The theory of" trickle down effect" of high growth on unemployment and poverty reduction has no validity because assets are highly skewed. It is also being disproved by negative outcomes.

Though it is generally recognized that high growth may not be sufficient condition for poverty alleviation, policy makers reckon a sustained 6-8 per cent growth rates could bring about positive results.

Independent economists tend to disagree. In the absence of any effective policy for distribution of incomes and assets which is highly skewed, benefits of a high growth rate cannot be widely distributed and social exclusion would persist.

It is also argued that sources of growth set the pattern for income distribution. There are occasional voices in the corridors of power about distribution of assets/resources but hardly any serious effort to move in this direction.

For the past 2-3 years, the high growth rates have been jobless ones and unemployment continues to increase. Official figures of poverty reduction are not supported by fact and figures, says a research report of Social Policy and Development Centre(SPDC).

Dr Kaiser Bengali, an eminent social scientist, and managing director, SPDC, briefing newsmen on the state of the economy on Thursday said the" trickle down effect" theory was discarded as far back as 1970s.

He reckons that a growth rate of 12-15 per cent would be required to reduce unemployment and cut poverty levels and not 6-8 per cent. A high growth rate of 12-15 per cent was neither achievable nor sustainable, even in case countries like China.

The annual review traces the sources of growth and decline and their impact on employment and poverty. Empirical evidence has conclusively established links of rural poverty with asset ownership. SPDC therefore wants effective land reforms to reduce rural land lessness to be re-introduced on the national agenda.

Though agriculture is the mainstay of the economy, capital formation in this sector has declined by 6.1 per cent, with growth in minor crops and fishing being lower than national population growth.

While budgets are debated variously as being invester-oriented, growth -oriented and pro-poor and so on; however unemployment and poverty have continued to rise, income and assets have become more unequal. Disparities in household and regional incomes have increased.

A case in point is that of exports moving towards concentration rather than diversification and driven by textiles. Ready made garments, a labour-intensive and high value-adding sector that provides employment opportunities to women, registered a 7.5 per cent decline.

In case of remittances, the situation is no different. The North American share in remittances has increased from about 8 to 30 per cent. Middle East's share has come down from 70 to 45 per cent. The remittance from the Middle East is income sent by workers for their families.

It's decline has adverse distributional implications and worrisome, says SPDC. It sees remittances from America and Europe as "more in the nature of capital transfers rather than income flows".

On the policy level, there is too much focus for water storage, when it is water conservation that deserves more attention. About forty per cent of the water for irrigation is wasted.

Lining of canals and other conservation measures could provide jobs countrywide rather than building of big dams when there is no water to store. Without being specific, the SPDC points out that that development projects are characterized by "lumpiness" and the location of any one large federally financed project in any one year can alter inter-provincial shares dramatically.

The location of a major project in Sindh or Balochistan can correct the widening North-South income divide. Incidentally, development spending has become more centralised, with provincial programme reduced from 29.4 per cent to 26.7 per cent.

In large- scale capital intensive industries, wages comprise only seven per cent of the production cost. And the wages have remained flat since 1998. Unemployment has increased during fiscal 2004 despite high growth in large scale manufacturing.

Of the seven industries in the large scale manufacturing sector that have posted double digit growth, six are capital intensive in terms of production technology. The large- scale manufacturing sector is displaying a phenomenon of jobless growth.

The housing sector that holds the promise for future growth with official support, does not offer much opportunity to the low income groups. Land is not accessible and it is costly. Bank credit is focused on affluent middle class. The high cost of private housing is beyond the purchasing power of low incomes.

The SPDC research report therefore recommends that housing should be considered as basic right and legislation introduced to render it incumbent for the state to provide minimal housing to every family.

Even the taxation system of the government tends to work against the low income groups. There is continuing decline for the second year in the share of direct taxes in total receipts.

The share has fallen from 35.3 per cent in fiscal 2002 to 32.9 per cent in fiscal 2004 and is projected to fall to 31.4 per cent in fiscal 2005. The distributional implication of this decline is not inconsequential" says SPDC.

While appreciating the rising development expenditure, the research report reckons that the allocation falls short of what is required to raise and sustain the rate of growth of the economy or for a meaningful reduction in poverty.

Huge gaps exist in the availability and the need for employment opportunities, particularly in rural areas and for the housing, health, education. At least a five per cent of GDP needs to be allocated for development expenditure or Rs255 billion at FY2004 prices