Sunday, July 31, 2016

Pakistan Scores Better Than India in Translating GDP Growth to Well-Being

Pakistan does better than India and China in translating GDP growth to citizens' well-being, according to a 2016 Boston Consulting Group (BCG) report titled "From Wealth to Well Being".

One particular metric BCG uses is growth-to-well-being coefficient on which Pakistan scores 0.87, higher than India's 0.77 and China's 0.75. Among South Asian nations, Bangladesh scores much higher at 1.03. The top ten countries in “current well-being” remain in Western Europe.

The BCG report quotes American economist Simon Kuznets, the creator of the concept of GDP in 1934, who said: "The welfare of a nation can scarcely be inferred from  measurement of national income".  It uses SEDA (sustainable economic development assessment) to score and rank countries.

The report uses 5 years worth of GDP growth data up to  2014 and compares it with improvements in citizens' well-being in the same period.

On the question of the ability to translate GDP growth to citizens' well-being,  Colin Hunter, Center for Research on Globalization, has written the following:

"India is home to over 340 million destitute people and is the second poorest country in South Asia after war-torn Afghanistan...In South Asia, Afghanistan has the highest level of destitution at 38%. This is followed by India at 28.5%. Bangladesh (17.2%) and Pakistan (20.7%) have much lower levels"

GDP growth and increases in per capita income and human development index are often used as indicators to represent improvements in the lives of ordinary people in developing nations in Asia, Africa and Latin America. Both of these have significant limitations which are addressed by Oxford Poverty and Human Development Initiative (OPHI)'s MPI, multi-dimensional poverty index.

The MPI brings together 10 indicators, with equal weighting for education, health and living standards (see table). If you tick a third or more of the boxes, you are counted as poor.

Source: Oxford Poverty and Human Development Initiative

Eradicating poverty in South Asia requires every person having access to safe drinking water, sanitation, housing, nutrition, health and education.

According to the MPI, out of its 1.2 billion-plus population, India alone is home to over 340 million destitute people and is the second poorest country in South Asia after war-torn Afghanistan, according to Colin Hunter of Canada-based Global Research.

Some 640 million poor people live in India (40% of the world’s poor), mostly in rural areas, meaning an individual is deprived in one-third or more of the ten indicators mentioned above (malnutrition, child deaths, defecating in the open).

 In South Asia, Afghanistan has the highest level of destitution at 38%. This is followed by India at 28.5%. Bangladesh and Pakistan have much lower levels. The study placed Afghanistan as the poorest country in South Asia, followed by India, Bangladesh, Pakistan and Nepal, according to Hunter.

Afghanistan is the poorest country in South Asia in terms of multi-dimensional poverty with 66% of its people being poor, followed by India with 54%, Bangladesh with 51%, Pakistan and Nepal at 44%, Bhutan at 27%, and Sri Lanka and the Maldives at 5%, according to Oxford researchers. Among 104 countries ranked by OPHI,  Nepal ranks 82, India 74, Bangladesh 73,  Pakistan 70, Sri Lanka 32 in MPI poverty.

Why has India lagged  behind its neighbors in spite of rapid economic growth in recent years? Here's how Hunter explains it: "The ratio between the top and bottom 10% of wage distribution has doubled since the early 1990s, when India opened up it economy. According to the 2011 Organization for Cooperation and Economic Development report ‘Divided we stand’, this has made India one of the worst performers in the category of emerging economies. The poverty alleviation rate is no higher than it was 25 years ago. Up to 300,000 farmers have committed suicide since 1997 due to economic distress and many more have quit farming."

What Colin Hunter hasn't clearly articulated is the fact that India remains home to the world's largest population of poor, hungry and illiterates who lack even basic sanitation 67 years after the nation's independence from British colonial rule.

As the new Hindu Nationalist government under Narendra Modi begins its anti-Muslim and anti-Pakistan campaigns so soon after inauguration, an Indian journalist  Pankaj Mishra reminds Indians  in a recent New York Times Op Ed that that "India’s reputation as a “golden bird” flourished during the long centuries when it was allegedly enslaved by Muslims. A range of esteemed scholars — from Sheldon Pollock to Jonardon Ganeri — have demonstrated beyond doubt that this period before British rule witnessed some of the greatest achievements in Indian philosophy, literature, music, painting and architecture".

It's time for Mr. Modi to shun his bellicose rhetoric (boli nahee goli--India's guns will do the talking) against Pakistan and focus on much more important issues of deep deprivation of his people.

Here's a video on Grinding Poverty in Resurgent India:

Haq's Musings Grinding Poverty in Resurgent India by faizanmaqsood1010

Related Links:

Haq's Musings

Pakistan Sees Robust Growth in Energy, Autos, Cement and Steel

Depth of Deprivation in India

India Home to World's Largest Population of Poor, Hungry and Illiterates

Grinding Poverty in Resurgent India

An Indian Farmer Commits Suicide Every 30 Minutes

India's Israel Envy: What if Modi Attacks Pakistan?

India Teaching Young Students Akhand Bharat 

Pakistan Army at the Gates of Delhi


M Johanssen said...

How come you have ignored WEALTH TO WELL BEING data which is the premise and the title of the Report? The second very important data set is the LONG TERM SUSTAINABILITY SCORE, which was also conveniently ignored. The GROWTH TO WELL BEING data should not be used by itself because it has much more variation (pg 18 & pg 21) as the authors acknowledge. For example, GROWTH TO WELL BEING COEFFICIENT cannot explain why Denmark(0.80), Malaysia(0.87) and USA(0.97) are all lower than Syria(1.00), Malawi(1.09) and Mali(1.20).

Riaz Haq said...

MJ: "How come you have ignored WEALTH TO WELL BEING data which is the premise and the title of the Report? The second very important data set is the LONG TERM SUSTAINABILITY SCORE,"

If you listen to Modi and his BJP henchmen, the GDP growth is the most important of all. They are even willing to fudge the numbers to show they are growing faster than China. Even the Indian Central Banker Rajan questioned the GDP figures and the exclusive focus on it by the Hindu Nationalists.

"... there is the problem of bad data. Rajan’s predecessor, Duvvuri Subbarao, blamed bad data for some of his bad decisions. So one can’t even be sure if Rajan has been behind the curve based on past CPI or WPI (Wholesale Price Index) or GDP trends. Till recently, the WPI has been in deflation territory, while CPI has always been positive. GDP has been buoyant, but many underlying indicators (the Index of Industrial Production, exports, etc) indicate the need for softer interest rates.

While the WPI has been abandoned as a guide for inflation targeting, there are now doubts about the new GDP series that uses the gross value added method for arriving at GDP estimates.

So Rajan is right to question the GDP obsession of politicians. The Modi government may want to claim an economic revival and use the latest GDP numbers (7.6 percent) to good effect, but the reality is that GDP growth does not matter even politically, unless other markers of “achche din” are also visible. These would be about jobs and real incomes"

Riaz Haq said...

#India's GDP growth is not creating enough jobs. #Modi #AcheDin - The Hindu …

India’s employment growth is beginning to show signs of a slowdown even as official data showed a pick up in GDP growth, according to a study by Care Ratings.

Jobs growth slowed to near-zero during 2014-15 in a sample of 1,072 companies. These companies created only 12,760 jobs in 2014-15. In the previous year, they had added 188,371 jobs.

Employment growth in the sample slowed to 0.3%, the slowest in four years, an analysis of the annual reports of the companies surveyed in the sample by the ratings agency showed.

The number of jobs in manufacturing sector companies in the sample, despite the government’s ‘Make In India’ push, declined. Employment growth in the manufacturing companies plunged to (-) 5.2% in 2014-15 from 3.2% in 2013-14.

Manufacturing accounted for more than 40 per cent of the jobs, the highest share in employment, followed by banking (23.0 per cent) and IT (18.4 per cent). “This means that the future of job creation would largely be dependent on the growth in this sector and the low growth in the last 3 years is a cause for concern,” according to the study. In the current financial year, 2015-16 too, growth in the sector has ranged around 3 per cent.

The study on trends in employment in the last four years is based on employment numbers provided by companies in their balance sheets. It does not include the impact of outsourcing. One reason the study gives for job creation not showing on the books of companies is the possibility of more jobs getting outsourced—in which case it would be accounted for elsewhere in the suppliers’ registers. Jobs that were performed by employees such as security, administrative functions and back office, are increasingly being outsourced in many companies.

However, the findings of the latest quarterly survey by the Labour Bureau in the Ministry of Labour and Employment do not support this argument.

The survey released last month shows a decline of 21,000 in contractual jobs during January-September 2015, against an increase of 1.20 lakh in the corresponding period of 2014.

M Johanssen said...

That did not answer my rebuttal. India or its politics is not my subject. The academic argument is the incorrect application in your analysis.

Unknown said...

Riaz this is all well and good but talk to me when Pakistan's exports pass the 100 billion dollar mark,till then this is just a feel good when the kabootar closes it's eyes when it see's a cat

Riaz Haq said...

SQA: " talk to me when Pakistan's exports pass the 100 billion dollar mark"

Volume of exports has nothing to do with the issue f translating economic growth into citizens' well-being.

What is needed are policies for better distribution of the benefits of economic growth among the middle and low income groups.

It means policies to create better-paying jobs, collect taxes, and spend on skills and education, health care and a basic safety net to help the most vulnerable in society.

Riaz Haq said...

#BMI Research puts #Pakistan in top "10 emerging markets". Key Growth Drivers: #Auto & #Textiles #Manufacturing Hub

"Pakistan will develop as manufacturing hub over the coming years, with the textile and automotive sectors posting the fastest growth at the beginning of our forecast period. Domestic manufacturing investment will be boosted by the windfall from lower energy prices compared to the last decade, and improved domestic energy supply."

A new report from BMI Research has identified the "10 emerging markets of the future" — the countries that are set to become new drivers of economic growth over the next 10 years.

BMI estimates that these countries will cumulatively add $4.3 trillion to global GDP by 2025 — roughly the equivalent of Japan's current economy.

In general, manufacturing and construction are the sectors that will drive the economies. BMI reports that new manufacturing hubs are set to emerge in Bangladesh, Myanmar, and Pakistan, and that these countries will see particularly strong growth in exporting manufacturing industries. And construction growth is going to be widespread throughout all the countries — partly to facilitate increases in urban populations and partly to help develop the manufacturing sector.

On the other hand, extractive industries — like mining, oil, and gas — are going to play a far smaller role in driving growth than they have the past 15 years.

While it might provide bright spots for some countries, the report states, "the ubiquitous commodity-driven growth model that was derailed by the 2012-2015 collapse in commodity prices is not coming back."

Riaz Haq said...

Spotlight: Construction of great corridor catapults #Pakistan into fast track - Xinhua | #China #CPEC …

With an investment of 46 billion U.S. dollars and scores of infrastructure projects, the ongoing construction of the China-Pakistan Economic Corridor (CPEC) is undoubtedly one of the largest endeavors now taking place on the planet.

Roads, energy projects, industrial parks and the Gwadar port are all included in the basket, satisfying Pakistan's immediate needs as well as helping the south Asian country get back on its feet after years of anti-terror campaigns wrecked its economy.

Three years after the initiative on the construction of CPEC was jointly announced by China and Pakistan, Xinhua has learned that the project is yielding its early fruits as new roads and power plants have put Pakistan's growth in the first gear.


Located 20 km east of Pakistan's largest city of Karachi, the Bin Qasim power plant is one of the pioneer and flagship projects of CPEC planned to begin operating at the end of next year.

For the coal-fired plant built by PowerChina, the Chinese construction company commissioned to undertake the construction of the project, two 660-megawatt generator units will be installed, which would generate 1,320 megawatts of electricity per year, more than a quarter of the 4,500-5,000 megawatts of power shortage estimated for the year 2012.

"With three more plants like this one, Pakistan would have no more energy woes," said Chen Enping, a manager at PowerChina.


For Sher Afzart, a shop owner in northern Pakistan's Hunza Valley, the Karakorum Highway is what he owes his livelihood to.

The two-lane highway, originally built by the Chinese in the 1970s and recently renovated by China Road and Bridge Corporation, connects Kashgar, a commercial hub in northwest China's Xinjiang Uigur Autonomous Region, and Pakistan.

Afzart can save days on trips to Kashgar to buy goods as the road cuts through the Karakorum mountains. There is a steady flow of business as thousands of Chinese workers labor around Hunza.

Following the completion of the Karakorum Highway renovation project, more business opportunities are created, Afzart said.

"With the convenience of road traffic, I'm thinking of opening branches in Islamabad and even in cities farther south," he said.

The Karakorum Highway is just one of the roads that falls under CPEC. The M-4 National Motorway, a strategic artery in central Pakistan, is also being paved by the Chinese.


The Gwadar port, located in the southern coast of Pakistan, is where CPEC meets the Indian ocean. From here resources can commence their journey onto the hinterlands of Pakistan and western China, and Chinese and Pakistani products can be shipped out to every corner of the world.

Viewed from above, the port is like an anchor protruding into the emerald waters, forming two natural bays that are as deep as 14.5 m, making them perfect harbors.

After the CPEC cooperation program was launched in 2013, a plan was developed in the following years to comprehensively transform the fishing town into a modern metropolis complete with industrial zones, a harbor and recreational zones.

Gwadar Port Authority Chairman Dostain Jamaldini has big ambitions for the port, eyeing Dubai, which is just across the Arabian Sea, as a model.

Near future plans for the port area include the construction of a Free Trade Zone, a Special Economic Zone, a coastal expressway, an international airport and a pipeline linking Iran, which are all part of the CPEC plan remodelling the town which will be the hinge of the corridor.

"Pakistan is ready to offer the most generous terms for companies investing in the port," Jamaldini said, "We believe the favorable policies and the superb location of the port will soon attract the interest of investors worldwide."

Anonymous said...

Rks said...

Riaz Bhai

kindly go through this article from Tribune Pakistan:

The report of GDP growth of Pakistan has been spiked by 50% and is bogus. This has been stated by renowned Pakistani economists Ishrat Hussain. Nawaz sharif government is making fools of every tom dick and harry. (“GDP growth rate is 3.1%, not 4.7%” in fiscal year 2015-16, according to the SPDC report. Former interim prime minister and world-renowned economist Moeen Qureshi is the patron of SPDC, while former finance secretary Saeed Qureshi and former State Bank governor Dr Ishrat Husain are on its board.)

Where is the question of translating GDP growth to well being when there is no growth at all? You cannot fill your empty stomach with hot air.

Riaz Haq said...

19640909rk: "Where is the question of translating GDP growth to well being when there is no growth at all? You cannot fill your empty stomach with hot air"

First, your claim of "no growth at all" is bogus. The critics are not claiming there was no growth; instead, they are claiming it was lower than the government figures.

Second, I tend to agree with the government, not the critics in this instance. Why? Because other broad indicators of growth reinforce government's claim.

Pakistan's energy consumption grew by 5.7% in 2015, faster than the 5.2% increase in neighboring India that claims significantly faster GDP growth. Primary energy consumption growth in a country is often seen as a strong indicator of its GDP growth. Ever since the advent of the industrial age, energy has become increasingly important as a driver of farms, factories, communication, transportation, construction, retail and other sectors of the economy. In addition to energy, other important economic indicators include cement and steel consumption, auto sales and air travel which are also growing significantly faster in Pakistan than in India.

Riaz Haq said...

Pakistan better than India in inclusive development.

India has been ranked 60th among 79 developing economies, below neighbouring China and Pakistan, in the inclusive development index, according to a WEF report. WEF’s ‘Inclusive Growth and Development Report 2017’,

The Inclusive Development Index (IDI) is based on 12 performance indicators. In order to provide a more complete measure of economic development than GDP growth alone, the index has three pillars — Growth and Development, Inclusion and Intergenerational Equity, and Sustainability.

While India is placed at the 60th spot, many of the neighbouring nations are ahead in the rankings. China is ranked at the 15th position, Nepal (27th), Bangladesh (36th) and Pakistan (52nd)

Riaz Haq said...

Rising inequality is a global phenomenon. Oxfam’s briefings paper ‘An economy for the 99%’ reports only eight men today have the same wealth as 3.6 billion of the world’s population. In the last three decades seven out of 10 people living in a country have been facing inequality. Also the report mentions that in the next 25 years, the world will have its first trillionaire.

Besides this, every year economically stagnated countries cost $1,000 billion in the shape of corporate tax evasions. This huge sum can provide education to 124 million children and prevent the deaths of at least six million children globally. On the other hand, global inequality has devastating consequences for low-income countries like Pakistan.

The per capita income of Pakistan is $1,629. Poor families can bear the cost of food, health, shelter, education and other fundamental needs for a year in the country. Meanwhile, Bangladesh — a young country — has seen an increase of up to $1,602 in its per capita income.
Oxfam’s another report titled Commitment to Reducing Inequality (CRI) ranks Pakistan at number 139 out of 152 countries. In spending on education, health and social protection, it is ranked on 146; progressive taxation is ranked at number 98 and labour rights is ranked at number 118.

According to development experts of Pakistan, between 1998-99 and 2013-14 consumption-based poverty fell from 57.9 per cent to 29.5 per cent. Multidimensional poverty that comprises education, health and living standards dropped from 55.2 per cent to 38.8 per cent between 2004-5 and 2014-15. In addition, during 2013-14, the Gini coefficient was 0.41 while in the years 1987-88 it was 0.35. Besides, the richest 20 per cent in Pakistan spend seven times more than the poorest 20 per cent.

Currently, our country is on the trajectory of high economic deficit. This has caused 35 per cent of the people to live below the poverty line, around 22.4 million children are out of school and 45 per cent are stunted. Moreover, women’s unpaid domestic work is not measured in any data. They are not paid equal wages and around 63 per cent youth spends their life impractically.

Income and wealth inequality in Pakistan is from top to bottom. Only 22 persons in the country have billions of wealth and reserves. The rest spend their life in hunger and poverty. Education and health infrastructures are on the verge of collapse. Institutions are rotten. Moral and ethical values are decaying.

In addition, extreme inequalities cause rampant corruption in society, obstruct economic growth, leads to irregular wealth and income distribution, moral and ethical iniquities, and adversely affect labour and human rights. This portrays an intimidating picture of the country’s overall economic scenario.

Civil society organisations, public-sector organisations and INGOs in Pakistan are working more on issues like poverty, gender disparity, water, food, rights, etc. However, so far the root cause of all these issues — inequality — is untouched and undebated.

Undoubtedly inequality is a highly political debate, as it is entrenched in government policies and institutions. However, it needs to be advocated by people, civil society, policymakers and parliamentarians to initiate discourse in the country.

Inequality needs to be controlled now. The CRI index shows that some African countries through spending on education, health and social protection have controlled inequality. The government needs to increase spending on education, health and social protection, and provide equal labour wages for both men and women. The government should revamp and reform the taxation system to bring progressive and just tax systems.