Perhaps India can take a few pages out of Pakistan’s poverty reduction playbook

[Dubious]

Never accused that you don't have rights rather just showing you the mirror.

what mirror? get off your high horse ...Reported for attempted derailing

 

[Force-India]

what mirror? get off your high horse ...Reported for attempted derailing

K continue with your hatred

By Hanid Mukhtaran hour ago

I recently came across ablogtitled ‘What’s Really Going on with income trends in India and Pakistan’. The blog was written by a Pakistani economist working in the Washington office of the World Bank. I have known the author and have great respect for him as an economist and as a person. However, it pains me to see that in this blog at least, excessive generalisations and selective analysis is presented to promote a political agenda.

Nobody can deny the fact that for over a decade, India’s economy has been doing very well. In comparison, Pakistan is having severe difficulties; partly due to internal reasons and partly imposed by the geo-political situation in the region. In my opinion, Pakistan could be well served by taking a few pages out of India’s economic management playbook.

Yet, when the author tried to compare the trends of per-capita incomes in both the countries, he seemed baffled to discover that as per the Exchange Rate Parity (ERP), Pakistan is not doing as bad in comparison to India as it should have been doing in his opinion.

Figure 1. Headline GDP per capita of India and Pakistan, 1990-2015 (current US dollars). Photo: World Development Indicators

As per the author,

“What is wrong with this picture? Why is there no difference in average growth between the two countries between 1990 and 2008, when India is supposed to have been on a reforms and high-investment path and Pakistan on a failed-state path.”

Rather than trying to find reasons for this lack of “evidence” to support his hypothesis, he blames it all on the data, and goes hunting for alternative data sources which would support his pre-suppositions, which he finds in terms of per-capita income measured in Purchasing Power Parity (PPP).

Figure 2. GDP per capita of India and Pakistan, 1990-2015 (constant 2011 international dollars). Photo: World Development Indicators

He then tries to convince us that per-capita income measured in PPP is a much better index of economic welfare than that measured in ERP.

“Don’t be misled by ‘headline’ data. Current dollar figures used in the media and in everyday discourse need to be scrutinised and adjusted to get the true picture.”

The author is a very good economist and it is inconceivable that he doesn’t know that superiority of PPP over ERP is not universally true, especially if one or both countries have some ‘administered prices’. In case of administered prices and/or large scale subsidies, per-capita income measured in PPP may even be a poorer indicator of welfare than its ERP counterpart.

We all know that there are a lot of subsidies in India, from food to agricultural inputs, from fuel to credits. These subsidies help in keeping domestic prices low, and hence better PPP. India spends more than 10 per cent of the Union Government’s budget on subsidies.

On the other hand, Pakistan has eliminated all subsidies except a minor subsidy on wheat. However, since the commodity price shock of 2007, electricity is also being subsidised. Still Pakistan spends only three to four per cent of its federal budget on subsidies.

As per the 2015/16 budget, India has allocated equivalent of $ 37 billion for subsidies. In comparison, Pakistan has allocated only $ 1.3 billion. With much higher subsidies, it is no surprise that India does significantly better than Pakistan in PPP terms (than in comparison using ERP). In other words, India’s higher growth in per-capita income measured in PPP terms has been “bought” using taxpayer money.

However, what bothered me most about the content of the blog was how the income story was only half-told. Going by the title of the blog, the readers expected an attempt by the author to show what really is going on with the income figures in these two countries. To elaborate, I would like to present two additional charts, similar to the charts presented by the author. Both of the charts use World Bank data.

Income disparities (if we exclude the “freak year”1995 for Pakistan) have been falling in Pakistan, while rising in India. I know the author would say,

“What’s the big deal, if there is nothing to share, the disparities in Pakistan will fall anyway.”

But then let’s look at the second chart.

In the early 90s, Pakistan had a much higher incidence of poverty than India. Despite the slower economic growth and a plethora of other problems, by 2010, incidence of poverty in Pakistan was about one-half of that in India.

What will happen in the future is hard to predict, but to date, it appears that the ‘failed’ state has managed to do much better in using its meagre economic growth to lower poverty than the ‘shining example of economic reforms’ has done with its rapid growth. Maybe India could be better served by taking a few pages out of Pakistan’s poverty reduction playbook.

The strong pro-growth (and an anti-poverty reduction) slant is perhaps reflective of the ideological change at the World Bank (where the author is employed), which has now taken some of its attention away from poverty reduction to focus on shared prosperity.



Hanid Mukhtar
the Author has a Ph.D. in economics from Boston University. He has taught economics at Quaid-i-Azam University, University of Massachusetts at Boston, North Eastern University, Boston University, and Applied Economics Research Centre, Karachi. He has also worked as a macro-economist with an International Finance Institution.


Perhaps India can take a few pages out of Pakistan’s poverty reduction playbook – The Express Tribune Blog

Population of India is 6 times. Not easy to eradicate poverty. And certainly Pakistan is not a role model for poverty reduction.

 

[Optimos Prime IA]

Lol can you even survive with Aid money ? Even with tiny population u are still under poverty . Think u drunken author

 

[Sky lord]

The govt spending in India on poverty alleviation is huge with MANREGA, food security bill. what schemes pakistan govt has for poverty alleviation is not clear in this article

Spending on mnegra is huge but the benefits have Not been as huge. India has had a government which for two generations now has actually tied our hands and not allowed us to make money. India has a large talented business community capable of making money anywhere and had the business men been given a fair deal india would have been a developed country by now, or at least closer to developed than we are now. India's problem was socialism, pakistans was army coups.

Pakistan is not a role model for poverty reduction because the government didn't do much, the people helped themselves as far as they could. If the government/ ruling elite had been doing its part the story would have been very different.

 

[Zibago]

people if india has higher loverty that doesnot mean we need to relax but we should bring our 1.25$ percentage to single digits by spending more on projects like bisp

 

[saurav]

Nice.... So Pakistan is doing well it seems. I hope both India-Pakistan continue on the same track ...

 

[AgNoStiC MuSliM]

The author did not mention what was in the Pakistan’s poverty reduction playbook. What steps Pakistan took to lower poverty? It only mentions that the subsidies are 4% in Pakistan while 10% in India. Another half baked analysis. There were no poverty reduction plan in Pakistan we have just been lucky even with the corruption during the PPP Zardari rule. Who gave this man a PhD ? He can't even write a good economic article with explanations.

Hanid Mukhtar
the Author has a Ph.D. in economics from Boston University. He has taught economics at Quaid-i-Azam University, University of Massachusetts at Boston, North Eastern University, Boston University, and Applied Economics Research Centre, Karachi. He has also worked as a macro-economist with an International Finance Institution.

I think the intention was to flag the discrepancies between statistics on economic growth rates and poverty rates, between India and Pakistan.

I agree with you that we need more detailed studies on Pakistan's poverty rates - whether the World Bank numbers are skewed or if the informal economy plays a larger role in Pakistan than in India, or if Pakistan's government and non-government welfare programs are just more efficient.

 

[vitalsign]

@Akheilos I think this decreasing economy credit goes to PPP. Even the Musharraf's period was better.

 

[Not So Good]

Its not my fault you see indianess in every article...

THE SAID article is talking about an article ON PAKISTAN...

And top indian poster on PDF does 1 liners and comparison...

Lastly, I am sorry you are so obsessed with india Pakistan you failed to see the article was about a Pakistani author and his piece about PAKISTANI economy


The article is less to do with india and more to do with Pakistani author of a previous article...I am sorry despite being educated you still have comprehension issues or are incapable of reading and understanding a simple article!

Good job buddy
good discussion should be encouraged

 

[Gauss]

An even better idea would be Pakistanis taking a lot of pages from books on European Enlightenment and Romantic periods to understand the modern ideas about individual and state better before opening their big mouths on their country or other countries.

 

[Faiez]

Spending on mnegra is huge but the benefits have Not been as huge. India has had a government which for two generations now has actually tied our hands and not allowed us to make money. India has a large talented business community capable of making money anywhere and had the business men been given a fair deal india would have been a developed country by now, or at least closer to developed than we are now. India's problem was socialism, pakistans was army coups.

Pakistan is not a role model for poverty reduction because the government didn't do much, the people helped themselves as far as they could. If the government/ ruling elite had been doing its part the story would have been very different.

Pakistan from day 1 had a very capitalistic, free-market oriented leadership. Had Bhutto not come to power, Pakistan would have done so much better...Even though Pakistan got rid of bhutto, he had already reproduced....

So it's not just the army, it's both army and left wing socialists who have destroyed pakistan....

 

[Sky lord]

Pakistan from day 1 had a very capitalistic, free-market oriented leadership. Had Bhutto not come to power, Pakistan would have done so much better...Even though Pakistan got rid of bhutto, he had already reproduced....

So it's not just the army, it's both army and left wing socialists who have destroyed pakistan....

Yeah, I hear you but some elements of the left like land reform would have been a very good thing for Pakistan. As there has never been land reform in Pakistan, the very rich entrenched feudal landlords have way too much power and way too little responsibility IMO. As for the Bhutto progeny, I doubt that he would ever come to power, but if he does, well it would be funny if it wasn't so tragic to think of the fate of almost 300 million people being decided by someone like Bilawal Saheb.

Pakistan never had quite as ridiculous a regulatory system as India but Army coups was defenitely a major retardant, the army has never allowed strong civilian government and never allowed the people to reward and punish democratic politicians based on their work for the country. I may be wrong, but as far as I can see the governments in Pakistan have never bothered much about the poor other than face saving measures. Successive governments always try to hide poverty or pretend it is not there or whenever they can, they use the poor to make money. For example How much of flood relief funds was actually used to strengthen dykes? What happens to the poor next time the rivers flood ? Does anyone even care? Whatever progress the poor made, they did mostly by their own by hard work and ingenuity and emigration.