A GDP growth rate of 8.4 per cent, higher than that targeted at 6.6 per cent during 2004-05 is indeed impressive, and should bring a sense of achievement to those who focused all energies on increasing the rate of economic growth.

While a high rate of economic growth plants a feather in the cap of country’s economic managers, it is the character of economic growth that people are more interested in knowing. That is, who benefited, how was the growth distributed, what happened to unemployment, income inequalities, and poverty?

While figures on employment, poverty alleviation, and income distribution will not be available before December 2005, it is claimed, according to the Pakistan Social and Living Standards Measurement (PSLM) survey, that the standard of living of Pakistanis has “significantly improved during the current fiscal year.” This “finding,” if at all, is smirked at by the people when they next look at the rate of inflation which rose to 9.3 per cent during July 2004-April 2005 compared to 3.9 per cent during the corresponding period of 2003-04. For, inflation erodes purchasing power thereby making people feel worse and not better off.

While CPI increased by 9.3 per cent, food inflation was 12.8 per cent compared to last year’s 4.9 per cent for the same year and food is a greater share of the household budget of low-income groups. How then did their standard of living improve if they had to spend that much more on food budget? Non-food inflation also increased to 6.9 per cent compared to 3.3 per cent for the same period last year. And, core inflation that excludes food and energy inflation also increased to 7.4 per cent compared to last year’s 3.3 per cent.

Inflation, all around, has a depressing effect on the standard of living and not the other way round. High inflation does not jibe with the improved standard of living claims for the low-income groups either especially when the Sensitive Price Index (SPI) representing essential items also rose to 12 per cent during July 2004-April 2005 compared to 5.8 per cent during the same period last year. The House Rent Index (HRI) increased to 11.1 per cent for the period studied this year compared to 3.8 per cent for the same period last year.

How the standards of living improved with the above kind of price pressures on people would be a study unto itself?

The PSLM survey is based on 77,000 households. While these households are from across the country, it is not known how representative these are of the population of the country. The survey makes these claims on the basis of rapid increase in electricity and tap water consumption, increase in primary school enrolments without mentioning the dropout rate and the reasons thereof, increase in literacy rate, and increase in the number of people living in 2-4 room houses and above. As for literacy rate, it is important to determine whether the officially defined literates have the ability to read the newspaper and to write a letter.

If not, the literacy rate is still over-stated and any upward movements meaningless. Primary school enrolments will make sense only if a large percentage of those enrolled graduate. If number of occupants of 2-4 room houses is going up, it is unclear whether it is the number of 2-room houses that are being more occupied or the 4-room houses.

While the percentage of population in shanties and the trend thereof must also be known, it is the number of persons per pucca room that reflects on the standard of living more than the percentage of households in a certain size house and that too of a sample whose representativeness is unclear. As for tap water, it is becoming increasingly scarce even for city dwellers and so is electricity.

Standard of living is better gauged through purchasing power parity (PPP) adjusted per capita income, its distribution, and the levels of poverty. So, while per capita income may have crossed the $700 mark, how different income segments are affected is unknown as this increase may have been concentrated in that segment that already is a major beneficiary of whatever growth takes place. For, $700 is an average and does not depict dispersion around the average.

To be over enthusiastic about economic growth hoping for a distribution at a later date does not necessarily mean that distribution will take place at a later date as ‘later date’ is an indefinite time frame for which no one is or will be held accountable. Grow-now-distribute-later is also an obsolete school of thought as was established by the experience of several South East Asian countries that not only grew fast but grew with equity.

So, a correlation between growth rates and income distribution now or in the future is not established in recent history as there are countries like South Korea and Taiwan that experienced high growth as well as better income distribution. Mexico could not improve income distribution or it worsened despite high rates of economic growth.

So, high growth may not necessarily result in better distribution now or in the future unless definite interventions are made towards this end. And, these are not to be paper interventions massaging the data but actual policy interventions to change the visible ground reality. High growth is, therefore, no cause for glee for its own sake unless it has utility in terms of poverty reduction and better distribution of not just income but of all those services that improve the quality of life of people.

Another lack of utility of high growth rate is manifested in the tax-to-GDP ratio that fell to 9 from 9.4 per cent last year. If high growth has not been resulting in higher tax revenues, then growth by itself is meaningless unless it also generates public resources for public and private consumption that would, in turn, lead to growth and development. Tax revenues are not likely to increase much with growth if much of growth is contributed by the agricultural sector that remains too sacrosanct to be taxed.

During 2004-05, agriculture grew at 7.5 per cent which is the highest after 1995-96 and considerably high than the highest at 4.1 per cent in the last half-decade. This should reflect in tax revenues but will not as agriculture is still defended against taxation by many. The large landlords live in cities but not only influence farming but also dabble into politics while diversifying their commercial interests in business and industry as well. This is why land-to-the-tiller is emphasized upon in LDCs so that the owner-farmer maximizes production, productivity, and thereby wealth contribution to the nation from agriculture.

So, when some of us advocate agricultural income tax, we do not mean to tax the impoverished multitude or the subsistence farmers in the countryside. Rather, it is the commercial farmer with a reasonable level of income that needs to be taxed just like the income earners, above a minimum limit, are taxed in the urban areas.

So, the economy may grow at above seven or eight per cent for five years but if it does not prove to be miraculous enough in the lives of all and sundry, the experience will be anything but a miracle.

Transformation in thought, attitudes, institutions, and structures is imperative before economic justice is dispensed within the society. This requires an upheaval within our individual personal constitution without which complacency over growth rates will only reinforce status quo, misery, deprivation, and injustice that remain the hall mark of our underdeveloped society.