

 

1960s

1970s

1980s

1990s

2000-04

2005-07

GDP growth

6.77

4.84

6.45

4.70

5.20

7

Poverty growth

40.24

30.68

37.4

32

34

30

Economic growth is a wide-ranging term that is often misunderstood. For an economy to grow in real terms, a bulk of the economic activity has to come from a large and vibrant middle class that pushes the economy forward. Growth fails to have the desired effect when a small upper class, being the sole beneficiary of government policy and incentives, is burdened with dragging along the entire economy.

Therefore, while it is appreciated that the economic managers are looking to build on the successes already achieved, it cannot be stressed enough that ensuring an egalitarian distribution of the gains deserves just as much, if not more, attention. There can be no denying the government's success in restoring a busted and squandered economy, but there can also be no denying the fact that the areas that they have left out now need their undivided attention.