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

22 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

Riaz Haq said...

#India’s Missing #MiddleClass : Multinational businesses relying on Indian consumers face disappointment. #China #Inequality

https://www.economist.com/news/briefing/21734382-multinational-businesses-relying-indian-consumers-face-disappointment-indias-missing-middle …


https://twitter.com/haqsmusings/status/951542797483499520


For all the talk of wanting to tap the middle class, no firm moving into India thinks it is targeting the middle of the income distribution. India’s mean GDP per head is just $1,700, and 80% of the population makes less than that. Adjust for purchasing-power parity by factoring in the cheaper cost of goods and services in India and you can bump the mean up to $6,600. But that is less than half the figure for China (see chart 2) and a quarter of that for Russia. What is more, foreign companies have to take their money out of India at market exchange rates, not adjusted ones.

Defining the middle class anywhere is tricky. India’s National Council of Applied Economic Research has used a cut-off of 250,000 rupees of annual income, or about $10 a day at market rates. Thomas Piketty and Lucas Chancel of the Paris School of Economics found in a recent study that one in ten Indian adults had an annual income of more than $3,150 in 2014. That leaves only 78m Indians making close to $10 a day.

Meagre market

Even adjusting for the lower cost of living, that is hardly a figure to set marketers’ heartbeats racing. The latest iPhone, which costs $1,400 in India, represents five month’s pay for an Indian who just makes it into the top 10% of earners. And such consumers are not making up through growing numbers what they lack in individual spending power. The proportion making around $10 a day hardly shifted between 2010 and 2016.

Another gauge is whether people can afford the more basic material goods they crave. For Indians, that typically means a car or scooter, a television, a computer, air conditioning and a fridge. A government survey in 2012 found that under 3% of all Indian households owned all five items. The median household had no more than one. How many of them will be anywhere near able to buy an iPhone or a pair of Levi’s if they cannot afford a TV set?

To get in the top 1% of earners, an Indian needs to make just over $20,000. Adjusted for purchasing-power parity, that is a comfortable income, equating to over $75,000 in America. But in terms of being able to afford goods sold at much the same price across the world, whether a Netflix subscription or Nike trainers, more than 99% of the Indian population are in the same league as Americans that count as below the poverty line (around $25,000 for a family of four), points out Rama Bijapurkar, a marketing consultant.

The top 1% of Indians, indeed, are squeezing out the rest. They earn 22% of the entire income pool, according to Mr Piketty, compared with 14% for China’s top 1%. That is largely because they have captured nearly a third of all national growth since 1980. In that period India is the country with the biggest gap between the growth of income for the top 1% and the growth of income for the population as a whole. At the turn of the century, the richest 10% of Indians made 40% of national income, about the same as the 40% below them. But far from becoming a middle class, the latter’s share of income then slumped to under 30%, while those at the top went on to control over half of all income (see chart 3).

Riaz Haq said...

India May Be The World's Fastest Growing Economy, But Regional Disparity Is A Serious Challenge

https://www.forbes.com/sites/salvatorebabones/2018/01/10/india-may-be-the-worlds-fastest-growing-economy-but-regional-disparity-is-a-serious-challenge/#23d049bd53ac

All of India is poor. The GDP per capita of Delhi, the National Capital Territory with a population of 20-25 million, is roughly equal to that of Indonesia at around $4,000. Bihar and Uttar Pradesh, India's poorest states, are on a par with sub-Saharan Africa (less than $1,000). And geographical disparities matter much more in India than in other large countries. In the United States, the richest state (Massachusetts) has roughly twice the GDP of the poorest (Mississippi). In China the ratio is 4-1 between Beijing and Gansu. In India, Delhi's GDP per capita is eight times that of Bihar.

In southern India, Bangalore is famous as India's technology capital, home to companies like Flipkart, Infosys and Wipro, as well as the Indian Institute of Science, India's top-ranked university. Yet the state of which Bangalore is the capital, Karnataka, has a GDP per capita of around $2,400, roughly the same as Papua New Guinea. Tech entrepreneurs drive to work past open sewers and shantytowns. The real Silicon Valley in California has similar problems with inequality, but the scale of inequality in Bangalore is something completely different.

If India's Prime Minister Narendra Modi is serious about his election slogan Sabka Saath, Sabka Vikas (Together with All, Progress for All), then reducing India's regional disparities should be high on his agenda. Modi's GST reform was an indispensable measure to reduce internal trade barriers, and his highway construction program is a good start toward knitting the country together. But India will need a lot more regional growth and much more generous fiscal transfers to its poorer states to overcome its extreme regional disparities.

India as a whole won't reach middle-income status until it unites its poorer states into the same Incredible India economy as the rest of the country. That's a challenge beyond the remit of any one government. But Modi and his BJP government swept to power in 2014 on the votes of India's poorest states, of the people most excluded from India's economic growth. If Modi wants to retain his majority in the next parliamentary elections, he would do well to focus on reducing the regional disparities that played such a key role in bringing him to office in the first place.

Riaz Haq said...

Hold your elephants. The Indian middle class conjured up by the marketers and consultants scarcely exists. Firms peddling anything much beyond soap, matches and phone-credit are targeting a minuscule slice of the population (see article). The top 1% of Indian adults, a rich enclave of 8m inhabitants making at least $20,000 a year, equates to roughly Hong Kong in terms of population and average income. The next 9% is akin to central Europe, in the middle of the global wealth pack. The next 40% of India’s population neatly mirrors its combined South Asian poor neighbours, Bangladesh and Pakistan. The remaining half-billion or so are on a par with the most destitute bits of Africa. To be sure, global companies take the markets of central Europe seriously. Plenty of fortunes have been made there. But they are no China.

https://www.economist.com/news/leaders/21734454-should-worry-both-government-and-companies-india-has-hole-where-its-middle-class-should-be

Centre parting

Worse, the chances of India developing a middle class to match the Middle Kingdom’s are being throttled by growing inequality. The top 1% of earners pocketed nearly a third of all the extra income generated by economic growth between 1980 and 2014, according to new research from economists including Thomas Piketty. The well-off are ten times richer now than in 1980; those at the median have not even doubled their income. India has done a good job at getting those earning below $2 a day (at purchasing-power parity) to $3, but it has not matched other countries’ records in getting those on $3 a day to earning $5, those at $5 a day to $10, and so on. Middle earners in countries at India’s stage of development usually take more of the gains from growth. Eight in ten Indians cite inequality as a big problem, on a par with corruption.

The reasons for this failure are not mysterious. Decades of statist intervention meant that when a measure of liberalisation came in the early 1990s, only a few were able to benefit. The workforce is woefully unproductive—no surprise given the abysmal state of India’s education system, which churns out millions of adults equipped only for menial work. Its graduates go on to toil in small or micro-enterprises, operating informally; these “employ” 93% of all Indians. The great swell of middle-class jobs that China created as it became the workshop to the world is not to be found in India, because turning small businesses into productive large ones is made nigh-on impossible by bureaucracy. The fact that barely a quarter of women work—a share that has seen a precipitous decline in the past decade—only makes matters worse.

Good policy can do an enormous amount to improve prospects. However, hope should be tempered by realism. India is blessed with a deeply entrenched democratic system, but that is no shield against poor decisions. The sudden and brutal “demonetisation” of the economy in 2016 was meant to target fat cats, but ended up hurting everybody. And the path to prosperity walked by China, where manufacturing produced the jobs that pushed up incomes, is narrowing as automation limits opportunities for factory work.

All of which means that companies need to deal with the India that exists today rather than the one they wish to emerge. A strategy of waiting for Indians to develop a taste for products that the global middle class indulges in—cars as income per head crosses one threshold, foreign holidays when it crosses the next—may lead to decades of frustration. Only 3% of Indians have ever been on an aeroplane; only one in 45 owns a car or lorry. If nearly 300m Indians count as “middle class”, as HSBC has proclaimed, some of them make around $3 a day.

Riaz Haq said...

India's Richest 1% Cornered 73% Of Wealth Generated Last Year: Oxfam Survey
Besides, 67 crore Indians comprising the population's poorest half saw their wealth rise by just 1 per cent, as per the survey released by the international rights group Oxfam.

https://www.ndtv.com/india-news/indias-richest-1-corner-73-of-wealth-generation-oxfam-survey-1802968



Besides, 67 crore Indians comprising the population's poorest half saw their wealth rise by just 1 per cent, as per the survey released by the international rights group Oxfam hours before the start of the annual congregation of the rich and powerful from across the world in this resort town.

The situation appears even grimmer globally, where 82 per cent of the wealth generated last year worldwide went to the 1 per cent, while 3.7 billion people that account for the poorest half of population saw no increase in their wealth.

The annual Oxfam survey is keenly watched and is discussed in detail at the World Economic Forum Annual Meeting where rising income and gender inequality is among the key talking points for the world leaders.

Last year's survey had showed that India's richest 1 per cent held a huge 58 per cent of the country's total wealth higher than the global figure of about 50 per cent.

This year's survey also showed that the wealth of India's richest 1 per cent increased by over Rs. 20.9 lakh crore during 2017 -- an amount equivalent to total budget of the central government in 2017-18, Oxfam India said.

The report titled 'Reward Work, Not Wealth', Oxfam said, reveals how the global economy enables wealthy elite to accumulate vast wealth even as hundreds of millions of people struggle to survive on poverty pay.
"2017 saw an unprecedented increase in the number of billionaires, at a rate of one every two days. Billionaire wealth has risen by an average of 13 per cent a year since 2010 -- six times faster than the wages of ordinary workers, which have risen by a yearly average of just 2 per cent," it said.

In India, it will take 941 years for a minimum wage worker in rural India to earn what the top paid executive at a leading Indian garment firm earns in a year, the study found.

In the US, it takes slightly over one working day for a CEO to earn what an ordinary worker makes in a year, it added.

Citing results of the global survey of 120,000 people surveyed in 10 countries, Oxfam said it demonstrates a groundswell of support for action on inequality and nearly two-thirds of all respondents think the gap between the rich and the poor needs to be urgently addressed.

With Prime Minister Narendra Modi attending the WEF meeting in Davos, Oxfam India urged the Indian government to ensure that the country's economy works for everyone and not just the fortunate few.


It asked the government to promote inclusive growth by encouraging labour-intensive sectors that will create more jobs; investing in agriculture; and effectively implementing the social protection schemes that exist.

Oxfam also sought sealing of the "leaking wealth bucket" by taking stringent measures against tax evasion and avoidance, imposing higher tax on super-rich and removing corporate tax breaks.

The survey respondents in countries like the US, UK and India also favoured 60 per cent pay cut for CEOs.

The key factors driving up rewards for shareholders and corporate bosses at the expense of workers' pay and conditions, Oxfam said, include erosion of workers' rights; excessive influence of big business over government policymaking; and the relentless corporate drive to minimise costs in order to maximise returns to shareholders.

About India, it said the country added 17 new billionaires last year, taking the total number to 101. The Indian billionaires' wealth increased to over Rs. 20.7 lakh crore -- increasing during last year by Rs. 4.89 lakh crore, an amount sufficient to finance 85 per cent of the all states' budget on health and education.

Riaz Haq said...

India Ranks Below China, Pakistan On This World Economic Forum Index
Norway remains the world's most inclusive advanced economy, while Lithuania again tops the list of emerging economies, the World Economic Forum said.

https://www.ndtv.com/business/india-ranks-much-below-china-pakistan-on-wefs-inclusive-development-index-1803140

http://www3.weforum.org/docs/WEF_Forum_IncGrwth_2018.pdf

Davos: India was today ranked at the 62nd place among emerging economies on an Inclusive Development Index, much below China's 26th position and Pakistan's 47th.

Norway remains the world's most inclusive advanced economy, while Lithuania again tops the list of emerging economies, the World Economic Forum (WEF) said while releasing the yearly index here before the start of its annual meeting, to be attended by several world leaders including Prime Minister Narendra Modi and US President Donald Trump.

The index takes into account the "living standards, environmental sustainability and protection of future generations from further indebtedness", the WEF said. It urged the leaders to urgently move to a new model of inclusive growth and development, saying reliance on GDP as a measure of economic achievement is fuelling short-termism and inequality.

India was ranked 60th among 79 developing economies last year, as against China's 15th and Pakistan's 52nd position.

The 2018 index, which measures progress of 103 economies on three individual pillars -- growth and development; inclusion; and inter-generational equity -- has been divided into two parts. The first part covers 29 advanced economies and the second 74 emerging economies.

The index has also classified the countries into five sub-categories in terms of the five-year trend of their overall Inclusive Development Growth score -- receding, slowly receding, stable, slowly advancing and advancing.

Despite its low overall score, India is among the ten emerging economies with 'advancing' trend. Only two advanced economies have shown 'advancing' trend.

Among advanced economies, Norway is followed by Ireland, Luxembourg, Switzerland and Denmark in the top five.

Small European economies dominate the top of the index, with Australia (9) the only non-European economy in the top 10. Of the G7 economies, Germany (12) ranks the highest. It is followed by Canada (17), France (18), the UK (21), the US (23), Japan (24) and Italy (27).



The top-five most inclusive emerging economies are Lithuania, Hungary, Azerbaijan, Latvia and Poland.

Performance is mixed among BRICS economies, with the Russian Federation ranking 19th, followed by China (26), Brazil (37), India (62) and South Africa (69).

Of the three pillars that make up the index, India ranks 72nd for inclusion, 66th for growth and development and 44th for inter-generational equity.

The neighbouring countries ranked above India include Sri Lanka (40), Bangladesh (34) and Nepal (22). The countries ranked better than India also include Mali, Uganda, Rwanda, Burundi, Ghana, Ukraine, Serbia, Philippines, Indonesia, Iran, Macedonia, Mexico, Thailand and Malaysia.

Although China ranks first among emerging economies in GDP per capita growth (6.8 per cent) and labour productivity growth (6.7 per cent) since 2012, its overall score is brought down by lacklustre performance on inclusion, the WEF said. It found that decades of prioritising economic growth over social equity has led to historically high levels of wealth and income inequality and caused governments to miss out on a virtuous circle in which growth is strengthened by being shared more widely and generated without unduly straining the environment or burdening future generations.


Riaz Haq said...

#Pakistan has the highest intergenerational income #mobility and the lowest #inequality among emerging economies. #WEF2018 #Davos https://www.weforum.org/agenda/2018/01/economist-plan-to-heal-fractured-societies/ …

https://twitter.com/haqsmusings/status/958166999166730242

Riaz Haq said...

India is one of the world’s most unequal countries: James Crabtree
In an interview with Mint, journalist and author James Crabtree talks about the rapid rise of India’s ultra-rich and the crony capitalism and inequality that have accompanied such concentration of wealth


https://www.livemint.com/Companies/FeRwRFEQJu8mKx7wcVN5FL/India-is-one-of-the-worlds-most-unequal-countries-James-Cr.html

Mumbai: These days, Vijay Mallya is shorthand for much that is wrong with Indian capitalism—a warning on what can happen when weak institutions allow arrogant billionaire free play. Mallya, unsurprisingly, sees it differently. When journalist and author James Crabtree meets him in London—an encounter narrated in an early chapter of The Billionaire Raj—Mallya describes himself as someone who has been made a scapegoat by a corrupt system. “You can’t weed corruption out of the system completely,” he says. “In India, it’s almost inbred.”

Over the past quarter century, there has been immense reduction in poverty in India. But a richer economy also means more high-profile corruption. This in turn is seen as being closely linked with the rapid rise of India’s tycoons. In 2002, there were five Indians on the annual Forbes list of the world’s billionaires. In 2018, the number has risen to 119. When it comes to billionaire wealth as a proportion of national output, India perhaps ranks only behind Russia. In an interview, Crabtree talks about inequality and crony capitalism in India and their consequences. Edited excerpts:

Do we put inequality on the back-burner, let the Ambanis and Adanis build and create wealth and jobs, or do we focus on inequality now?

I don’t think there’s a contradiction between these things. The problem India faces is that while it has had a good record on basic poverty reduction—much more impressive than it’s given credit for—it has a much worse record on inequality reduction than it’s given credit for. The evidence is right in front of your eyes. Look at Antilla—Mukesh Ambani’s residence in Mumbai, built at an estimated cost of $1 billion—and look at what’s around it. Whether you look at International Monetary Fund research or the work that Thomas Piketty has done, or the World Inequality Report, they all point in the same direction. Which is that India is one of the world’s most unequal countries—probably up there with South Africa or Brazil. It’s more unequal than the successful economies of East Asia and it’s at a very early stage of its development.

So the risk comes from it going on at the same rate over the next 10-15 years. There’s all sorts of new research that suggests that inequality is more damaging than we had thought. That’s true economically and that’s true in terms of human happiness. We are not arguing for red in tooth and claw socialism here. This is simply about more inclusive growth, perhaps a more progressive taxation system than India has now, a support system for people coming out of the fields and into other forms of employment. There is no contradiction between this and being pro-business. Businesses need reasonably skilled, healthy workers after all. So this debate in India where people on the centre-right say, well, we only care about how people on the bottom are doing, the top doesn’t matter, that’s a bit old fashioned now.