Under the veil of economic growth

Whatever the degree of economic growth, if it is not concurrently translated into common good of the populace, it scarcely carries any meaning. The per capita income of $925 is analogous with per capita geographical area, which equals 0.004975 km or 5 meters per head (796,000 / 160 million).
It would be childish to assume that each and every Pakistani essentially owns a 5 meter piece of land, or it is only possible in a fool's paradise.
The Governor State Bank, Dr Shamshad Akhter attributes current growth momentum to multiple factors; chiefly being sustained economic growth policy, fair degree of macroeconomic stability, contained emerging fiscal and external imbalances, investment level, enhanced investor confidence, high employment generation and poverty alleviation measures.
She maintains hope that the coming budget will further reinforce the pace engendered by the recent macroeconomic policy framework. Majority of economists are of the view that strong domestic demand and dominance of investment over-consumption, which occurred first time during the last 3 years is one of the main reasons for this overwhelming growth.
The growth rate is claimed to have attained a historic consistency, that is above 7 % over the last five years (2003-07, half a decade). I would anticipate economists start calling it a 'gained decade' against the 'lost decade' of 1990s.
The Economic Survey 2006-07 lists main economic landmarks of the present government, as growth in Large Scale Manufacturing (LSM) 8.8 %, growth in real per capita 5.2 % with an average of 5.5 % during the last 3 years, growth in per capita income by 11 % to $925, expansion in credit to the private sector to the tune of 12.2 %, core inflation contained at 7.7 %, decline in public debt from 56.9 % to 53.4 % of GDP, workers remittances, mounting to $5.5 bn and nevertheless, the highest ever foreign investment inflows equalling $6.5 bn. In a word, the commodity-producing sectors (agriculture and industry) contributed 40 %, while the services sector contributed 60 % to current GDP level.
There is no denial that a historically positive and consistent economic growth rate has been achieved, but here we need to take a pause before we are carried too far away in the labyrinth of statistics. To Disraeli, 'there are three kinds of lies; lies, damn lies and statistics.'
In the first place, the global economic expansion of 5.4 % had a wavelike impact on our economic growth, which is quite akin to global inflation, which was 11 % and is believed by our economic managers to have adversely affected domestic price level. Taking this 5.4 % global growth rate as given, our net economic growth remains 1.6 % (7 % - 5.4 %) for which a commensurate amount of appreciation must go in favour of our economic managers.
Again, the growth trend was ubiquitous in the region as well. The economic growth of developing economies went at 7.9 %, developing Asia grew at 9.4 %, China at 10.7 %, and our arch-rival India grew by 9.2 % with Vietnam at 7.4 %; so no much wonder if we also escorted other Asian countries.
As said in the beginning, the colossal claims of economic growth remain hollow if the economic growth does not trickle down to general comfort and convenience of the people at large; 'poverty is not a vice but an inconvenience.' (Shakespeare). And the most gruesome inconvenience has been occasioned by high cost of living embedded in escalating inflationary trends. Understandably, inflation, poverty and inconvenience are interrelated and directly proportional to each other.
We can all see around ourselves what the plight of the poor is, which is yet inexplicable; to word it, still 25 % of our people live below one dollar per day and 74 % below two dollars per day. In fact, the major component of high cost of living, that is food prices is haunting. The reasons presented are global inflationary trends, ineffectiveness or insufficiency of supply chain which is partly ascribable to poor infrastructure and the shortage of some of the food items at domestic level.
One example would sound interesting. The domestic production of rice is 5 million tonnes per year, whereas local, consumption demand is only 2.5 million tones per year, then why the prices of rice doubled in every corner of the country? One answer is the shortage of rice, shortage due to rice exports so as to attract foreign exchange (revenue) and contribute to trade balance.
Now; where do all and the sundry revenues vanish, if they are not spent on development works? For example in the current budget, out of a total subsidy outlay of Rs 113.9 bn, a meager 2.45 bn [2.15 % satirically less than zakat rate] is supposed to be used for containing the prices of pulses, sugar and ghee; and this was the area where a handful of subsidy would have been allocated. In a word, much of the national exchequer is allocated to write off huge loans taken by big industrialists and to support other embezzlements. Of the stealers, embezzlers and usurpers, the snails are caught and crocodiles are spared!
Estranged by the economic terminologies the poor always find economists attempting to pacify the vexations triggered due to price hike. These could be inflation, food inflation, core inflation and global inflation. First of all, 'inflation', it rose at an average of 7.9 % against the target of 6.5 % this year.
During April 2007, inflation rose to 9.4 %, against 3.6 % last year during the same period. Here, out of 124 food items, the prices of 47 items increased; and the price increase ranged from 10 % to 100 % [eggs, fruits, cooking oil, rice, chicken and vegetables]. The second terminology, 'food inflation' rose to 10.2 % this year, which is expected to rise to 10.5 % by the end of this year. According to the Economist London, presently the food inflation in dollar terms peaked at 13.5 %.
By the way this is the real concern of the poor. Admittedly, the global food inflation also rose by 16.1 %, but at the same time there were other positive global trends as well which must have been cherished and emulated. Plausibly, the non-food inflation declined to 5.2 % from 8 % compared with that of the previous year. Among others, coupled with the high interest rate, inflation eroded savings such that there occurred a 42 % fall in consumer loans. However investments were a hefty 23 % of GDP.
Now comes the third terminology, 'core inflation' which excludes food and energy prices and this type of inflation remained at just 5 %, which is appreciable but unfortunately it cannot assuage a mammoth 74 % of the population. In this category, 15 out of 43 items saw an increase of 10 %, 6 items' prices increased, ranging between 5-10 %, and 11 items' prices rose by 5 %.
To cut it short, combined weight of several commodities rose to double digits; that is a massive 42 %. To compound in normal jargon, CPI increased from 6.2 % to 6.9 %. The increases in house rent index, the second largest component of CPI after food (40.3 %) averaged 6.7 % as against 10.3 % last year during the same period. To further simplify it, alarmingly, the consumption rate of the poorest 20 % of the Pakistanis remained below 10 % and the richest 20 % raised their consumption to a luxurious 50 %!
The plight of the poor could not be reversed in spite of pro-poor expenditures incurred by the government. These expenditures, as percentage of GDP during 2001-2005, were 3.8 %, 4.3 %, 4.6 %, 4.8 % and 5.6 % respectively. As a result, reduction in poverty headcount was observed to be 12.77 million people with urban people equalling 2.85 million and rural 9.92 million.
It is a matter of concern that agriculture has no more remained an engine of growth though it used to be so. Employing 43.4 % of labour force its share in GDP has declined by 3.2 % points. Of human capital, gender gap in labour force stood at 50 % against the average of south Asia 3.5 %. In Pakistan, the expenditures on education just equalled 0.2 % of GDP, in Vietnam they were 3.2 %. This leads to low skill and education level of human capital.
Economic Intelligence Unit's 'Global Peace Index' (GPI), has evolved a ranking of the most dangerous countries of the world. According to this report, out of 121 countries, Pakistan is the 7th most dangerous country.
Among top ten, the first is Norway with 0.965 score and tenth is Portugal with 0.904, no wonder if USA is 96th and Iraq 121st. In terms of Human Development Index (HDI), Pakistan locates at 145th position out of 175 countries, implying that we are better than only 40 countries in the whole globe. Nevertheless, we stand a better status where as our fertility rate has declined from 4.8 % to 3.8 % during the last 7 years; thanks to economic managers.
To conclude, the uneven income distribution as is often depicted by the Lorenz curve, erects a huge cemented divide between the haves and have-nots. The privileged are over-endowed and the people are undersold in the hands of poverty. 'I was told that the Privileged and the People formed Two Nations.' (Disraeli)