Friday, October 3, 2014

India-Pakistan Economic Comparison 2014

India and Pakistan are running neck and neck in per capita GDP in both nominal US dollar terms and purchasing power parity terms, according to data available from multiple sources.

Nominal and PPP GDP:

CIA World Factbook reports that the 2013 official exchange rate GDP of India is $1.67 trillion while that of Pakistan is $237 billion. It's a ratio of 7, about the same as the population ratio between the two countries.

World Bank's International Comparison Program (ICP) 2011 did a detailed cross-country purchasing power comparison and estimated $778 billion PPP GDP for 2011. It put India's GDP at $5,757 billion, about 7.4 times Pakistan's.  It makes India's economy the third largest and Pakistan's economy 23rd largest in the world in PPP terms.  The ICP findings conclude that Pakistan's per capita income is US$4,450.00, just slightly below India's US$4,735.00. 

India Pakistan Sri Lanka Per Capita Income Source: World Bank

Poverty Rates:

The number of Pakistanis living below the 2005 $1.25 poverty line (set at $1.44 for 2011) is 4.8 million, less than one-seventh of the 35.1 million reported earlier., according to Center for Global Development (CGD). It is a huge drop from about 20% of the population to 3% of the population living below the international poverty line.
World Bank's Revised Poverty Estimates (Source: CGD)

Poverty rates for many other nations, including India and Bangladesh,  have also seen dramatic downward revisions. As a result, India now has 102 million poor, just slightly above China's 99 million. In fact, the new report has cut the world poverty rate in half from 19.7% to 8.9%. Reduction from 21% to 3% for Pakistan poverty is much sharper than the rest of the world because ICP 2011 found it to be the second cheapest in the world.

Cost of Living Comparison in Asia

The revision became necessary after the World Bank's International Comparison Program (ICP) completed a detailed study of a list of around 800 household and non-household products to compare real purchasing power for trans-national income comparison program (ICP). The CGD explained that the revision in poverty rate was necessitated by the results of latest ICP. It said: "Pakistan’s PPP conversion rate for GDP was 19.1 Rupees to the dollar in 2005 and 24.4 in 2011 — a gentle increase of 28 percent. The Consumer Price Index in Pakistan has gone up 102 percent over that same period. That might reflect changing or inadequate ICP commodity baskets or consumption data in one or both years, or mismeasurement of prices by Pakistan’s statistical agencies. But whatever the reason, it appears to apply to a lot of countries. Very few places saw PPP conversion rates climb close to or more than CPIs between 2005 and 2011, which is why poverty rates based on the 2011 PPP numbers tend to be lower."

Rural Poverty: 

One of the key reasons for lower rural poverty in Pakistan is the relatively high per capita agriculture value added  for its region.

Agriculture Value Added Per Capita in Constant 2000 US$--Source: World Bank
Livestock revolution enabled Pakistan to significantly raise agriculture productivity and rural incomes in 1980s. Economic activity in dairy, meat and poultry sectors now accounts for just over 50% of the nation's total agricultural output. The result is that per capita value added to agriculture in Pakistan is almost twice as much as that in Bangladesh and India.

Manufacturing Percentage of GDP Source: World Bank

GDP Growth Rates:

While per capita GDPs of Pakistan and India are neck-and-neck at the moment, the fact is that economic growth rates in Pakistan are continuing lag growth rates in India and other SAARC economies.

Meager 4.1% GDP growth reported by Pakistan for 2013-14 caps sixth consecutive year of disappointing economic performance under "democratic" governments in the country. This slow growth brings back bitter memories of the last lost decade of 1990s when economic growth plummeted to between 3% and 4%, poverty rose to 33%, inflation was in double digits and the foreign debt mounted to nearly the entire GDP of Pakistan as the governments of Benazir Bhutto (PPP) and Nawaz Sharif (PMLN) played musical chairs.

India-Pakistan GDP Growth Rates Since 1990s Source: World Bank 

Unless Pakistani leaders find a way to accelerate growth, Pakistan will be left far behind India in terms of per capita gdp by the end of this decade.


While India has suffered an economic slow-down in recent years, growth in Pakistan has dramatically plummeted under "democratic" leadership since 2008. Pakistan is in the midst of another lost decade like the 1990s, putting it at risk of being the worst economy in South Asia region and hurting its people in myriad ways including human development rates. This has to change for the better for Pakistan to keep up with its neighbors. 

Related Links:

Haq's Musings

Underinvestment Hurting Economic Growth in Pakistan

Pakistan's Revised PPP GDP 2011

Pakistan Among Top 25 World Economies

Pakistan's Per Capita Income

Pakistan Fares Better Than Neighbors on World Misery Index

Pakistan's Underground Economy

India Pakistan Comparison 

Pakistan Economic History

Pakistan's Expected Demographic Dividend


Anonymous said...

Correct me if I am wrong but this almost equal to India is because of the revision of the base year numbers under zardari about two years ago.

I am not suggesting fraud all countries revise base year data every 10 or so years and India I think will do so this year.

Otherwise think about it Indian per capita income was a bit higher than Pakistan in 2008 before the democratic revolution in Pakistan.

India has had an appreciable higher economic growth and an appreciably lower population growth every year since.

Also the currency has depreciated lesser than PAkistani rupee 2008-14 timeframe.

Still the two countries are neck and neck??

I think the true disparity will come out once India does base year realingnment by end of this financial year.

I think India would be around 50% richer in nominal per capita income.

Its VERY IMPORTANT for everyone to know the FULL EXTENT of the damage this feudal lord power cartel democracy has caused and by all indications will continue to cause.

Riaz Haq said...

Anon: Correct me if I am wrong but this almost equal to India is because of the revision of the base year numbers under zardari about two years ago."

Pakistan economy was rebased from 1999-2000 to 2004-5 in 2012-13. It resulted in 7.8% increase over the old base estimate.

India's nominal GDP has suffered because of a major decline of the Indian rupee relative to US$.

Also, the ICP 2011 showed that the PPP correction factor should be higher than previously used, resulting in higher PPP GDP.

Hopewins said...

^^RH: "India and Pakistan are running neck and neck..."

I keep telling you this...

^^RH: "..economic growth rates in Pakistan are continuing lag India ..."

You are showing growth in Total GDP. Have you had a look at growth in per capita GDP (since we have higher population growth rate than India/Bangladesh)?

It is bad. Very bad. If we don't come out of this new lost decade soon, it will be all over for us in South Asia as even Bangladesh will be moving ahead of us.

Hopewins said...

^^RH: "....One of the key reasons for lower rural poverty in Pakistan is the relatively high per capita agriculture value added for its region..."

China v/s Pakistan Poverty:

China v/s Pakistan Agriculture value-added:

Majumdar said...

Prof Riazul Haq sb,

There is one more point worth seeing. Even in the "golden era" of Musharraf barring 2000, "democratic" India outperformed army ruled Pakiland. The thesis that military rule benefits a country is eminently debatable, if we are basing our conclusion only in the South Asian context.


Riaz Haq said...

Majumdar: "The thesis that military rule benefits a country is eminently debatable, if we are basing our conclusion only in the South Asian context"

Even in South Asian context, Pakistan's economy saw much faster growth than India's under Ayub Khan and Zia ul Haq. Since then, Pakistan has grown faster during Musharraf years than the decade before and after him under PPP and PMLN.

If the growth trajectory of 1960s had been maintained, I have no doubt that Pakistan would be an Asian Tiger economy.

Read my post on Pakistan's economic history:

CanadianBoy said...

no no no no you see Mr.Haq, for Indians Pakistan will be a failed state now matter how many universally credible articles you reference to prove otherwise. All they see is terrorism this and terrorism that,despite the fact that nations plagued by decades of terrorism like Israel,turkey,Ireland to name a few have progressed economically.But i suppose a former sponsor of terrorism(Tamil tigers against Democratic Srilanka) India thinks terrorism is be all and end all,but only if it is the one sponsoring it :-)

Matt said...

According to WORLD BANK..
Gdp nominal[2013] India=$1.87 trillion
Gdp nominal 2013,Pak=$236 billion
So Indian economy 8 times bigger than Paks..
Gdp ppp India 2013=$6.77trillion
Gdp ppp Pak2013= $855billion
Indian economy 8 times bigger than Pak...
Do you want IMF datas??

Riaz Haq said...

Matt: "According to WORLD BANK..
Gdp nominal[2013] India=$1.87 trillion
Gdp nominal 2013,Pak=$236 billion
So Indian economy 8 times bigger than Paks..
Gdp ppp India 2013=$6.77trillion
Gdp ppp Pak2013= $855billion
Indian economy 8 times bigger than Pak...
Do you want IMF datas??"

Indian GDP in Indian currency was 100 trillion for 2012-13. At Rs. 61.56 to a US$, it works out to US$ 1.62 trillion.

As to the PPP GDP, it's being revised based on the latest ICP (International Comparisons Program) 2011.

World Bank's International Comparison Program (ICP) does a detailed study of a list of around 800 household and nonhousehold products to compare real purchasing power for trans-national income comparison program (ICP). The latest ICP findings conclude that Pakistan's per capita income is US$4,450.00, just slightly below India's US$4,735.00

Nigel said...

Being British, I remember both countries being similar in their potential and their desperate conditions at independence. Pakistan had better agricultural infrastructure and India had better industry. After the poorer Bangladesh split, Pakistan leapt ahead statistically in GDP and poverty.

In the last decade or two, I believe, there is a divergence in progress. India has a higher trajectory in terms of growth and human development. Pakistan may be better in some areas however, overall India is clearly ahead.
In ten to twenty years, I expect the divergence to grow and Pakistan may lag behind in many indices such as poverty rates, which Pakistan is in slightly better position today.

Tambi Dude said...

Homeland, the award winning series from SHowtime started its Season 4 last night. This time the season is based on Pakistan. Here are some dialogues I heard:

Do you want to go back to that shit hole called Pakistan?

Isn't everyone there a relative to OBL or Haqqani.

I can understand how in the bay area you must be feeling miserable on introducing yourself as a pakistani.

CanadianBoy said...

@Nigel: here is something another average British bloke who knows a bit about economics said about Pakistan,not as much as Mr. Nigel though hahaha:

Pakistan has the potential to become the 18th largest economy of world by 2050, leaving behind many strong economies, according to Jim O'Neill, a British economist.

Jim O'Neill,a retiring chairman of Goldman Sachs Asset Management, is famous for coining the term BRIC - Brazil, Russia, India and China in 2001, analyzing their potential to become the world's most powerful economies.

Now he has come up with a new term MINT - Mexico, Indonesia, Nigeria and Turkey, projecting their economies to see the strong growth in the coming decades.

According to his projections for 2050, Pakistan would become the 18th largest economy in the world by 2050 with a GDP of US$3.33 trillion (almost the same size as the current German economy).

Vishal said...

It is interesting to look at the economic policies of Pakistan between the 60s to 80s. I was actually quite surprised when I stumbled across documentaries of the Ayub Khan days and and compared them with those from India in that era. The speeches about opening Pakistani economy, having more manufacturing etc looked quite impressive considering it was back in the 60's.

In comparison, at the same time in India, the emphasis was agriculture; the discourse was to stop eating food for 1 day; rather than boost productivity or promote manufacturing. I think it was only in the 90's India changed its policies, and that too because it went broke.

Mr. Riaz Haq, I am wondering what changed in Pakistan? Pakistan was reaping the benefits of industrialization back in 1960s. It's GDP was averaging way above 6%-8%. Pakistan established oil refineries back in the 60's, space program in 1961. It looks like Bhutto followed a socialist, left centered platform, which is also interesting considering he brought religion into Pakistani politics.

Interestingly, in most countries, the right wingers are pro (majority) religion but are also pro-business. But it looks like Pakistan switched to pro-religion, socialist polity and left industrialization in the 70's. Why the double whammy in Pakistan?

Riaz Haq said...

In his recent piece published in Pakistan's Herald, Princeton Prof Atif Mian praises India's export performance and argues that exports data can not be manipulated.

US GAO thinks otherwise. A 2005 study by US General Accounting Office (GAO) found that Indian government's figures for software and technology exports to the United States were 20 times higher than the US figures for import of the same from India.

India's IT exports to US have received scrutiny from US Congress which asked GAO to look into why there's a huge disparity between India's claimed exports to US and imports from India as measured by US Commerce Dept. In theory, India follows what is known as BPM 6 (MSITS) reporting method for software and information-enabled technology services (ITES) which counts sales to all multinationals, earning of overseas offices, salaries of non-immigrant overseas workers as India's exports. In practice, India violates it. BPM 6 allows the salaries of first year of migrant workers to be included in a country's service exports. India continuously and cumulatively adds all the earnings of its migrants to US in its software exports. If 50,000 Indians migrate on H1B visas each year, and they each earn $50,000 a year, that's a $2.5 billion addition to their exports each year. Cumulatively over 10 years, this would be $25 billion in exports year after year and growing.

Vishal said...

>>In the case of India, it is possible to estimate (using tax return data) that the increase in the upper centile's share of national income explains between one-quarter and one-third of the "black hole" of growth between 1990 and 2000.

Mr Haq, you must be joking. Only an Oracle could compute total GDP using tax return data of countries like India and Pakistan where only few file income tax returns. My neighbor has 2 jewelry shops and 5 houses, but still shows his yearly income as Rs. 50,000 and is therefore exempt from filing tax returns. It's only the organized/salaried service sector that files income taxes in India, which is a small number.

The production numbers, on the other hand, are more realistic and are the basic for GDP computations across the world.

>> If one tries to measure income growth by using household survey data, it is often quite difficult to identify the reported rates of macroeconomic growth

It's almost impossible to do an accurate survey of income growth in India and China as it varies across regions and there is a huge black economy that is never reported.

Also, I really doubt your claim about 20X over-reporting of IT exports. Most of the Indian IT firms are multinational companies and are listed globally. The stock valuation is usually based on revenues and profits. Any fudging would have been long caught by international agencies and would have shut these companies down. It's impossible to hide such discrepancies for 3 decades.

Also, given the huge deficits India operates due to its subsidies and fuel import bill, it would have been simply impossible to balance the economy with 20 times lesser IT exports as you claim.

Riaz Haq said...

M. Ali Kemal and Ahmed Waqar Qasim, economists at Pakistan Institute of Development Economics (PIDE), have published their research on estimates of the size of Pakistan's informal or underground economy.

Kemal and Qasim explore several published different approaches for sizing Pakistan's underground economy and settle on a combination of PSLM (Pakistan Social and Living Standards Measurement) consumption data and mis-invoicing of exports and imports to conclude that the country's "informal economy was 91% of the formal economy in 2007-08".

Riaz Haq said...

Vishal: "Mr Haq, you must be joking. Only an Oracle could compute total GDP using tax return data of countries like India and Pakistan where only few file income tax returns."

Re-read what Piketty wrote:

"In the case of India, it is possible to estimate (using tax return data) that the increase in the upper centile's share of national income explains between one-quarter and one-third of the "black hole" of growth between 1990 and 2000. "

In other words, he's not suggesting doing a total computation of national income using tax data.

What he is saying is to look at the tax returns of top 1% of income earners who hide their income to partially explain the "black hole" of growth.

Anonymous said...

GDP and Household income are as different as chalk and cheese.

GDP is meant to study economic activity not household income. but unfortunately keynesian economists dont understand this in such a simple way.

To give you an analogy, a company which has a 100 Billion profit in the form of receiveables is considered more profitable than a company which has 1 million profit on hand.

Economists do not factor the risk of receivables not being paid.

Hopewins said...

^^RH: ".... French economist Thomas Piketty argues that the GDP growth rates of India and China are exaggerated...."

What he is describing, i.e. a difference between household income growth and overall GDP growth, is a STANDARD feature of all rapidly growing developing countries.

What it indicates is that retained corporate profits or business earnings are rising faster than wages. This is only natural in countries where rural-to-urban migration of millions keeps wage growth below productivity growth.

Where is the "surprise" that this french fellow finds in this? Most likely he is comparing developing countries to his experience in the West, where this phenomenon ended in the 19th century and people have no data to examine from that time in Europe.

Riaz Haq said...

HW: "What it indicates is that retained corporate profits or business earnings are rising faster than wages."

Retained earnings are not big enough to account for the "black hole" paradox Piketty is taking about.

BTW, household surveys in developing countries indicate the size of the underground economy above and beyond the official economy...but apparently not in case of India and China.

For example, Kemal and Qasim of Pakistan Inst of Dev Economics have explored several different approaches for sizing Pakistan's underground economy and settled on a combination of PSLM (Pakistan Social and Living Standards Measurement) consumption data and mis-invoicing of exports and imports to conclude that the country's "informal economy was 91% of the formal economy in 2007-08".

Anonymous said...

Largest deal in aviation history!

IndiGo (India's SouthWest) orders 250 planes.

It has already ordered 100 planes(of which 99 are delivered)

and 180 planes(Deliveries to begin next year)

Riaz Haq said...

From The Economist:

IN OCTOBER 1987 the landmark privatisation of British Petroleum (now BP) was derailed by “Black Monday”, a big stockmarket crash. Pakistan’s planned divestment of a 7.5% stake in OGDCL, a listed but largely state-owned oil firm, has not been quite as cursed, but the circumstances could be more propitious. Pakistan’s government has been on the back foot following street protests in August and September. A nuisance suit to stop the sale was quashed this week by the Supreme Court. But there is likely to be a further delay while OGDCL publishes its results. Meanwhile the oil price has fallen sharply, as have stockmarkets around the world.

The good news for Pakistan’s government is that the appetite for local assets has been strong. Since the start of 2012 MSCI’s index of Pakistani shares has risen by 60% in dollar terms—ahead of global indices as well as Pakistan’s peers among frontier markets, which are less liquid and less open to foreign capital than others (see chart). The surprise is that the market did not fall further over the torrid summer. That was thanks largely to foreigners, who kept piling in even as jittery locals began selling. They bought a net $36m-worth of shares in August, when the protests were at their height, and a further $53m-worth in September.

The market’s bull run began in 2012 when a tax amnesty allowed previously hidden cash to be invested in stocks. Foreigners’ interest was piqued after elections in May of last year which led to the country’s first ever handover from one civilian government to another. The new one was seen as friendlier to business and took advice and credit from the IMF. Reforms were drafted and privatisations scheduled. A $2 billion bond issue this April was many times oversubscribed.

This was encouraging for a country more often seen as a cauldron of instability than as a fount of opportunity. Pakistan remains at the wrong end of international rankings of corruption, human development and security. But it is almost mid-table in the World Bank’s international comparison of the “ease of doing business”, scoring higher than either Brazil or India. Pakistan’s listed firms have a handsome average return on equity of more than 25%. The market is cheap relative to its frontier-market peers, with shares priced at 8.5 times earnings on average....

Pakistan’s market also spans lots of industries with a variety of well-run firms in each, says Andrew Brudenell, who runs a $700m frontier fund for HSBC which has a tilt towards Pakistan. Such diversity is in part a product of successive governments’ habit of privatisation by fits and starts: no fewer than 169 chunks of state-owned firms have been offloaded since 1991. The two most recent sales, in June, were of a 5% stake in Pakistan Petroleum, another oil firm, and of the state’s 20% shareholding in United Bank.

The more shares that float freely, the bigger the weighting Pakistan earns in the stockmarket indices that act as industry benchmarks. It is already the fourth-biggest frontier market, following the promotion of United Arab Emirates and Qatar to MSCI’s emerging-market index in June. This may explain the continued buying of its stocks during the turbulent summer. The sale of the stake in OGDCL is thus pivotal. It will not only give the stockmarket greater depth, but also add to Pakistan’s depleted currency reserves if, as expected, foreigners are the main buyers. The seven further privatisations in the pipeline should bring similar benefits. None of them is an oil company.

Riaz Haq said...

From Daily Times:

KARACHI: Karachi stock market bounced back on Wednesday after six consecutives negative sessions on withdrawal of Islamabad’s prolonged sit-in by Pakistan Awami Tehreek (PAT).
Karachi Stock Exchange (KSE)-100 index gained 246.12 points to close at 29,940.39 points as compared to 29,694.27 of previous session. KSE-30 index went up by 117.15 points as closed at 19,862.25 points as against 19,745.10 points of last closing.
Elixir Securities’ analyst Faisal Bilwani said, “Pakistan equities closed with gains, breaking the six day losing streak primarily triggered by positives on political front as cleric led PAT called off 70 day long sit-in in Islamabad”.
Investors cheered on hopes despite PAT calling for nationwide protests and PTI continuing its sit-in in Islamabad, this move will help ease political tensions.
KSE-100 index pushed by oil stocks tested 30,000 in early trade while gains in MCB Bank (plus 1.5%) and Engro Corporation (plus 2.7%) helped counter profit taking in index heavy illiquids. Maple Leaf Cement (minus 0.7%) that announced lower than estimated first quarterly earnings, led volumes and churned over 45 percent of KSE-100 index and ended the day lower.
We see benchmark to test 30,000 and trade volatile with investors focus on profits and payouts during earnings season. Market will remain sensitive to flows from foreigners and news flow of over politics in days ahead, said Bilwani.
Habib Metropolitan Financial Services’ analyst Amreen Hirani said, “The local bourse finally took a breather as tension on the political front partially alleviated”.
Oil stocks picked momentum after the ongoing correction. In key result announcements, Maple Leaf Cement’s growth was ignored by investors and the scrip was punished on the back of decline registered in Year on Year Y/Y earnings posted by the Company.
Cement scrips kept the momentum strong on robust earnings expectations for first quarter fiscal year (FY15). Corporate result of Meezan Bank Limited announced after market hours Tuesday had an optimistic impact on the scrip Wednesday as the stock closed at its upper circuit.
Ease in the political environment, stable oil prices and ongoing result season might push the index upwards in the coming days, said Ms Hirani.
The market volume increased by 19.97 percent to 172.533 million shares traded on Wednesday as compared to 143.817 million shares traded in previous session.
The overall market capitalisation rose by 1.05 percent and traded Rs 6.979 trillion as compared to Rs 6.906 trillion of previous session. Gainers outnumbered losers 231 to 140, while 20 stocks were remained unchanged amidst the total 391 stocks traded. The KMI-30 index lost 97.69 points to close at 47,503.56 points as compared to 47,601.25 points of previous session. The KSE all-share index went 28.96 points down to close at 21,858.63 points as compared to 21,887.59 points of previous session.
Maple Leaf Cement was the volume leader in the market with 29.045 million shares as it closed at Rs 29.01 followed by Bank of Punjab trading of 14.406 million shares and closed at Rs 8.70. Pak Elektron XR traded 8.209 million shares and closed at Rs 27.14.

Riaz Haq said...

Delhi jubilant but neighbour scores with Obama call, China cash & Russian military deal...The world community not only praises but wants to do business with Pakistan now,” Shoigu was quoted as saying in Islamabad. He also extolled Pakistan’s defence production capacity.

Riaz Haq said...

Every Aussie who takes an interest in such matters knows how a country goes from being undeveloped to developed. We've been watching our neighbours do the trick for years. It's called export-oriented growth.
It's all about building a big manufacturing sector. You encourage under-employed rural workers to move to the city and take jobs in factories.
Because your one big economic advantage is an abundant supply of cheap labour, you start by concentrating on making low-cost, simple, labour-intensive items such as textiles, clothing and footwear.
Since the locals don't have much capacity to buy this stuff, you concentrate on exporting it. Foreigners will lap it up because to them it's so cheap.

As the plan works and the country's income rises, you plough a fair bit back into raising the education level of your workers, which allows you to move to making more elaborate goods and to paying higher wages. You're on the way to being a developed country.
Over the decades we've seen a succession of countries climb this ladder: Japan, Hong Kong, South Korea, Taiwan, China and now even Vietnam and Bangladesh at the bottom. It's like pass-the-parcel: as each country's labour gets too expensive to be used to produce low-value thongs and T-shirts, some poorer country takes over and starts the climb to prosperity.
That's the way it's always done. Except for one country: India. Its economy started growing strongly in the 1990s and now it's the world's third-biggest (provided you measure it correctly, allowing for differences in purchasing power).
India has got this far without building a big, export-oriented manufacturing sector. It's done something that's probably unique: skipped the manufacturing stage and gone straight to the rich-country stage, in which most growth in jobs and production comes from services.
The Indians have done it by being so good with software and other information and communications technology and the things that hang off it, such as call centres. It's a big export earner.
It's an impressive effort, and there's no reason a developing country shouldn't have a big tech sector.
But, even so, the experts are saying India would be a lot better off if it had a bigger, more vibrant manufacturing sector, employing a lot more people who, by Indian standards, would be on good wages. This is a key theme in the Organisation for Economic Co-operation and Development's report on the Indian economy, issued this week.
The report offers suggestions on what could be done to encourage the growth of manufacturing, which go a fair way towards explaining why manufacturing never really got going the way it did in other "emerging market economies".
First, some basic facts. India has a population of 1250 million and before long it will overtake China's. About 29 per cent of the population is younger than 15.
Manufacturing accounts for only 13 per cent of India's gross domestic product, which is low compared with the other BRIICS emerging economies Brazil, Russia, Indonesia and China, but not South Africa.
Indian manufacturing probably accounts for a slightly smaller share of its total employment. Huh? It's normally the other way round. You'd expect it to be quite labour intensive. But despite abundant, low-skilled and relatively cheap labour, Indian manufacturing is surprisingly capital and skill intensive, the report says.
Almost two-thirds of manufacturing employment is in companies with fewer than 10 employees. That compares with Brazil's 9 per cent. This tells us the sector's many small firms mean it isn't exploiting its potential economies of scale.

Read more:

Riaz Haq said...

Big city people per hectare: ‪#‎Bangladesh‬ 175 ‪#‎India‬ 105 ‪#‎Pakistan‬ 92 ‪#‎US‬ 21 As people get richer they use more space

Those who argue that suburbia is dying are wrong on the facts; those who say it is doomed by the superiority of higher-density life make a far from convincing case. Cities that have sought to stop the sprawl—London is the most striking example—have achieved dubious benefits at great cost.

Riaz Haq said...

FORBES: "India Becoming Third Largest World Economy Is A Sign Of Failure, Not Success"

An interesting little point following on from the CEBR report into the size of national economies. Of course, as we would expect, reports from different countries about the same report note and detail different facets of said report. So we’ve a report out of SE Asia that looks at the way in which India is set, within the decade, to become the largest economy in the Commonwealth and the third largest overall. This is being seen as a sign of success, of their doing something right. Which is true in a trivial manner: but the greater truth is that this is a sign of the failure of previous policies.

Here’s that report from Malaysia:

The latest edition of Cebr Global’s World Economic League Table (WELT) will see the “unstoppable” rise of India as it surpasses Britain to become the largest economy in the Commonwealth in 2018 and the third largest economy in the world by 2024, according to a new global league table reported by the Press Association.

In more detail, the predictions are:

Its 2014 ranking puts the US first, followed by China, Japan, Germany, the UK, France, Brazil, Italy, India and Russia, in that order.

By 2030, it forecasts that globalization will have reached its mature phase, with China installed as the world’s biggest economy ahead of the US and India in third place, followed by Japan, Brazil, the UK, Germany, South Korea, France and Russia.

And the digest of the report itself says:

The rise of India looks unstoppable. India overtakes the UK in 2018 to become the largest economy in the Commonwealth and the rise continues – by 2024 India is the world’s third largest economy

This is all good stuff, of course it is. It’s just wonderful that places that are currently poor are becoming richer. And yes, at least part of it all is that better public and economic policies are being followed in those formerly poor nations, the very things and policies that are making them richer.

However, we also need to consider some other points. For example, it’s not the economic output of a certain group of people within certain arbitrary lines upon the map that really matters. It’s how many people there are and what standard of living they each have that is. And if we look at countries by population, by GDP and by GDP per capita, we find very different answers.

If all countries were doing equally well in providing a lifestyle for their citizenry then we would expect the world’s largest economies to be those with the largest populations. And this isn’t quite so: it’s only just now that China, with four or five times the population, has passed the US as the largest economy. And India is still well behind, despite a similarly larger population. Meaning that the US is doing four or five times better than China in providing a living standard to its people than China is: and obviously yet again better than India.

So, yes, obviously it’s good that these poor countries are getting richer. But it’s not an unalloyed joy: because when we look on a per capita basis then we can see how far they’ve still got to go. And of course that means that while current policies must be better than those that went before, it also means that past policies were really pretty bad.

Peter said...

Pakistani economy performed very well until 1990 and was well ahead of
India during this period. But there has been a perceptible shift since 1991 and India has done
much better and has overtaken Pakistan. A growth rate averaging 6 percent for the last 15 years
without any periods of decline for a diverse society of one billion is indeed highly creditable. As
a global leader in business outsourcing , an attractive location for the services sector, a dynamic
Private sector it is positioning itself to become a major player in the global economy. World
class professionals educated and trained in India and abroad are adding to the intellectual capital
of the country. The out ward orientation, liberalization and integration in the global economy are paying huge dividends.
Pakistan has slipped badly in the last 15 years . Despite impressive economic performance between 2002-07 the country is facing serious difficulties. Macroeconomic stability has to be re-established to restore confidence of domestic and international investors and
financial institutions. Pakistan has also lost its advantage in international trade by continuing to
depend up low-tech non-dynamic sector such as cotton textiles as its main export earner. A
narrow base, lack of diversification in commodity composition and markets has accentuated the vulnerability of the economy.

Riaz Haq said...

Peter: "But there has been a perceptible shift since 1991 and India has done
much better and has overtaken Pakistan"

Pakistan's GDP is significantly under-estimated, according to the State Bank of Pakistan's 2014 report. Entire fast growing sectors are missing from govt data. These sectors have grown to meet the needs of rapidly expanding middle class in the country.

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.

On the other hand, economist Thomas Piketty says India's and China's GDP figures are exaggerated.

In "Capital in the Twenty-First Century", French economist Thomas Piketty argues that the GDP growth rates of India and China are exaggerated.

Picketty writes as follows:

"Note, too, that the very high official growth figures for developing countries (especially India and China) over the past few decades are based almost exclusively on production statistics. If one tries to measure income growth by using household survey data, it is often quite difficult to identify the reported rates of macroeconomic growth: Indian and Chinese incomes are certainly increasing rapidly, but not as rapidly as one would infer from official growth statistics. This paradox-sometimes referred to as the "black hole" of growth-is obviously problematic. It may be due to the overestimation of the growth of output (there are many bureaucratic incentives for doing so), or perhaps the underestimation of income growth (household have their own flaws)), or most likely both. In particular, the missing income may be explained by the possibility that a disproportionate share of the growth in output has gone to the most highly remunerated individuals, whose incomes are not always captured in the tax data."

"In the case of India, it is possible to estimate (using tax return data) that the increase in the upper centile's share of national income explains between one-quarter and one-third of the "black hole" of growth between 1990 and 2000. "

Riaz Haq said...

Four years ago, newspapers in India published the intriguing news that their government was likely to benefit from the changes in base year for calculating gross domestic product (GDP) data, as the change would render the fiscal deficit much lower than projected.

Neighboring Pakistan then amplified the issue by stating that it explained a statistical paradox on living standards between the two countries. This January, India will again rebase its GDP with a newer base year, and the sneaking suspicion regarding who will benefit remains.

Last April, Nigeria, meanwhile, gained the status of the largest economy in Africa, surpassing South Africa after changing its GDP base year from 1990 to 2010. The Nigerian National Bureau of Statistics said that the change would better represent the current structure of the economy.

As a result, Nigerian GDP almost doubled compared with when it was calculated from a 1990 base year.

Indonesia is set for a similar occurrence with the upcoming economic growth announcement in February. GDP, the main element to measure economic growth, will appear in a new base year: 2010.

The year 2000 has been used as a base year for 14 years, or 56 quarters of GDP calculation. Since the base year is essential to develop GDP, it should be renewed or rebased when the economic structure can no longer be appropriately represented by the current base year.

However, changing the base year requires a lot of effort and money, especially in developing countries where administrative data are not yet sufficiently available.

Taking these points into consideration, the Central Statistics Agency (BPS) has decided to rebase GDP from base year 2000 to base year 2010. The base years prior to 2000 were 1993, 1983, 1973 and 1960.

Resetting the base year is usually accompanied by introducing a new classification of GDP components, either components in GDP by expenditure or GDP by industry. Every change in base year usually presents more detailed component classifications of GDP.

More importantly, rebasing usually changes GDP levels because of improvement in methodology, coverage and data source quality. As the result, the level of GDP will likely rise.

After changing the base year from 1993 to 2000 a decade ago, Indonesian GDP in 2000 at current prices was Rp 1.27 quadrillion (US$100.64 billion) using 1993 as the base year, but higher by 9.87 percent using 2000 as the base year. This means there was an additional Rp 125 trillion in nominal GDP amount for the same economy.

Changing the base year from 1983 to 1993, GDP for the year 1993 also came out in two versions. The first version based on 1983 amounted to Rp 302 trillion and the second version based on 1993 totaled Rp 329 trillion, an increase of Rp 27 trillion.

However, the economic growth figure will not be affected significantly, neither upward nor downward. Rebasing mostly affects the size of the economy, not the growth.

This is because as regards the growth, the principle of comparability should be applied as a new set of items can only be compared with another new set of items. Put briefly, an apple can only be compared with an apple.

Nevertheless, the above statement is open to criticism. This is because new data coverage added to the GDP calculation will surely bring a new set of commodities.

And as new commodities, they stick to the rule of industrial life cycles, which states that new commodities grow more quickly than old commodities.

Consequently, overall growth will likely be higher than the old series, although in many cases, the difference is negligible.

- See more at:

Riaz Haq said...

Talking about narratives, the "India Shining Pakistan collapsing" narrative promoted by India and its newly-found post Cold War post 911 western friends has been thoroughly debunked by Indian journalist-author Pankaj Mishra who recently visited Pakistan:

...I also saw much in this recent visit that did not conform to the main Western narrative for South Asia -- one in which India is steadily rising and Pakistan rapidly collapsing.

Born of certain geopolitical needs and exigencies, this vision was always most useful to those who have built up India as an investment destination and a strategic counterweight to China, and who have sought to bribe and cajole Pakistan’s military-intelligence establishment into the war on terrorism.

Seen through the narrow lens of the West’s security and economic interests, the great internal contradictions and tumult within these two large nation-states disappear. In the Western view, the credit-fueled consumerism among the Indian middle class appears a much bigger phenomenon than the extraordinary Maoist uprising in Central India.
Traveling through Pakistan, I realized how much my own knowledge of the country -- its problems as well as prospects -- was partial, defective or simply useless. Certainly, truisms about the general state of crisis were not hard to corroborate. Criminal gangs shot rocket-propelled grenades at each other and the police in Karachi’s Lyari neighborhood. Shiite Hazaras were being assassinated in Balochistan every day. Street riots broke out in several places over severe power shortages -- indeed, the one sound that seemed to unite the country was the groan of diesel generators, helping the more affluent Pakistanis cope with early summer heat.

In this eternally air-conditioned Pakistan, meanwhile, there exist fashion shows, rock bands, literary festivals, internationally prominent writers, Oscar-winning filmmakers and the bold anchors of a lively new electronic media. This is the glamorously liberal country upheld by English-speaking Pakistanis fretting about their national image in the West (some of them might have been gratified by the runaway success of Hello magazine’s first Pakistani edition last week).

But much less conspicuous and more significant, other signs of a society in rapid socioeconomic and political transition abounded. The elected parliament is about to complete its five- year term -- a rare event in Pakistan -- and its amendments to the constitution have taken away some if not all of the near- despotic prerogatives of the president’s office.

Political parties are scrambling to take advantage of the strengthening ethno-linguistic movements for provincial autonomy in Punjab and Sindh provinces. Young men and women, poor as well as upper middle class, have suddenly buoyed the anti-corruption campaign led by Imran Khan, an ex-cricketer turned politician.

After radically increasing the size of the consumerist middle class to 30 million, Pakistan’s formal economy, which grew only 2.4 percent in 2011, currently presents a dismal picture. But the informal sector of the economy, which spreads across rural and urban areas, is creating what the architect and social scientist Arif Hasan calls Pakistan’s “unplanned revolution.” Karachi, where a mall of Dubai-grossness recently erupted near the city’s main beach, now boasts “a first world economy and sociology, but with a third world wage and political structure.”

Even in Lyari, Karachi’s diseased old heart, where young gangsters with Kalashnikovs lurked in the alleys, billboards vended quick proficiency in information technology and the English language. Everywhere, in the Salt Range in northwestern Punjab as well as the long corridor between Lahore and Islamabad, were gated housing colonies, private colleges, fast- food restaurants and other markers of Pakistan’s breakneck suburbanization....

Riaz Haq said...

‪#‎India‬’s bubble. Pervasive Poverty, Banning ‪#‎IndiaDaughter‬, ‪#‎BeefBan‬ in ‪#‎Maharashtra‬ ‪#‎Mumbai‬. Secular Democracy?

Yasser Latif Hamdani: "Things changed drastically on the fifth day when I started reporting on the abject poverty I experienced in South Delhi and old Delhi; one uncle, whom I have known for a decade and a half and who is a renowned food journalist in India, even threatened to get me deported for “misusing my visa”. It is about marketing boss and no one can be allowed. Shining India sans marketing is a third world country with huge disparities and social inequities. This is an unforgiveable criticism even from someone like me who has principally refused to look at India as the enemy.This is a strange kind of psychosis. Now, if India were a person, it would be an extremely insecure, egoistic and overly prickly individual, ready to draw daggers at anyone who dares criticise it. Much of this was confirmed in the way India reacted to the film India’s Daughter. Many reasons are given for this opposition. One argument was that the airing of the film amounts to contempt of court. This is a flimsy excuse. Another one is that there was no “informed consent”. Without getting into the merits of these arguments, suffice it to say that these arguments would have made sense if India had attempted only to block the airing of the video in its territorial jurisdiction. The Indian government’s notice to the BBC clearly indicates that its aim was to block the airing of the video globally. Not only were YouTube and Google too eager to please the Indian government, even the BBC was threatened and cowered into withdrawing the video from YouTube, citing “copyright infringement”. Basically, theBBC has admitted that it cannot take on the government of India. For people like me — I was the counsel in the YouTube case before the Lahore High Court (LHC) –this complicates things further. On the one hand, the world’s largest democracy, which talks of democracy and secularism with a forked tongue, has effectively censored criticism of misogyny in its society and, on the other hand, the champions of free speech — Google and theBBC — have bent over backwards to accommodate India’s humongous ego. All the moral arguments one had about freedom of speech and open society have gone out the window. ..Amazingly, the ban on India’s Daughter came the same week the state of Maharashtra, where the great cosmopolitan city of Mumbaiwith its huge Muslim population is located, decided to criminalise slaughter and possession of beef. Any person possessing or eating beef in the great state of Maharashtra can now be imprisoned for a period of up to five years and fined Indian Rs 10,000. Consider the fact that Pakistan, which is officially an Islamic state, does not criminalise possessing or eating of pork. This makes this ban even more unconscionable for a country that is so self-righteously pompous about its secular democratic credentials.Of course, this has been a longstanding project of Indian nationalists pre-dating even partition. Gandhi had justified his support for the reactionary Khilafat Movement in the 1920s by saying that he wanted the cows to be spared the Muslim knife. The reasons had nothing to do with vegetarianism or love for animals (lamb slaughter or chicken slaughter has never had any political appeal) but the fact that the cow is a holy animal for the Hindus. Hindu cultural life thus was the bedrock upon which Indian nationalism was sediment. The project has reached fruition in 2015"

Riaz Haq said...

The fact that Pakistan's middle class has grown to 55% of the population from 2001 to 2010 while its GDP growth has been relatively low since 2008 is seen by some as a puzzle.

There's no puzzle here that basic understanding of income distribution can not solve. Headline stories of Economist and WSJ won't help you here.

It's not the overall GDP growth and average per capita income increases but the median per capita income growth that tells you how the GDP gains are shared among the population.

So to assess the size of the middle class, it's important to look at the median per capita income, an income level that divides the top 50% from the bottom 50% of income earners.

Median income in India ($60 per month) is significantly lower than that in Pakistan ($73 per month) in 2005 PPP $ based on 2009-10 surveys.

$60 per month per capita or $2 per day per capita in India means half the population in India does not meet the ADB and WB definition of middle class in India.

On the other hand, media income of $73 per month per capita in Pakistan means more than half of Pakistanis meet the ADB and WB definition of middle class.

Income poverty rate (those below $1.25 per capita per day) in India is 33% vs 13% in Pakistan, according to WB data on povcalNet.

Also Gini Index for India is 33 and for Pakistan 29, indicating that Pakistan has lower inequality.

Riaz Haq said...

Earlier this month, the United States approved a $952 million sale of helicopters, missiles, engines, targeting and positioning systems, and other equipment in response to a request made by Pakistan last year to help its efforts to counter domestic insurgents.\

“This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a country vital to U.S. foreign policy and national security goals in South Asia,” reads the certification by the U.S. Defense Security Cooperation Agency (DSCA) notifying Congress of the possible sale on April 6.

Yet national security may just be a pretext used for the swift clearance of this deal.

According to Stockholm International Peace Research Institute, selling arms may once have been “a major foreign policy and security tool” for the U.S., but this practice has been replaced by the need to prop up the U.S. arms industry at a time when the country’s own military expenditures have dropped.

“To sell or not sell weapons depends only upon political and strategic imperatives,” said Dr. Pervez Hoodbhoy, a professor of physics at the Forman Christian College University in Lahore, who is also a national security analyst.

Speaking to MintPress News, he added that that all arms suppliers, including the U.S., use human rights as a “fig leaf.” As an example of this, he pointed to the United States’ massive arms sales to Saudi Arabia, “which supports extremist groups across the world and mistreats minorities badly.”

“Today, given that Pakistan is fighting some Taliban groups instead of supporting them as earlier, it has become politically expedient and financially profitable for the U.S. to sell to Pakistan as well,” Hoodbhoy concluded.

Likewise, Commodore Uday Bhaskar, the director of the independent Society for Policy Studies in New Delhi and former head of the government-funded Institute for Defence Studies and Analyses (IDSA) and the National Maritime Foundation, a non-governmental think tank, noted the sale should be tied to “stringent conditions” on Pakistan’s army’s compliance with terrorism and human rights frameworks.

In 2014, global defense trade increased for the sixth straight year to $64.4 billion, up from $56.8 billion, with the U.S. and Russia topping the list of arms exporters. Soon after the approval of its sale to Pakistan, the U.S also approved a potential $57 million sale of air-to-surface missiles to Egypt.

According to IHS, a global information company, there has been “unparalleled demand from the emerging economies for military aircraft” since the escalation of “regional tensions” in the Middle East and Asia Pacific.

IHS’s Global Defense Trade Report, released in March, lists the top defense exporters and importers in 2013 and 2014 and shows how these rankings have changed year-on-year:

Top Defence Exporters Top Defence Exporters
2013 2014
1. United States 1.United States
2. Russian Federation 2. Russian Federation
3. France 3. France
4. UK 4. UK
5. Germany 5. Germany
6. Israel 6. Italy
7. China 7. Israel
8. Italy 8. China
9. Sweden 9. Spain
10. Canada 10. Canada

Top Defence Importers Top Defence Importers
2013 2014
1. India 1. Saudi Arabia
2. Saudi Arabia 2. India
3. UAE 3. China
4. Taiwan 4. UAE
5. China 5. Taiwan
6. Indonesia 6. Australia
7. South Korea 7. South Korea
8. Egypt 8. Indonesia
9. Australia 9. Turkey
10. Singapore 10. Pakistan

India’s race for arms
The Indian defense budget has increased to $40 billion, compared to a mere $7 billion for the neighboring Pakistani military. “India is claiming to be worried but its weapons purchases far exceed Pakistan’s,” Hoodbhoy asserted.

Meanwhile, the Chinese defense budget stands at roughly $145 billion, nearly four times that of India. In fact, China is second only to the U.S. in triple-digit military spending.

Riaz Haq said...

#Pakistan improving sanitation way faster than #India: Study - The Economic Times

NEW YORK: Pakistan has left India far behind in terms of improving water and sanitation access for their citizens, reveals a new performance index released on Friday.

While Pakistan was ranked five in the new index developed by The Water Institute at the University of North Carolina at Chapel Hill's Gillings School of Global Public Health in the US, India occupied an unenviable 92nd position.

High-performing countries for 2015 are those that achieved significant improvement i ..

Read more at:

Riaz Haq said...

Express Trib Op Ed on India-Pakistan economy and poverty:

I recently came across a blog titled ‘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.

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).

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.

Aditya said...

...The Indian defense budget has increased to $40 billion, compared to a mere $7 billion for the neighboring Pakistani military. “India is claiming to be worried but its weapons purchases far exceed Pakistan’s,” Hoodbhoy asserted.

In many of your articles you have correctly multiplied Pakistan figures by 7 and accounted for equality by the fact that population of India = 7 times that of Pakistan.

By the same logic $7 billion times 7 = $49 billion - which is actually higher than India's $40 billion.

You should not do "convenient" reporting.

Riaz Haq said...

Aditya: "$7 billion times 7 = $49 billion - which is actually higher than India's $40 billion. You should not do "convenient" reporting. "

Do you think India will deploy only one-seventh of its military resources against Pakistan in the event of war? Reflect on it...

Riaz Haq said...

Jaitley Hails #India's Tax-Free, Job-Rich Informal Economy Estimated At 40% of Official GDP #Modi #BJP via @business

India’s underground economy is booming, and Finance Minister Arun Jaitley wants to keep it that way.
The informal sector is estimated at $780 billion, or about 40 percent of India’s official gross domestic product. It employs more than 90 percent of India’s workforce, according to the government.
“I’m a great supporter of this informal sector," Jaitley said in an interview on Monday. “The informal sector generates more jobs than the organized industry."
The approach goes against the advice of many economists, including those at the International Monetary Fund, which recommends widening the tax net to alleviate India’s chronic shortfalls in fiscal revenue. Indian governments often need to slash infrastructure spending to meet deficit targets that are still among Asia’s highest.
India ranks among the world’s top employers in the informal sector, according to the International Labour Organisation. It puts to work about 400 million people -- more than the entire U.S. population.
In India, it’s nearly impossible to avoid. Retail stores offer discounts for customers if they pay cash, and landlords often take a portion of the monthly rent in stacks of 1,000-rupee notes. Back-alley hawalas transfer billions of dollars around the globe with no questions asked, and thousands of unregistered and underpaid chauffeurs and housemaids don’t file annual income declarations.
“The black economy is growing faster than the white economy and everybody is involved -- the entire country," said Arun Kumar, author of “The Black Economy in India," who came up with the $780 billion estimate by looking at wages, under-the-table transactions and cash-based real estate sales. “This isn’t just a problem among the wealthy -- almost everyone with disposable income participates in the black economy and it’s accepted."

Total corporate and personal income tax payers in India amount to about 40 million -- roughly 3 percent of the country’s 1.2 billion people. To expand that, a Finance Ministry-created panel suggested putting levies on farmers in the untaxed rural sector who make more than 5 million rupees ($76,000) per year -- an approach backed by the IMF.
“We think there’s scope to bring the fiscal deficit down in particular with the revenue side," said Thomas Richardson, the resident representative of the IMF in India. “It’s really a task of widening the tax net -- not raising rates, but bringing more people into the tax net."
“Neo-Middle Class"
Jaitley, for one, rejects that idea. Most farmers don’t make much money anyway, he said, and the rest could use the extra cash.
“We need to strengthen the neo-middle class and put more money in their pockets," Jaitley said. “So bringing tax violators into the tax net, yes, but bringing people with marginal incomes into the tax net -- I’m not so excited about it at all."
Instead, Jaitley wants to finance them. This year the government started a program to boost lending to small entrepreneurs like shopkeepers, fruits and vegetable vendors and artisans. Government-run banks have so far disbursed nearly $6 billion in increments of as much as about $15,000.
Part of the problem is India’s strict labor laws for companies with more than 100 employees. They incentivize businesses to stay small, leaving workers with few rights. The government so far has tweaked only a few minor labor laws, and it’s unclear when they will push for more changes.
While Jaitley this year is again struggling to raise revenue, he’s confident he’ll hit his deficit target of 3.9 percent of GDP without slashing funds for roads, bridges and ports. Shortfalls in direct taxes and state assets sales will be compensated by higher-than-expected indirect taxes -- including payments on services and exports.

Unknown said...

Dear All,
it is a never ending situation of analyzing different nations achieving different milestones. briefly the point should be in front of all countries and people who are making the policies should be to make policies and circumstances for the uplift of standard of living. obviously the lower end of all people who are living close or below the poverty line should be the first target. for India and Pakistan, China can be a role Model where 40 crore people in last 20 years are having a better life who were earlier living in shanty towns.
our both nation achievements are far less than what other nations are achieving.
education, health, clean water, life expectancy, employment, law and order etc all the fields where we need to work hard.

Riaz Haq said...

#Pakistan's new higher #poverty line of Rs. 3,030.32 pm per adult to classify 59m as poor: Planning Commission

Pakistan has performed exceptionally well in reducing monetary poverty over the past 15 years, down from nearly 35pc of the population in 2001-02 to under 10pc in 2013-14.


As the country’s population is estimated to be around 200 million, the new poverty line set by the government will allow 6.8 to 7.6 million households or 53 to 59 million people to be classified as poor, according to a Planning Commission document.

This demonstrates the government’s commitment to reaching low-income households through its policies and interventions, and to improving the lives of all of Pakistan’s people, the document says.

Read: New poverty line makes a third of Pakistanis poor

The commission says that by resetting the poverty threshold the government is reaffirming its commitment to a sustainable and inclusive development path which is aligned with its policy priorities.

According to poverty rates based on the 2013-14 re-estimation, the new poverty line is Rs3,030.32 per adult equivalent per month, and 29.5 per cent of the population will be considered poor.

Based on the most recent Household Income and Expenditure Survey, conducted in 2013-14, Pakistan’s poverty line was equal to Rs2,259.4 per adult equivalent per month. This number translates into Rs2,502.32 per person per month.

The commission mentioned its commitments on Sustainable Development Goals (SDGs), a robust social protection programme, and the creation of more and better jobs for the poor.

According to the commission, most developing countries revisit their poverty threshold when poverty rates get as low as those seen in Pakistan today.

In light of this, the government has made a decision to raise the bar on which it will consider the poor in Pakistan today.

Pakistan has performed exceptionally well in reducing monetary poverty over the past 15 years, down from nearly 35pc of the population in 2001-02 to under 10pc in 2013-14.

The last time a poverty line was set in Pakistan was in 2001-02. The line used the food energy intake method, with a reference group that included the bottom three quintiles of the distribution of expenditure as the reference group.

It also used a caloric threshold of 2,350 calories per adult equivalent per day — higher than the FAO standard used in much of the region.

In Pakistan, the reduction in poverty led to an increase in dietary diversity for everyone. For the poorest, the share of expenses devoted to milk and milk products, chicken, eggs and fish, as well as vegetables and fruits increased.

In contrast the share of cereals, which provide the cheapest calories, declined steadily between 2001-02 and 2013-14.

Since foods like chicken, eggs, vegetables, fruits and milk and milk products are more expensive than cereals and pulses, and have lower caloric content, this shift in consumption increased the amount that people spend per calorie over time.

The commission’s document says that many secondary and tertiary cities have sprung up in the rural periphery and, with them, the informal economy has burgeoned. This needs to be better captured in national data, including the GDP, and is likely an important source of the reduction in poverty.

An important indicator is the lack of change in the share of the employed in the rural economy combined with the reduction in male participation in agricultural work.

These issues need to be carefully examined in order to understand both the key determinants of the decline in poverty thus far and the prospects for a continued robust decline in poverty.

Riaz Haq said...

India is far ahead of Pakistan in more ways than I can count :-)

Here are some:

1. India leads the world in open absolute numbers and percentages.

2. India leads the world in child absolute numbers and percentages.

3. India has more poor, hungry and illiterate people than any other country in the world. In percentage terms, the poverty rate in India is 2X higher than in Pakistan.

4. More farmers have killed themselves in India than any other country in the world.

5. Top 1% of Indians own 58% of India's wealth, 2nd only to Russia's 70%.

6. India has a mass murderer Modi as its elected leader.

7. India has more slaves than any other country in the world.

8. India has had more anti-minority riots than any other country in the world.

9. India is only one of only two countries where Apartheid is still rampant....the other is Israel.

10. There are more active insurgencies in India than any other country in the world.

And yet, India is a "secular democracy"!!!!!

All of the above are easily verifiable facts from credible sources which track such data.