Sunday, November 25, 2012

Growing Incomes and Economic Mobility in Pakistan

A 2012 study of 22 nations conducted by Prof Miles Corak for the Organization for Economic Cooperation and Development (OECD) has found income heritability to be greater in the United States, the United Kingdom, Italy, China and 5 other countries than in Pakistan.

The study's findings, presented by the author in testimony to the US Senate Finance Committee on July 6, 2012, rely on the computation of "inter-generational earnings elasticity" which the author explains as follows:


"(It) is the percentage difference in earnings in the child’s generation associated with the percentage difference in the parental generation. For example, an intergenerational elasticity in earnings of 0.6 tells us that if one father makes 100% more than another then the son of the high income father will, as an adult, earn 60% more than the son of the relatively lower income father. An elasticity of 0.2 says this 100% difference between the fathers would only lead to a 20% difference between the sons. A lower elasticity means a society with more mobility."

Intergenerational Mobility in Pakistan:

Corak calculates that the intergenerational earnings elasticity in Pakistan is 0.46, the same as in Switzerland. It means that a difference of 100%  between the incomes of a rich father and a poor father is reduced to 46% difference between their sons' incomes. Among the 22 countries studied, Peru, China and Brazil have the lowest economic mobility with inter-generational elasticity of 0.67, 0.60 and 0.58 respectively. The highest economic mobility is offered by Denmark (0.15), Norway (0.17) and Finland (0.18).


The author also looked at Gini coefficient of each country and found reasonably good correlation between Gini and intergenerational income elasticity.

 In addition to Corak, there are other reports which confirm that Pakistan has continued to offer  significant upward economic and social mobility to its citizens over the last two decades. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report titled "Asia's Emerging Middle Class: Past, Present And Future".

 More evidence of upward mobility is offered by recent Euromonitor market research indicating that Pakistanis are seeing rising disposable incomes. It says that there were 1.8 million Pakistani households (7.55% of all households) and 7.9 million Indian households (3.61% of all households) in 2009 with disposable incomes of $10,001 or more. This translates into 282% increase (vs 232% in India) from 1995-2009 in households with disposable incomes of $10,001 or more. Consumer spending in Pakistan has increased at a 26 percent average pace the past three years, compared with 7.7 percent for Asia, according to Bloomberg.

Mobility Drivers:

The study identified three key drivers of inter-generational mobility: Family, Labor Market and State.

The biggest difference the family makes is in terms of education and training of the children. Growing labor market is important for the availability of better paying jobs, and the state matters because its policies influence access to education and growth of economic opportunities. For Pakistanis, the weakest link here has been the state which has failed to adequately fund education and facilitate economic growth through infrastructure investments. The private sector, the civil society and the international community have, however, stepped in to at least partially compensate for some of the most serious shortcomings of the state.   

Education:

Pakistani parents are taking education more and more seriously and enrolling their children at all levels. According to Harvard University researchers Robert Barro and Jhong-Wa Lee, Pakistan has been increasing enrollment of students in schools at a faster rate since 1990 than India. In 1990, there were 66.2% of Pakistanis vs 51.6% of Indians age 15 and above who had no schooling. In 2000, there were 60.2% Pakistanis vs 43% Indians with no schooling. In 2010, Pakistan reduced it to 38% vs India's 32.7%.




As of 2010, there are 380 (vs 327 Indians) out of every 1000 Pakistanis age 15 and above who have never had any formal schooling. Of the remaining 620 (vs 673 Indians) who enrolled in school, 22 (vs 20 Indians) dropped out before finishing primary school, and the remaining 598 (vs 653 Indians) completed it. There are 401 (vs 465 Indians) out of every 1000 Pakistanis who made it to secondary school. 290 (vs 69 Indians) completed secondary school  while 111 (vs. 394 Indians) dropped out. Only 55 (vs 58 Indians)  made it to college out of which 39 (vs 31 Indians) graduated with a degree.

Labor Market:

Pakistan's employment growth has been the highest in South Asia region since 2000, followed by Nepal, Bangladesh, India, and Sri Lanka in that order, according to a recent World Bank report titled "More and Better Jobs in South Asia".



Total employment in South Asia (excluding Afghanistan and Bhutan) rose from 473 million in 2000 to 568 million in 2010, creating an average of just under 800,000 new jobs a month. In all countries except Maldives and Sri Lanka, the largest share of the employed are the low‐end self-employed.



The report says that nearly a third of workers in India and a fifth of workers in Bangladesh and Pakistan are casual laborers. Regular wage and salaried workers represent a fifth or less of total employment.

Analysis of the labor productivity data indicates that growth in TFP (total factor productivity) made a larger relative contribution to the growth of aggregate labor productivity in South Asia during 1980–2008 than did physical and human capital accumulation. In fact, the contribution of TFP growth was higher than in the high‐performing East Asian economies excluding China.

Summary: 

The experience of OECD nations shows that construction of a large and vibrant middle class is an absolutely essential pre-requisite for a prosperous and democratic society.  In spite of all of its current difficulties, Pakistan's middle class is growing as evident from data coming from a variety of sources ranging from ADB and the World Bank to University researchers and Euromonitor consumer research firm.  More enlightened leadership in Islamabad can help accelerate this process by focusing greater attention to raising more revenue and increasing public investment in education, health care and infrastructure.

Related Links:

Haq's Musings

Economic Mobility Across Generations

Upward Social and Economic Mobility in Pakistan

Pakistan GDP Grossly Underestimated, Shares Highly Undervalued

Investment Analysts Bullish on Pakistan

Precise Estimates of Pakistan's Informal Economy

Pak Consumer Boom  Fuels Underground Economy

Rural Consumption Boom in Pakistan

Pakistan's Tax Evasion Fosters Aid Dependence

Poll Finds Pakistanis Happier Than Neighbors

Pakistan's Rural Economy Booming

Pakistan Car Sales Up 61%

Resilient Pakistan Defies Doomsayers

Land For Landless Women in Pakistan

Pakistan's Circular Debt and Load-shedding

Hypermart Pakistan

14 comments:

Riaz Haq said...

Here's a BR report on new US Ambassador's thoughts about Pakistan:

In the brief few weeks that the new US ambassador Richard Olson has been in Pakistan, he is said to have been struck by the tremendous economic potential Pakistan possesses and by the industriousness and vitality of its people.

According to him, he has also been pleased to see the many ways in which the United States is working with Pakistan to harness this potential to create a brighter economic future for the people of Pakistan. Here are a few examples:

Boosting agricultural output: To generate jobs and higher incomes among the 45 percent of the population employed in agriculture, the United States helped train 14,000 Pakistani farmers to better protect their livestock from disease, improve the quality of their products, and achieve profitable growth. We're also helping to build new irrigation canals that will expand arable land by more than 200,000 acres.

Building roads for greater trade: To connect communities and facilitate trade, the United States is helping to build more than 1,000-km of roads in Fata, Khyber-Pakhtunkhwa, and Balochistan. The Peshawar-Torkham Highway reconstruction is also underway and it will connect Jamrud and Landikotal tehsils in Khyber Agency with the city of Peshawar to foster regional trade for years to come.

Helping businesses bloom: The United States is uniquely placed to support entrepreneurship in Pakistan because, as President Obama said, "innovation is what America has always been about." In September, we launched the Pakistan Private Investment Initiative, a private equity offering designed to help Pakistan's talented entrepreneurs access the capital they need to expand their businesses and create jobs. In October, we organised the "US-Pakistan Business Opportunities Conference" in London to bring together Pakistani and American businesses and bankers to identify new business opportunities.

Promoting trade and investment: The United States is Pakistan's largest export market. Two-way trade between our countries amounted to almost S6 billion in 2011. The US government wants to expand our trade and investment relationship with Pakistan and so do US investors who are attracted to this country's market of 180 million people.


http://www.brecorder.com/business-a-economy/189/1261765/

Riaz Haq said...

Here's a Bloomberg story titled "Pakistan, Land of Entrepreneurs":

On a warm Sunday morning in November, Arif Habib leaves his posh home near the seafront in southern Karachi and drives across town in a silver Toyota Prado SUV. About half an hour later, he arrives to check up on his latest project: a 2,100-acre residential development at the northern tip of this city of 20 million. He hops out, shakes hands with young company call-center workers who are dressed for a cricket match, and joins them at the edge of the playing field for a traditional Pakistani breakfast of curried chickpeas and semolina pudding. After a quick tour of the construction site, he straps on his leg pads, grabs his bat, and heads onto the field. “The principles of cricket are very effective in business,” says Habib, 59. “The goal is to stay at the wicket, hit the right balls, leave the balls that don’t quite work, and keep an eye on the scoreboard. I feel that my childhood association with cricket has contributed to my success.”

Habib, who started as a stockbroker more than four decades ago, has expanded his Arif Habib Group into a 13-company business that has invested $2 billion in financial services, cement, fertilizer, and steel factories since 2004. His group and a clutch of others have become conglomerates of a kind that went out of fashion in the West but seem suited to the often chaotic conditions in Pakistan. Engro (ENGRO), a maker of fertilizer, has moved into packaged foods and coal mining. Billionaire Mian Muhammad Mansha, one of Pakistan’s richest men, is importing 2,500 milk cows from Australia to start a dairy business after running MCB Bank, Nishat Mills, and D.G. Khan Cement.

These companies have prospered in a country that, since joining the U.S. in the war on terror after Sept. 11, has lost more than 40,000 people to retaliatory bombings by the Taliban. Political violence in Karachi has killed 2,000 Pakistanis this year, and an energy crisis—power outages last as long as 18 hours a day—has led to social unrest. Foreign direct investment declined 24 percent to $244 million in the four months ended Oct. 31, according to the central bank.

At the same time, some 70 million Pakistanis—40 percent of the population—have become middle-class, says Sakib Sherani, chief executive of Macro Economic Insights, a research firm in Islamabad. A boom in agriculture and residential property, as well as jobs in hot sectors such as telecom and media, have helped Pakistanis prosper. “Just go to the malls and see the number of customers who are actually buying in upscale stores and that shows you how robust the demand is,” says Azfer Naseem, head of research for Elixir Securities in Karachi. “Despite the energy crisis, we have growth of 3 percent.”

Sherani of Macro Economic Insights estimates the middle class doubled in size between 2002 and 2012. “Those who understand the difference between the perception of Pakistan and the reality have made a killing,” Habib says. “Foreigners don’t come here, so the field is wide open.” The KSE100, the benchmark index of the Karachi Exchange, has risen elevenfold since mid-2001. Shares in the index are up 43 percent this year alone. Over the past decade, stocks have been buoyed by corporate earnings, which were bolstered in turn by rising consumer spending.
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Today, Habib has 11,000 employees and annual revenue of 100 billion rupees. He plans to expand into commodities trading and warehousing. “I’ve created all my wealth in Pakistan and reinvested all of it here,” says Habib, who drives himself to his cricket matches and is never accompanied by security guards. In 1998, when Pakistan’s share index fell to a record low after the government tested nuclear weapons, Habib bought shares even though “people thought I was mad.”...


http://www.businessweek.com/articles/2012-11-29/pakistan-land-of-entrepreneurs

Riaz Haq said...

Here's Daily Times on Mobilink's planned $1 Billion expansion:

A delegation of VimpelCom informed Prime Minister Raja Pervez Ashraf of plans for further investment of $1 billion in Pakistan for the enhancement of Mobilink’s nationwide mobile network. A delegation comprising senior management from VimpelCom, the parent company of Mobilink, called on the prime minister at the Prime Minister House, on Thursday. The delegation was headed by VimpelCom Group CEO Jo Lunder who apprised the prime minister on VimpelCom’s global operations and the significance of the Pakistani market for VimpelCom’s growth strategy. The prime minister also discussed VimpelCom’s outlook on current operating conditions within Pakistan, and was apprised of Mobilink’s existing investment of over $3.9 billion towards consolidating its position in Pakistan’s telecom sector.

http://www.dailytimes.com.pk/default.asp?page=2012\11\30\story_30-11-2012_pg5_2

Riaz Haq said...

In a recent piece tiled "Pakistan Staring into the Abyss", Pakistani journalist Najam Sethi captures the highly pessimistic mood of the press coverage and books about Pakistan.

http://indiatoday.intoday.in/story/the-pakistani-state-is-staring-at-a-dark-abyss/1/185216.html

Historically, purveyors of books and magazines predicting doom and gloom have mostly been wrong but sold lots of copies.

Matt Ridley, the author of "The Rational Optimist", says that the prophets of doom and gloom from Robert Malthus to Paul Ehrlich(both predicted catastrophe of mass starvation) have always found great acceptance as "sages" in their time but proved to be completely wrong because they discount human resilience and ingenuity.

http://books.google.com/books?id=YoVpW0zJIgYC&printsec=frontcover&dq=rational+optimist+sage&hl=en&sa=X&ei=B6a6UKb4BebgigLV84DoAQ&ved=0CDUQ6AEwAA#v=snippet&q=ehrlich&f=false

The reasons for wide acceptance of pessimists have to do with how the human brain has evolved through the millennia.

It's been established that once the amygdala starts hunting for bad news, it'll mostly find bad news.

Peter Diamandis explains this phenomenon well in his book "Abundance-Why Future is Better Than You Think".

Here's a excerpt from Diamandis's book:

"These are turbulent times. A quick glance at the headlines is enough to set anybody on edge-with endless media stream that has lately become our lives-it's hard to get away from those headlines. Worse, evolution shaped human brain to be acutely aware of all potential dangers...this dire combination has a profound impact on human perception: It literally shuts off our ability to take in good news."

http://books.google.com/books?id=lCifxlN8ZIoC&printsec=frontcover&dq=abundance&hl=en&sa=X&ei=Iqe6UNqeM4zmiwKs5YDYAg&ved=0CDsQ6AEwAQ#v=onepage&q=bad%20news&f=false

In Pakistan's case, the good news continues to be the emergence of a large and growing middle class population and a vibrant mass media and civil society which underpin the country's extraordinary resilience.

Pakistan needs such resilience to complete its difficult ongoing transition to democracy which, the history tells us, has never been easy for any nation.

I believe Pakistan is making good progress toward becoming a prosperous urban middle class democracy.

Riaz Haq said...

Here's a Dawn story on growing retail sector in Pakistan:

Karachi’s Dolmen City Mall is a large, plush building that would not be out of place in Dubai. Heavily fortified with security guards, the interior is impressive, with its cavernous corridors and gleaming marble floor – a far cry from the hustle and bustle of the city’s other shopping areas.

Newly arrived from London earlier this year, Karachi residents were insistent that I must see this wonderful new addition to the city. When I did, it was something of a home from home. In addition to high end local clothing brands were a whole plethora of foreign stores, from Mango, to Next, to the Body Shop. Many (though not all) of these are British imports.

The latest to open its doors was Debenhams, stalwart of the British high street, which this year became the first international department store in Pakistan with its branch in Dolmen. It joins other UK brands such as Next, Early Learning Centre, Accessorize and Monsoon.

So what is behind the influx of foreign stores to Karachi’s high streets? Internationally, Pakistan is not viewed as an obvious market for retail brands due to security concerns – both real and perceived – and the attendant difficulties of doing business.

However, the numbers tell a different story. The retail sector is one of the fastest-growing in Pakistan, and is expected to grow at a rate of 7 per cent per year until 2015. To give some indication of the growth it has already seen in recent years, compare the market value in 2006 – £19124.1 million – with 2010, when it had increased to £26541.2 million.

Yasin Paracha runs Team A Ventures, the company which holds the franchises for UK brands Debenhams, Next, Early Learning Centre, Accessorize, and Mothercare. He explains that the historic ties between the two countries means that British brands have instant recognition in Pakistan.

“People in our target market are used to travelling to London frequently,” he says – many people will have visited the UK as tourists, students, or on family or business visits.

Indeed, the growth of this target market – young, urban, and with significant disposable income – is crucial to increased retail operations in Pakistan. The urbanized middle classes are a steadily growing group.

Of Pakistan’s 180-million strong population, around 55 million live in cities such as Karachi, Lahore, and Faisalabad. Consumerism is on the up, fuelled by a recent boom in consumer banking and the media industry, and encouraged by ever-increasing investment from both local and foreign chains. Traditionally, many people in this target market have preferred to do much of their shopping abroad, meaning that they are already predisposed to foreign brands.

But what about the security risks for new businesses? Karachi, in particular, is home to outbreaks of sectarian and ethnic violence, terrorist attacks, and a high instance of crime including extortion rackets.

“Of course it’s a concern for new investors,” says Paracha. “On the surface of it, a lot of brands are hesitant, but when they first make the trip to Pakistan, they are reassured because they realise that the things on the ground are very different from what they see in the media.”

However, the situation cannot be ignored. “One has to be cautious,” Paracha continues. “You can’t go into a very aggressive expansion because you can’t deny the security issue, especially in some cities. But so far we have not had a major negative impact on our operations.”

The visible success of household names like Debenhams and Next in Pakistan is likely t encourage other British brands to see the country as a potentially viable market. In addition to this, there is a concerted drive from the UK government to encourage British investment in Pakistan, due to a bilateral trade agreement between the two countries....


http://dawn.com/2012/12/05/banking-on-history-british-brands-thrive-in-pakistan/

Riaz Haq said...

In an Express Tribune article titled "Pakistan's tarred reputation", Pak economist Javed Burki paints a grim picture of Pakistani economy and references media stories of violence published in The Economist and The New York Times as a deterrent to foreign investors, governments and IFIs like IMF and World Bank.

http://tribune.com.pk/story/477347/pakistans-tarred-reputation/

What Brurki doesn't say (or maybe he doesn't understand?) is that governments, investors and corporations who do their own research know that Pakistan is too big and important a country which they can not afford to ignore for long.

Pakistan has a large and growing consumer base as well as a growing stockpile of sophisticated nuclear weapons. It can be highly profitable or highly dangerous depending how the world chooses to deal with it.

That's why the total foreign currency inflows into Pakistan have continued to grow for over a decade. Decline in FDI has been more than made up by growing remittances, grants and loans as well as significant increase in exports.

Riaz Haq said...

The "peace of the dead" is ending with the "eclipse of feudalism" in Pakistan. What we are seeing now is an "unplanned revolution" in the words of a Pakistani sociologist, a revolution that is transforming Pakistan for the better in the long run.

http://books.google.com/books?id=EKHZAAAAMAAJ&q=feudalism#search_anchor

http://himalmag.com/component/content/article/5126-the-eclipse-of-feudalism-in-pakistan.html

http://himalmag.com/component/content/article/5126-the-eclipse-of-feudalism-in-pakistan.html

http://sai.columbia.edu/outreach_files/Social%20&%20Structural%20Transformations%20in%20Pakistan.pdf

Riaz Haq said...

Here's a FT story on Pakistan:


The Islamic Republic of Pakistan is not a place where visitors expect to see billboards advertising “Liposuction, Tummy Tuck, Breast Reshaping” for middle-class women, let alone brothels to entertain middle-class men in a red-light district near the main mosque. They are both there in the sprawling commercial city of Lahore.

Nor is Pakistan a country where foreigners wary of Islamic extremism would necessarily envisage a politically correct gender studies centre such as the one at Quaid-i-Azam University in the capital Islamabad – where students, male and female, discuss everything from honour killings to reproductive rights.


To say that Pakistan has an image problem in the west is an understatement. A new Global Terrorism Index published by the Institute for Economics and Peace shows that Pakistan comes second only to Iraq in terms of terrorist violence because of “significant and widespread” attacks, mostly bombings and shootings. (Pakistan’s neighbours, Afghanistan and India, come third and fourth.)

Yet Pakistan is more diverse than outsiders tend to think and the beliefs of its 180m people are more heterogeneous than in many other nations that profess themselves Islamic. Women hold positions of power in politics, business and academia; mystical Muslims worship at Sufi shrines that are anathema to puritan Sunnis in the Saudi mould; and those who might be categorised as Islamic extremists have never won more than 12 per cent of the vote in a general election.
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Democracy in Pakistan – according to one western diplomat who draws comparisons not with South America but with the Middle East – is far from perfect but more developed than it is in Egypt. “At a time when democracy in other parts of the Muslim world is running into problems ... there is something consolidating here against all the odds,” the diplomat says. “Something quite significant is happening here.”

The mere fact of a government finishing its allotted term and facing new elections is important, says another Pakistan-based diplomat. “It’s very hard for the outside world to understand how important that’s going to be ... It changes intangibly the calculations of politicians and the military.”
----------

Few Pakistanis dispute that the weakness of the economy is a source of fragility, that drastic electricity shortages stoke public anger, or that corruption is worsening further as the election approaches. A few investors, foreign and Pakistani, look back to the decade long military rule of Pervez Musharraf, which ended in 2008, as a kind of golden age of growth and prudent decision-making.

But even Gen Musharraf will wear civilian clothes if – as he hopes – he is able to return from exile to join the political fray. And even business leaders appalled by the state of the economy now hesitate to recommend military intervention in modern Pakistan.


www.ft.com/intl/cms/s/0/fd6b21f2-494b-11e2-9225-00144feab49a.html

Riaz Haq said...

Here's an Express Tribune list of Pakistani companies with over a billion in revenue:

The Billion Dollar Club

1. Pakistan State Oil Company

Revenues: $11.57 billion

Joined club: Before 1986

2. Pak-Arab Refinery

Revenues: $3.00 billion

Joined club: 2000

3. Sui Northern Gas Pipelines

Revenues: $2.52 billion

Joined club: 2004

4. Shell Pakistan

Revenues: $2.38 billion

Joined club: 2000


5. Oil & Gas Development Company

Revenues: $2.23 billion

Joined club: 2005

6. National Refinery

Revenues: $1.97 billion

Joined club: 2005

7. Hub Power Company

Revenues: $1.97 billion

Joined club: 2009



8. Karachi Electric Supply Company

Revenues: $1.84 billion

Joined club: 2008


9. Attock Refinery

Revenues: $1.74 billion

Joined club: 2008


10. Attock Petroleum

Revenues: $1.72 billion

Joined club: 2010


11. Lahore Electric Supply Company

Revenues: $1.49 billion

Joined club: 2006

12. Pakistan Refinery

Revenues: $1.44 billion

Joined club: 2011


13. Sui Southern Gas Company

Revenues: $1.38 billion

Joined club: 2005

14. Pakistan International Airlines

Revenues: $1.36 billion

Joined club: 2005

15. Engro Corporation

Revenues: $1.29 billion

Joined club: 2011


16. Pakistan Telecommunications Company

Revenues: $1.25 billion

Joined club: 2000

17. Kot Addu Power Company

Revenues: $1.14 billion

Joined club: 2012

18. Mobilink

Revenues: $1.11 billion

Joined club: 2006

19. Pakistan Petroleum

Revenues: $1.09 billion

Joined club: 2012

.


http://tribune.com.pk/story/483287/corporate-revenues-the-growth-of-the-billion-dollar-club-in-pakistan/

Riaz Haq said...

Here's ET on near billion dollar Pak companies:

The Near-Billion Dollar club

1. Telenor Pakistan

Revenues: $951 million

2. Pepsico Pakistan

Revenues: $922 million

3. State Life Insurance Corporation

Revenues: $885 million

4. Toyota Indus

Revenues: $869 million

5. Habib Bank

Revenues: $831 million

6. Nestle Pakistan

Revenues: $804 million

7. National Bank of Pakistan

Revenues: $781 million

8. Faisalabad Electric Supply Company

Revenues: $775 million

9. Multan Electric Power Company

Revenues: $761 million

10. Unilever Pakistan

Revenues: $746 million

11. Pakistan Tobacco Company

Revenues: $728 million


12. Pak Suzuki

Revenues: $713 million

13. Islamabad Electric Supply Company

Revenues: $681 million


14. Fauji Fertilizer Company

Revenues: $634 million


15. Lotte Pakistan

Revenues: $624 million

16. United Bank

Revenues: $622 million


17. MCB Bank

Revenues: $617 million

.


tribune.com.pk/story/483448/rising-tide-consumer-centric-companies-dominate-the-near-billion-dollar-club/

Riaz Haq said...

Here are some excerpts of a piece titled "How's India Doing (2012)?" as published in The Hindu:

One, the decline in poverty has not been uniform across regions and communities. If in 1982 your parents lived on the banks of the Cooum in Madras or in Dharavi in Bombay, it is likely that today your economic status is better than theirs. But if you are from a Dalit or adivasi family in Madhya Pradesh, Chhattisgarh, Bihar, or Uttar Pradesh, chances are that you are no better off now than your parents were in 1982. Two, the benefits of growth have indeed trickled down, but that is exactly what has happened: it has been just a trickle. The incidence of poverty has declined, but a quarter of the population or around 300-350 million people are still desperately poor. Three, if other basic necessities like shelter, access to clean drinking water and sanitation are included, the picture is much more dismal. Research by R. Jayraj and S. Subramanian shows that severe “multidimensional poverty” afflicted 470 million in 2005-06, not much lower than the estimate of 520 million in 1992-93. Four, in certain critical areas — for instance, malnourishment and maternal mortality — conditions remain terrible. Close to half our children suffer from malnutrition, much the same as 30 years ago.

So if we paint a broader picture, the old sliver of the beneficiaries of India’s growth has only thickened a bit. For the large mass of India’s poor, daily life remains a struggle. There is no doubt India lost a major opportunity in the past three decades.

---

The sex ratio has at last begun to see some improvement, though only in the past decade. And the life expectancy of women is now, as it should be, longer than of men. But we are in a far worse situation than in 1982 with respect to the status of the girl child. The sex ratio at birth — the number of girls born for every 1,000 boys born — has declined in recent decades. And the sex ratio of children under six has also worsened. Whether the result of sex-selection at birth, female infanticide, or neglect of the girl child, India has become an awful place for girls.

---

The outcome, however, has not been any major improvement in the economic status of the deprived castes. It may be too early to express any definite opinion on the achievements of these parties, but the early optimism that they would position the demand for lower-caste rights as part of a larger movement for justice and equality has faded. These parties have at times turned into movements solely for the advancement of sectional interests, and, worse, have become vehicles of personal aggrandisement.

If these are the changes in four areas that Sen examined in 1982, one also has to recognise that major changes have taken place in other areas.
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For a country that became independent amid gruesome violence on religious lines, communalism has been no stranger. Soon after Sen’s essay, we had the anti-Sikh riots of November 1984. Mass murder was conducted over three days in the capital under the benign gaze of a new Prime Minister. The message was: if you mobilise yourself with force, you can get away with anything. The message was heard, and put into practice in Bhagalpur 1989, Bombay 1993, and Gujarat 2002.

Beyond such open violence, it is the routinisation of communalism in daily life that is new. Mobilisation on communal lines took new forms after the Vishwa Hindu Parishad/Bharatiya Janata Party decided to raise the issue of the Babri Masjid. The rath yatra of 1990, the Congress’s cynical attempt at soft Hindutva, and the destruction of the Babri Masjid completed the post-Independence transformation of India on communal lines. All this has contributed in no small measure to the growth of domestic terrorism. India is tragically now a less tolerant society than what it was in the early 1980s.


http://www.thehindu.com/opinion/op-ed/how-is-india-doing-2012/article4249630.ece

Riaz Haq said...

Here's an excerpt of Shahid Burki's Op Ed in the Express Tribune:

(Prof) Hirschman looked at three possibilities. People could remain loyal to the system that has caused them anxiety and despair. In that case, their hope will be that they can work within the system to reform it and thus improve their own situation in it. This happens in most functioning democracies. People use the opportunities inherent in democratic systems to improve what they receive from politics and economics. The second option is to raise their voice. That can be done by stepping out of the system and entering into a different kind of discourse. This is essentially what was done by the participants in the Arab Spring. The Arab street woke up when the realisation became acute that the autocratic structures in several Arab states did not have the space in which the alienated could raise their voice. They took to the streets and to the public squares and brought about regime change in several countries that had been governed for decades by autocrats.

The third option — of exiting the system — is the most radical of the three that Hirschman considered. This has happened in Syria. Earlier, it happened in Pakistan when the citizens of the eastern wing decided to opt out and create a country of their own. They had tried hard to remain within the Pakistani system as conceived by Mohammad Ali Jinnah but the political structure within West Pakistan could not countenance the idea of political power moving from Islamabad to Dhaka. That would have happened had the results of the 1970 election been allowed to create the government that would have been dominated by East Pakistan’s Awami League. What followed is familiar history.

There can be no denying the fact that the level of people’s alienation with the current economic and political systems in Pakistan has, at this time, reached a level never experienced before. And yet, the citizens have chosen to remain within the developing political order, rather than opt out and try for something new. That the people’s response this time around has been different from those in the Arab world is because of their belief in the political order that is under development. But the process of development has been messy which was to be expected. This brings me to another point that Hirschman developed in his long academic career.

He was of the view that progress is never linear. It does not happen in a smooth way, either with the economy or with the political system. Most systems operate through disequilibria making adjustments as they go along....


http://tribune.com.pk/story/486740/professor-hirschman-and-pakistan

Riaz Haq said...

Talking about "doing a Reagan", here's NY Times' Op Ed about India-China race:

As recently as 2006, when I first visited India and China, the economic race was on, with heavy bets being placed on which one would win the developing world sweepstakes.

Many Westerners fervently hoped that a democratic country would triumph economically over an autocratic regime.

Now the contest is emphatically over. China has lunged into the 21st century, while India is still lurching toward it.

That’s evident not just in columns of dry statistics but in the rhythm and sensibility of each country. While China often seems to eradicate its past as it single-mindedly constructs its future, India nibbles more judiciously at its complex history.

Visits to crowded Indian urban centers unleash sensory assaults: colorful dress and lilting chatter provide a backdrop to every manner of commerce, from small shops to peddlers to beggars. That makes for engaging tourism, but not the fastest economic development. In contrast to China’s full-throated, monochromatic embrace of large-scale manufacturing, India more closely resembles a nation of shopkeepers.

To be sure, India has achieved enviable success in business services, like the glistening call centers in Bangalore and elsewhere. But in the global jousting for manufacturing jobs, India does not get its share.

Now, after years of rocketing growth, China’s gross domestic product per capita of $9,146 is more than twice India’s. And its economy grew by 7.7 percent in 2012, while India expanded at a (hardly shabby) 5.3 percent rate.
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India’s rigid social structure limits intergenerational economic mobility and fosters acceptance of vast wealth disparities. In Mumbai, where more than half the population lives in slums often devoid of electricity or running water, Mukesh Ambani spent a reported $1 billion to construct a 27-story home in a residential neighborhood.

Don’t get me wrong — I am hardly advocating totalitarian government. But we need to recognize that success for developing countries is about more than free elections.

While India may not have the same “eye on the prize” so evident in China, it should finish a respectable second in the developing world sweepstakes. It just won’t beat China.


http://opinionator.blogs.nytimes.com/2013/01/19/india-is-losing-the-race/

Riaz Haq said...

Here's a New York Times story on economic and income mobility in US:

This geography appears to play a major role in making Atlanta one of the metropolitan areas where it is most difficult for lower-income households to rise into the middle class and beyond, according to a new study that other researchers are calling the most detailed portrait yet of income mobility in the United States.

The study — based on millions of anonymous earnings records and being released this week by a team of top academic economists — is the first with enough data to compare upward mobility across metropolitan areas. These comparisons provide some of the most powerful evidence so far about the factors that seem to drive people’s chances of rising beyond the station of their birth, including education, family structure and the economic layout of metropolitan areas.

Climbing the income ladder occurs less often in the Southeast and industrial Midwest, the data shows, with the odds notably low in Atlanta, Charlotte, Memphis, Raleigh, Indianapolis, Cincinnati and Columbus. By contrast, some of the highest rates occur in the Northeast, Great Plains and West, including in New York, Boston, Salt Lake City, Pittsburgh, Seattle and large swaths of California and Minnesota.

“Where you grow up matters,” said Nathaniel Hendren, a Harvard economist and one of the study’s authors. “There is tremendous variation across the U.S. in the extent to which kids can rise out of poverty.”

That variation does not stem simply from the fact that some areas have higher average incomes: upward mobility rates, Mr. Hendren added, often differ sharply in areas where average income is similar, like Atlanta and Seattle.

The gaps can be stark. On average, fairly poor children in Seattle — those who grew up in the 25th percentile of the national income distribution — do as well financially when they grow up as middle-class children — those who grew up at the 50th percentile — from Atlanta.

Geography mattered much less for well-off children than for middle-class and poor children, according to the results. In an economic echo of Tolstoy’s line about happy families being alike, the chances that affluent children grow up to be affluent are broadly similar across metropolitan areas.
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What they found surprised them, said Raj Chetty, one of the authors and the most recent winner of the John Bates Clark Medal, which the American Economic Association awards to the country’s best academic economist under the age of 40. The researchers concluded that larger tax credits for the poor and higher taxes on the affluent seemed to improve income mobility only slightly. The economists also found only modest or no correlation between mobility and the number of local colleges and their tuition rates or between mobility and the amount of extreme wealth in a region.

But the researchers identified four broad factors that appeared to affect income mobility, including the size and dispersion of the local middle class. All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods.

Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups.


http://www.nytimes.com/2013/07/22/business/in-climbing-income-ladder-location-matters.html?pagewanted=all&_r=0