June 26, 2006	Monday	Jumadi-ul-Awwal 29, 1427

THE recently released Economic Survey of Pakistan revealed that the methodology used for estimating the poverty levels in the year 2000-2001 was flawed.

The new methodology put the estimates of people living below the poverty line in 2000-2001 at 34 per cent as against the earlier estimates of 32 per cent. This figure, the survey states, had been reduced to 23.9 per cent in 2004-2005. Thus, in the four year period from 2000-2001 to 2004-2005, around 10 per cent of the population has been lifted out of poverty. Impressive figures!

Whatever the methodology and whatever the figures, one thing is clear, different methodologies can lead to very different conclusions. In any event, these indicators give us an idea of the direction that the economy is moving in. It would have been useful, if the estimation of current poverty level based on the previously used methodology, even if flawed, had been indicated in the Economic Survey. Since the details of the new methodology are not spelt out in the Survey either, some other facts make the analysis pretty easy.

According to the government figures, per capita income has risen from $429 to $736 during the same period i.e. 2000-2001 to 2004-2005. Since dollar to rupee ratio remained almost stable during these four years, one could conclude that per capita income has increased from Rs25,740 in 2000-2001 to Rs44,160 in 2004-2005.

Taking into account the official figures of inflation (21.45 per cent), the buying power of Rs25,740 of 2000-2001 equals that of Rs31,261 four years later. In other words, the finance ministry says that net increase in the average buying power over these four years has been around 41 per cent.

Given the facts that the unofficial estimates of inflation are much higher than the official ones, there does not seem to be a significant reduction in the poverty levels. One can put inflation figures to a simple litmus test. Salaries of the government servants during the period 2000-2001 to 2004-2005 were raised more than the official inflation figure of 21.45 per cent. How many government servants would agree that their economic condition was better in 2004-2005 than four years back. Surely, none.

The increase in the average per capita income, as stated by the ministry of finance in four years has been only 41 per cent. This increase has to be seen against the prosperity levels of the upper strata. Whether it is visit to a real estate office, a view of expensive flashy cars in Lahore, Karachi and Islamabad or a mehndi ceremony in a five-star hotel, just a glance leaves little doubt about an unprecedented increase in the wealth of the rich.

Why go through the small font statistical tables in the economic survey when the reality is visible so clearly and glamorously! With around eight per cent increase in the national per capita income, this hustle bustle must have been a drain on some other pockets.

The Economic Survey comes handy in understanding the point. The consumption expenditure of various economic strata grew during these four years proportionate to their wealth. Richer ones getting much more than the poorer ones. A typical feature of free market economies!

The consumption expenditure of the richest 20 per cent grew by some 22 per cent while that of the poorest 20 per cent by only 9.25 per cent. Not to forget that a one per cent increase in the income of an upper strata family implies a crucial reduction in the income of dozens of families at the lowest economic strata. Unlike the finance ministry’s complicated methodologies, this is simple logic.

Level of well-being of a person cannot be evaluated in vacuum. Poverty indicators based on income need to be seen against a host of other factors - availability of free or subsidised medical facilities, clean drinking water, education, insurance, access to roads, so on and so forth.

These factors affect the life of a common man, at times more than his income. The well being levels of two families with same income, one with and the other without all these facilities would be poles apart. Poverty as they say doesn’t exist in books or economic surveys. It haunts the nations as a reality in villages, towns and cities.

Again according to the Economic Survey, Pakistan’s infant mortality rate stands at 74 per 1000 live births which is the highest in the region. Comparative figures for India, Bangladesh and Sri Lanka are 63, 13 and 46. Pakistan also tops the list of regional countries in terms of child mortality with a figure of 98 per 1000 live births as compared to 87 for India, 69 for Bangladesh and 15 for Sri Lanka. What other than poverty could one put the blame for these depressing figures. Lack of simple medicines, safe drinking water, food, what else? Who has the time to care for the luxuries like education!

Many dread the memories of October earthquake which took away 83,000 of our brothers and sisters. It is a nightmare. With a crude death rate of 8.1 per cent, a calculator would not take long to show that every year more than 300,000 children die before reaching their first birth rate. We are having a bigger earthquake than the October one, only for below one year children, every four months. Every morning 800 mothers get up to see the death of their infant child. All that goes unnoticed without becoming a news even in the inner pages of the newspaper.

All that in a nation that created an unbeatable example of brotherhood on October 8! Is it not frightening! What is still more frightening is that these figures do not take into account other equally deadly faces of poverty - similar fate of above one year children and adults. What is critically important for poverty alleviation is to pay due attention to the hitherto neglected health sector, both in terms of budgetary allocations as well as governance.

Economists are generally unanimous their view that market economies, unless coupled with specific and effective government policies for a fair income distribution, lead to income disparities. It is these government policies for a fair distribution that make market economies different from the law of jungle where only might is right.

Benefits of new technologies and markets under any free economy go to those who have the resources to make use of them or in other words cushion money to put at stake in the new technologies. Once they do so, the ones that do not have that kind of money, are weeded out of the market because of their obsolete technologies. The outcome for the poor is a slide downwards from bad to worse. Law of the jungle!

The green revolution of 1960s provides the best example. Newer varieties of seeds and fertilizers benefited the big landlords. The smaller units were economically weeded out. This was not a phenomenon specific to Pakistan. Today, with all the global emphasis on market economy and a potential increase in the markets, the phenomenon is of greater relevance than it was ever before in the past.

An important feature of any poverty alleviation programme, particularly when luckily the overall economy is improving, is the integration of the poor into the country’s mainstream economy. The point needs elaboration.

Poor people in a remote village whose total income as well as spending is based on agriculture for their own consumption would not benefit from increased exports in manufacturing units in, say Karachi or Sialkot. They would benefit from an increase in national income only if their livelihood is in some way related to the main areas of economic activity.

To illustrate the point further, a village that is not connected to the rest of the country by road and transport network would not benefit from new technologies. Even if by some miracle it did, it would not be able to sell its increased produce to the market. Even if by another miracle, it succeeded in doing that too, its produce will not be cost effective because of the difficulties in transportation.

Profit sharing between the landlord or industrialist, the middle man and the worker is another determinant of poverty. In Pakistan, increased profits largely benefit the middle man and the capitalist. It is obvious to all. The worker gets inelastic wages which hover around his bare minimum requirements. This traditional pattern with no (or at least no effective) labour laws has been the most important contributory factor to poverty.

Then there is the role of taxes in increasing or decreasing the poverty levels. The greater the indirect taxes, the more hard hit are the poorer segments of the society. The greater the direct taxes, the greater is the impact on the well-to-do people. Compared with many other developing countries, the taxation in Pakistan is skewed towards indirect taxes. This skewed nature of taxation further accentuates poverty.

Last but not the least is the sociological context of poverty. I remember my “gup shup” with my maid whose husband owned a taxi and was earning more than Rs15,000 a month - statistically, well above the poverty line by any standards.

At the peak of her emotions, which appeared ready to be poured out, she told me that for the last six years, her husband had been trying to gather money for his daughter’s marriage. He failed because of the expenditures on his father’s illness.

Having married his daughters, he would start collecting money for his own old age sickness. On what side of the poverty line would this family fall. With no social securities available, the insecurities have reached a level where most of the poor people cannot think of comfort or luxuries, which for them includes education, even if they have the cushion money to do so. Poverty levels cannot be judged in vacuum!