06 September 2004	Monday	20 Rajab 1425

Poverty is a rural phenomenon. The rural poor are not a homogeneous group. They depend largely on agriculture, fishing, forestry, and related small-scale industries and services.

One important way to classify the rural poor is according to their access to agricultural land: cultivators have access to land as small landowners and tenants, and non cultivators are land less, unskilled workers. Non-cultivators are perhaps the poorest among the rural poor.

To understand poverty creation in rural areas and its effects on different groups, we need to look at the assets that the poor own or they have access to, and their links to the economy. The economic conditions faced by the rural poor are affected by a variety of assets (and the returns on them) held at the household and community levels.

The poor's physical assets consist of natural capital (private and common property rights in land, pastures, forest, and water), machines and tools and structures, stocks of domestic animals and food, and financial capital (jewelry, insurance, savings, and access to credit).

Their human assets are the labour pools-comprising workers of varying ages, genders, skills, and health-in the households and communities.

Their infrastructural assets are publicly and privately provided transport and communications, access to schools and health centres, storage, potable water, and sanitation.

Their institutional assets contain their legally protected rights and freedoms and the extent of their participation in decision-making in households and communities.

Substantial evidence suggests that a highly unequal distribution of income is not conducive to either economic growth or poverty reduction. Agricultural growth-where there is a low concentration of land ownership and labour-intensive technologies are used-has almost always helped reduce poverty. Sharp drops in economic growth-resulting from shocks and economic adjustments-may increase the incidence of poverty.

Even when growth resumes, the incidence of poverty may not improve if inequality has been worsened by the crisis. Theoretically speaking, economic growth has inherent worth of being pro-poor or anti-poor. It is argued that to achieve a rapid reduction in poverty, the Poverty Equivalent Growth Rate (PEGR) is to be maximized instead of normal growth rate alone.

Both national and international level studies on Pakistan have been made with regard to poverty and inequality, but most of such efforts depict partial treatment of the issue. None of such efforts were directed in composite and comprehensive manner.

A great deal of effort is necessarily to be made to solve the poverty puzzle and the task could only be settled if a research endeavour is directed towards a thorough appraisal of rural poverty in conjunction with agricultural growth and income inequality.

In generating poverty estimates, there are two issues to be handled in the present research endeavor. The first relates to the identification phenomenon which would encompassed fixing of poverty thresh-hold (both poverty lines and poverty bands) while the other relates to measuring of poverty indices.

Poverty lines are widely professed to take up a vital role in poverty analysis. In fact, setting a poverty line often receives the bulk of attention and intellectual effort in studies of poverty.

The condition called poverty is not confined to the population below the poverty line, but goes beyond it and includes the people residing above the poverty line with significantly high probability of falling below it.

Following the classification of McCulloch and Baulch (1999), the population was distributed into six groups by consumption-expenditure quartiles around the poverty line and analyzed the poverty dynamics by comparing salient characteristics of these quartile bands.

The cluster of people above the poverty line, who are normally declared as non-poor in the technical language of poverty estimates, are actually vulnerable segments of the rural masses. It has been seen that the cluster is going to be thicker and thicker closer to the upper segment of the poverty line.

For the year 1990-91, 39.42 per cent of the total 31.81 of the population below the poverty line was found to be absolute poor containing chronically and extremely poor in the proportion of 34.01 per cent and 60.58 percent respectively.

Blow the poverty line, extremely poor, chronically poor and transient poor constitute 1.72 percent, 10.82 percent and 19.27 percent of the overall population in rural Pakistan.

It has further been analyzed that transitorily poor constitute 31.53 percent; a major proportion of the overall population. There is almost continuous increase in the proportion of absolute poor and transitorily poor segments of the society from 1990-91 to 2000-01.

On the other hand, we observed a consistent decrease in the proportion of non-poor, both transient non-poor and non-poor, in the whole time series. It is interesting to note that clusters of population very close to the poverty lines have significantly increased from 31.53 to 40.88 per cent, which reflects a proportionate increase of 29.65 per cent.

This much high proportion of the population close to the poverty line demand for policy attention because a very little effort on the part of the government institutions can check the vulnerability phenomenon on the one hand ad pulling the transiently poor out of the poverty trap on the other hand.

Bringing 59.11 percent of the poor population out of poverty is to certain extent easier than bringing the remaining 40.89 percent out of poverty trap. Moreover, "halving the poverty", as per one of the Millennium Goals (MDGs), seems to be an achievable target through target-oriented economic policies.

In this regard, the vulnerability phenomenon can not be separated from any poverty study in its descriptive as well as prescriptive scenario. The vulnerable poor has greater probability to enter into poverty trap, as there is great likelihood of transient poor, who are very close to the poverty line, to quit the poverty with the passage of time.

So such an econometric analysis compels the policy makers to opt for two pronged policy: keep the vulnerable segments of the society in the bands above the poverty line by maintaining their basket of tangible and intangible good, and provide monetary space for the transient poor who need a slight push to quit out of poverty trap.

In this study, an innovative effort and empirical evidence is presented to visualize the long term impact of agricultural growth and inequality on rural poverty in Pakistan.

The study analyses the long run relationships between agricultural growth, rural poverty and income inequality by first setting a consistent time series on rural poverty, inequality and average income of rural households by using Household Integrated Economic Surveys (HIES) data from 1990-91 to 2000-01.

Instead of taking overall agricultural growth, there is a more direct measure of growth based on the same HIES surveys from which poverty and inequality indices are derived so as to maintain the consistency of analysis and validity of the procedure.

It is shown that in rural Pakistan, a 1 percent increase in average household income reduces poverty (HCR) by 0.25 percent. NWFP is the only province where agricultural growth trickles down to the rural poor relatively better.

The growth elasticity of poverty in this province has been -0.28 between the year 1990-91 and 2000-01. In Balochistan the effect of growth is negligible. The coefficient of elasticity is -0.02 and that too is insignificant.

Ali and Tahir (1999), estimated long time coefficient of elasticity as -0.77 in rural Pakistan indicating a larger trickle-down effect of agricultural growth in reducing poverty as compared to the present study.

This perhaps is due to decline in the real wages among low-wage workers in rural areas and reduced employment of totally unskilled labour in the agriculture sector throughout the 1990 decade.

Pakistan's rural scenario shows that one percent increase (decrease) in the income inequality, poverty increase (decrease) by 0.24 percent. In Punjab and NWFP, the impact of income inequality on poverty is very nominal while higher in rural Sind where the coefficient of elasticity is 0.39.

However in Balochistan the rise in income inequality is reducing poverty. Thus the likely impact of inequality on poverty in rural areas of Pakistan for the 1990's decade is inconclusive.

On an overall, the findings reveal that one percent increase in income inequality and average income in rural areas of Pakistan leads to an increase and decrease in poverty at the rate of about 0.31 and 0.27 percent respectively.

It indicates that the impact of inequality in increasing poverty is a somewhat greater than that of growth in average income in reducing rural poverty. These results vary at the provincial level.

The coefficient of inequality elasticities of poverty in Punjab and Balochistan is negative showing fall in poverty. But such results are found to be non-significant at 5 percent level.

In Sind, the coefficients of inequality and growth elasticities are 0.27 and -0.16 while the impact of income inequality in reducing poverty in rural NWFP is quite nominal.

The short term PEGR reveals that agricultural growth is anti-poor in Pakistan and in all provinces from 1990-91 to 1992-93. and in the subsequent years (from 1992-93 to 1998-99), showed pro-poor growth in rural Pakistan.

The Punjab province also follows the same pattern of pro-poor growth in agricultural sector. In Sind and NWFP, there is only one short term period (from 1996-97 to1998-99) when growth is pro-poor because the values of PEGR rates are greater than that of the agricultural growth rates.

In this way, the short run PEGR analysis reveals that pro-poor growth scenario is improving in rural Pakistan. If the growth remains pro-poor in the subsequent years as reflected in the year 2000-01, there is likelihood that growth trickles down to the poor more than the non-poor.

Punjab province also showed an improving trend in terms of pro-poor growth in the analysis. However, the situation is alarming in other provinces because of anti-poor growth. The futuristic vision is that we should focus on poverty equivalent growth rates instead of actual economic growth rate in agriculture.