Wednesday, November 29, 2017

Credit Suisse: Pakistan's Wealth Inequality is the Lowest in South Asia

Data released by Credit Suisse with its Global Wealth Report 2017 shows that Pakistan is the most egalitarian nation in South Asia. It also confirms that the median wealth of Pakistani households is three times higher than that of households in India.

Wealth Inequality:

Inequality is measured in terms of Gini index. It ranges from 0% for perfect equality (when everyone has the same wealth)  to 100% for total inequality (when all of the wealth is owned by one person).  On this scale, Pakistan’s Gini index is 52.6%, Bangladesh’s 57.9%, Sri Lanka’s 66.5%, Nepal’s 67.3%, China’s 78.9% and India's 83%.

Data Source: Credit Suisse Graph: Counterview


Household Wealth:

Here is per capita wealth data for India and Pakistan as of mid-2017, according to Credit Suisse Wealth Report 2017 released recently.

Pakistan average wealth per adult: $5,174 vs India $5,976
Pakistan median wealth per adult: $3,338 vs India $1,295

Average household wealth in Pakistan is $15,522 (3 adults) vs India $14,940 (2.5 adults)
Median household wealth in Pakistan is $10,014  (3 adults) vs India $3,237 (2.5 adults)

Pakistan Gini Index 52.6% vs India 83%

Ownership of Appliances and Vehicles: 

Growing household wealth in developing nations like India and Pakistan is reflected in  ownership of consumer durables like computers, home appliances and vehicles. This data is sourced from periodic household surveys like NSS (National Sampling Survey) in India and PSLM (Pakistan Social and Living Standards Measurement) in Pakistan.

Durables Ownership in India and Pakistan. Source: KSBL


India-Pakistan Comparison:

Dr. Jawaid Abdul Ghani, a professor at Karachi School of Business Leadership, has recently analyzed household surveys in India and Pakistan to discover the following:

1.  As of 2015, car ownership in both India and Pakistan is about the same at 6% of households owning a car. However, 41% of Pakistani household own motorcycles, several points higher than India's 32%.

2. 12% of Pakistani households own a computer, slightly higher than 11% in India.

3. Higher percentage of Pakistani households own appliances such as refrigerators (Pakistan 47%, India 33%), washing machines (Pakistan 48%, India 15%) and fans (Pakistan 91%, India 83%).

4. 71% of Indian households own televisions versus 62% in Pakistan.

Durables Ownership Growth in Pakistan. Source: KSBL
Growth over Time:

Dr. Abdul Ghani has also analyzed household data to show that the percentage of Pakistani households owning washing machines has doubled while car and refrigerator ownership has tripled and motorcycle ownership jumped 6-fold from 2001 to 2014.

Income/Consumption Growth in Pakistan. Source: KSBL

Rapid Income Growth:

Rising ownership of durables in Pakistan has been driven by significant reduction in poverty and growth of household incomes, according to Dr. Abdul Ghani's research. Percentage of households with per capita income of under $2 per day per person has plummeted from 57% in 2001 to 7% in 2014. At the same time, the percentage of households earning $2 to $10 per day per person has soared from 42% of households in 2001 to 87% of households in 2014.  The percentage of those earning over $10 per day per person has jumped 7-fold from 1% of households in 2001 to 7% of households in 2014.

Summary:

Credit Suisse wealth data for 2017 shows that Pakistan has the lowest wealth inequality in its region as measured by Gini index. Lower inequality can be seen in terms of rising percentage of households that can afford to buy durables like appliances and vehicles as reported by Dr. Abdul Ghani of Karachi School of Business and Leadership (KSBL).

Related Links:

Haq's Musings

Credit Suisse Wealth Report 2016

Pakistan: A Majority Middle Class Country

Karachi School of Business and Leadership

State Bank: Pakistan's Actual GDP Higher Than Officially Reported

College Enrollment in Pakistan

Musharraf Accelerated Development of Pakistan's Human and Financial Capital

China-Pakistan Economic Corridor

15 comments:

Riaz Haq said...

#Broadband subscribers including #3G, #4G cross 49 million in #Pakistan. #Internet #Mobile https://dnd.com.pk/broadband-subscribers-including-3g-4g-cross-49-million-in-pakistan/135907 … via @Dispatch News Desk

The total broadband subscribers including 3G and 4G services have crossed around 49 million in the Country till October this year, registering a reasonable growth rate with each passing month.

As per latest figures issued by Pakistan Telecommunication Authority (PTA), of the total number of broadband users, major contribution has been made in shape of 3G and 4G subscribers by Mobile Phone Operators which reached 46 million by October 2017.

The number of broadband subscribers in other technologies included DSL 1,550050, HFC 51,715, Wimax 151,330, FTTH 54,107 and EvDO 55,8,740. The tele-density of total broadband has reached 22.6 per cent while 3G and 4G tele-density of the total subscriber base crossed 21.6 per cent.

Experts of telecom industry are having a viewpoint that portable mobile broadband devices like MiFi and Wingles are one of the main reasons of this growth in 3G/4G subscribers and many more will follow this trend in upcoming days.

Meanwhile, Country’s largest mobile phone operator, Mobilink has overtaken its competitors as 3G/4G player after official figures were released by PTA. Jazz subscribers base was 13.94 million 3G and 1.56 million 4G till the period mentioned.

A senior official of the Company said key to this leading position is consistent investment to further innovate on behalf of subscribers by delivering not just the best 3G/4G and voice network, but also improvements in customer service, and product lines.

As per statistics, the 3G subscribers of Zong have now extended to 8.99 million and 4.78 4G users by end of October 2017. The number of Telenor 3G subscribers was 10.64 million and 1.16 4G users till the period mentioned above.


An increase has also been observed in Ufone subscribers base, reaching 5.45 till the period from 5.3 million 3G users by August 2017.

Meanwhile, the mobile broadband is helping in widespread adoption of social media which has an impact on everyday lives of billions of people around the world.

Social media has also been gaining vast popularity among masses in Pakistan. The introduction of mobile broadband coupled with influx of affordable Smartphones had a catalytic effect on use of social media.

People turn towards social media to voice their opinions, experiences, suggestions and feedback on any topic or constituent of the society.

http://www.pta.gov.pk/en/telecom-indicators

nayyer ali said...

I think this is more data that shows Pakistan is developing successfully. I have a hard time though reconciling it with macrodata that shows slow GDP growth since 2008 compared with India, and significantly lower per capita income in Pakistan. Also, if Pakistanis overall are doing this well, why are we not seeing rising secondary and university school enrollment and rising life expectancy and literacy. If you can afford a motorbike you should be able to afford clean water, basic health care, and sending the kids to decent private school.
Also why are exports so sluggish, there has been little export growth for several years now. I think it is due to an overvalued rupee which needs to go down to 135 to the dollar to reach fair value.

Riaz Haq said...

NA: "I think this is more data that shows Pakistan is developing successfully. I have a hard time though reconciling it with macrodata that shows slow GDP growth since 2008 compared with India..."

Pakistan's official GDP numbers compiled by Finance Ministry are based on production data, not consumption data.

Consumption data gathered by PLSM (Pakistan Living Standards Measurement) surveys shows Pakistan actual GDP is significantly higher than what is officially reported.

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".

http://www.riazhaq.com/2012/11/pakistans-gdp-grossly-underestimated.html

The other important factor is that GDP growth in Pakistan is more evenly shared than in India. This can be seen in the Gini index.


As to Indian GDP, prominent Indian economists Abhijit V Banerjee, Pranab Bardhan, Rohini Somanathan and TN Srinivasan teaching at MIT, UC Berkeley, Yale University and Delhi School of Economics believe that India's GDP estimate based on household survey (National Sampling Service or NSS) data is about half of what the Indian government officially reports as India's GDP.

Here's a quote from French economist Thomas Piketty's book "Capital in the Twenty-First Century" explaining his skepticism of production-based official GDP figures of India and China:

"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."

http://www.riazhaq.com/2017/05/comparing-ownership-of-appliances-and.html

nayyer ali said...

If both of what you state were accurate, actual Pakistani GDP would be almost double while Indian would be much less than what is reported. It would imply that Pakistan is still significantly wealthier than India. Does this match up to the evidence on the ground? Such a disparity should be obvious to visitors who travel widely in both nations.

Riaz Haq said...

NA: "Such a disparity should be obvious to visitors who travel widely in both nations."


Many foreign visitors to Pakistan who have seen both India and Pakistan, including Indians, have a "true eye-opener" experience.

Please read the following:

http://www.riazhaq.com/2015/02/india-rising-pakistan-rapidly-collapsing.html

19640909rk said...

"Pakistan's Wealth Inequality is the Lowest in South Asia"... Nobody has any doubts on this Riaz bhai. The reason is there are hardly any rich left in Pakistan. The economy is so weak, the difference between rich and poor is blurred now. In India, There are too many Billionaires and Millionaires. The poor also increased because of their laziness.

Riaz Haq said...

19640909rk " The reason is there are hardly any rich left in Pakistan"


Please read my post and the CS report. Private household wealth in Pakistan is greater than that in India.

nayyer ali said...

The Economist Year in Review came out and placed Pak GDP at PPP per capita around 5700 and India's around 7700. I don't see how there really can be that big a gap. India has tens of millions of people living on sidewalks and masses of beggars still, you see almost no able-bodied beggars in Pakistan anymore (I really didn't see any back in 2007 when I visited, in contrast to the 1970's when swarms would appear and soon as you gave even a small donation to someone). In addition to the underground economy, which all Third World countries have, Pakistan has not rebased its GDP in over a decade, making the stats very out of date. It is likely that after rebasing we will be significantly higher, maybe 20% (rebasing in 2005 raised GDP numbers by about 20%). I think it's true that Pakistan has greater university enrollment and completion than India, and is more urban and as the numbers showed higher rates of consumer appliance ownership. In your view are India and Pakistan about even economically, or is one significantly ahead of the other?

Riaz Haq said...

NA: " Pakistan has not rebased its GDP in over a decade, making the stats very out of date. It is likely that after rebasing we will be significantly higher, maybe 20% (rebasing in 2005 raised GDP numbers by about 20%)."


The State Bank of Pakistan agrees with you.

"In terms of LSM growth, a number of sectors that are showing strong performance; (for example, fast moving consumer goods (FMCG) sector; plastic products; buses and trucks; and even textiles), are either under reported, or not even covered. The omission of such important sectors from official data coverage, probably explains the apparent disconnect between overall economic activity in the country and the hard numbers in LSM." State Bank of Pakistan Annual Report 2014


Economists have long argued that Pakistan's official GDP figures significantly understate real economic activity in terms of both production and consumption.

Pakistan has changed a lot since 2006 in terms of economy and demographics. The World Bank moved Pakistan from a low-income to middle-income country in 2007. Pakistan is much more urbanized and more middle class now than it was in 2006. Pakistan's large scale manufacturing (LSM) sector has changed to respond to meet the rising new product demands of the country's growing middle class consumers. Its time for Pakistan Bureau of Statistics (PBS) to conduct a new manufacturing census and Pakistan Census Bureau to do a population census to paint a more accurate picture of the country's demographics and economy now.

http://www.riazhaq.com/2015/01/state-bank-pakistans-actual-gdp-higher.html

Riaz Haq said...

#Pakistan's bottom quintile #income share has increased from 8.1% to 9.6% since 1990. It is the highest in #Asia, #world, according to UNESCAP Statistical Yearbook. #inequality http://www.unescap.org/sites/default/files/SYB2015_Full_Publication.pdf …

Although more people in China have
lifted themselves out of poverty than any other
country in the world, the poorest quintile in that
country now accounts for a lower percentage
of total income (4.7 per cent) than in the early
1990s (8.0 per cent). The same unfortunate
trend is observed for a number of other
countries, including in Indonesia (from 9.4 per
cent to 7.6) and in the Lao People’s Democratic
Republic (from 9.3 per cent to 7.6).

In a number of other countries, people in the
poorest income quintile have increased their
share of total income including in Kyrgyzstan
(from 2.5 per cent to 7.7), the Russian Federation
(4.4 per cent to 6.5), Kazakhstan (7.5 per cent to
9.5) and Pakistan (8.1 per cent to 9.6).

Raza R. said...

According to the Household Integrated Economic Survey 2015-16 of Pakistan Bureau of Statistics, the monthly per capita consumption expenditure of top 20 per cent of the population in Pakistan was 4.76 times higher than the bottom 20 per cent. In 2013-14, this consumption gap was 4.44 times, which indicates a trend of rising economic inequality. This gap has many connotations. For instance, with their greater consumption of fuel and energy, the rich make disproportionately high carbon imprint on the environment. Such consequences of economic inequality make moral justification of high inequality untenable. Good article by Jahanzeb Awan

https://dailytimes.com.pk/150616/gated-communities-exclusive-clubs-elite-schools/

Riaz Haq said...

Rising Living Standards of the Poorest 20% in Pakistan:

According to the latest World Report titled "Pakistan Development Update: Making Growth Matter" released this month, Pakistan saw substantial gains in welfare, including the ownership of assets, the quality of housing and an increase in school enrollment, particularly for girls.

First, the ownership of relatively more expensive assets increased even among the poorest. In the bottom quintile, the ownership of motorcycles increased from 2 to 18 percent, televisions from 20 to 36 percent and refrigerators from 5 to 14 percent.

In contrast, there was a decline in the ownership of cheaper assets like bicycles and radios.

http://www.riazhaq.com/2016/11/world-bank-reports-big-jump-in-living.html

Riaz Haq said...

Pak economy performs robustly in 1Q, with fiscal deficit at 1.2 percent

https://www.geo.tv/latest/169849-with-fiscal-deficit-at-12pc-first-quarter-shows-strong-financial-performance

With the fiscal deficit recorded at 1.2 percent of the gross domestic product (GDP), the federal government's financial operations and debt statistics for the first quarter of the current fiscal year (1QFY17) show strong performance and prudent expenditure.

On one hand, the revenue collection — especially that from taxes — registered a strong growth of over 20 percent during 1QFY17, while, on the other, the government's domestic and external borrowings were kept under check, a finance ministry spokesperson said in a statement here Tuesday.

The spokesperson stated that there were expenditure controls as well, which reflected on the prudent fiscal management and government's resolve to maintain this momentum in the remaining quarters of the year.

Based on the actual data, the overall fiscal deficit during 1QFY17 was recorded at 1.2 percent of the GDP as opposed to 1.3 percent during the last year's corresponding period, the spokesperson added.

He said the total consolidated federal and provincial revenue amounted to Rs. 1.025 trillion, which reflects an 18.9-percent increase over same period last year.

The tax collection by Federal Board of Revenue (FBR) amounted to Rs. 765 billion — denoting a hefty growth of over 20 percent — while the non-tax receipts for the period amounted to Rs. 114 billion, which are also higher when compared to the same period, last year.

The total expenditure during the period amounted to Rs. 1.466 trillion, of which the current and development expenditures were Rs. 1.241 trillion and Rs 0.221 trillion, respectively.

The statistical discrepancy for the period July-September 2017 amounted to Rs. 4 billion compared to Rs. 38 billion during last year's same period.

The spokesperson said the civil accounts data of the federal government's revenue receipts and expenditure in 1QFY17 was received from the office of Accountant General Pakistan Revenues (AGPR), financing data from Economic Affairs Division (EAD) — external financing — and from the State Bank of Pakistan (SBP).

Likewise, the civil accounts data of the provincial government's revenue receipts and expenditure in 1QFY17 was received from the provincial Accountant General (AGs).

He added that the deficit figure reported earlier was based on the SBP's daily cash balance reports, which did not include the financing on account of project aid and financing from National Savings Schemes.

The financing from project aid was substantially higher on account of roads and infrastructure, he said.

The spokesperson said around 47 percent of the budget estimates were received as project aid financing during July-September 2017 on that account.

This has mainly been received during September 2017, while incremental receipts on account of National Savings Schemes have recently been reported by the SBP, he added.

The federal government deposits with the SBP, he stated, also reduced during September 2017.

Therefore, after including the aforementioned financing data, the overall fiscal deficit for the July-September 2017 period amounted to 1.2 percent of the GDP against 1.5-1.8 percent of GDP projected by some analysts.

The spokesperson said a section of the media had drawn some premature conclusions on debt performance of the government based on the data for the first two months of the current fiscal year. He clarified that choosing to evaluate debt statistics based on two-month numbers was a flawed method that led to misrepresentation.

He said as debt numbers from relevant agencies — such as Economic Affairs Division, Budget Wing, National Saving and State Bank — were received and consolidated for 1QFY17, it had become quite clear that the upwards bump in public debt was well below the analysts' forecasts.

nayyer ali said...

One area where Pakistan has lagged India badly in the last 10 years is electricity installed capacity. India now has 330 GW and Pakistan about 25 GW. Based on population size we should have about 45 GW to be at pace with India. The electricity shortages are definitely retarding economic growth rates. CPEC has some large projects, the question is whether they will all come in on time. But Pakistan needs to build even more power than what CPEC includes. Probably need to double installed capacity by 2030, and even then will not catch up to India would be my guess. Are they on track to do so?

Riaz Haq said...

NA: "Pakistan has lagged India badly in the last 10 years is electricity installed capacity."

That may be true for electricity but not true of the overall energy picture.

A report titled "Global Tracking Framework" issued jointly by the World Bank and the International Energy Agency identified India as the most deprived country in terms of access to energy: as many as 306.2 million of its people are still without this basic utility. The remaining 19 nations lacking access to energy, with the number of deprived people is as follows: Nigeria (82.4 million), Bangladesh (66.4 million), Ethiopia (63.9 million), Congo (55.9 million), Tanzania (38.2 million), Kenya (31.2 million), Sudan (30.9 million), Uganda (28.5 million), Myanmar (24.6 million), Mozambique (19.9 million), Afghanistan (18.5 million), North Korea (18 million), Madagascar (17.8 million), the Philippines (15.6 million), Pakistan (15 million), Burkina Faso (14.3 million), Niger (14.1 million), Indonesia (14 million) and Malawi 13.6 million).


http://www.riazhaq.com/2013/06/massive-growth-in-electrical.html