Pakistanis are less miserable than Indians in the economic sphere, according to the Hanke Annual Misery Index (HAMI) published in early 2021 by Professor Steve Hanke. With India ranked 49th worst and Pakistan ranked 39th worst, both countries find themselves among the most miserable third of the 156 nations ranked. Hanke teaches Applied Economics at Johns Hopkins University in Baltimore, Maryland. Hanke explains it as follows: "In the economic sphere, misery tends to flow from high inflation, steep borrowing costs, and unemployment. The surefire way to mitigate that misery is through economic growth. All else being equal, happiness tends to blossom when growth is strong, inflation and interest rates are low, and jobs are plentiful". Several key global indices, including misery index, happiness index, hunger index, food affordability index, labor force participation rate, ILO’s minimum wage data, all show that people in Pakistan are better off than their counterparts in India.
Hanke's Misery Index:
Hanke's Annual Misery Index (HAMI) ranks Pakistan 49th (32.5) and India 39th (35.8) most miserable for year 2020. Bangladesh is significantly better than both India and Pakistan with a misery index of 14 and rank of 129. Venezuela ranks number 1 as the world's most miserable country followed by Zimbabwe 2nd, Sudan 3rd, Lebanon 4th and Suriname 5th among 156 countries ranked this year. The rankings for the two South Asian nations are supported by other indices such as the World Bank Labor Participation data, International Labor Organization Global Wage Report, World Happiness Report, Food Affordability Index and Global Hunger Index.
|Hanke's Annual Misery Index 2021. Source: National Review
Employment and Wages:
Labor force participation rate in Pakistan is slightly above 50% during this period, indicating about 2% drop in 2020. Even before COVID pandemic, there was a steep decline in labor force participation rate in India. It fell from 52% in 2014 to 47% in 2020.
|Labor Force Participation Rates in Pakistan (Top), India (bottom). Source: Trading Economics
The International Labor Organization (ILO) Global Wage Report 2021 indicates that the minimum wage in Pakistan is the highest in South Asia region. Pakistan's minimum monthly wage of US$491 in terms of purchasing power parity while the minimum wage in India is $215. The minimum wage in Pakistan is the highest in developing nations in Asia Pacific, including Bangladesh, India, China and Vietnam, according to the International Labor Organization.
|Monthly Minimum Wages Comparison. Source: ILO
The impact on livelihoods of workers in developing nations during the COVID pandemic has varied depending on the size of the informal work forces, according to The Economist magazine.
|Workers in Informal Economy of Selected Developing Countries. Source: The Economist
Most countries with large informal work forces have recovered but India's jobs crisis has only deepened since the start of the COVID19 pandemic. Latest CMIE data indicates that employment rate in India was just 37.34% in November, 2021.
|Asian Employment Rates.
|History of Inflation in Pakistan. Source: Statista
|Hunger Trends in South Asia. Source: Global Hunger Index
Amid the COVID19 pandemic, Pakistan's World Happiness ranking has dropped from 66 (score 5.693) among 153 nations last year to 105 (score 4.934) among 149 nations ranked this year. Neighboring India is ranked 139 and Afghanistan is last at 149. Nepal is ranked 87, Bangladesh 101, Pakistan 105, Myanmar126 and Sri Lanka129. Finland retained the top spot for happiness and the United States ranks 19th.
|Pakistan Happiness Index Trend 2013-2021
One of the key reasons for decline of happiness in Pakistan is that the country was forced to significantly devalue its currency as part of the IMF bailout it needed to deal with a severe balance-of-payments crisis. The rupee devaluation sparked inflation, particularly food and energy inflation. Global food prices also soared by double digits amid the coronavirus pandemic, according to Bloomberg News. Bloomberg Agriculture Subindex, a measure of key farm goods futures contracts, is up almost 20% since June. It may in part be driven by speculators in the commodities markets. These rapid price rises have hit the people in Pakistan and the rest of the world hard. In spite of these hikes, Pakistan remains among the least expensive places for food, according to recent studies. It is important for Pakistan's federal and provincial governments to rise up to the challenge and relieve the pain inflicted on the average Pakistani consumer.
Pakistan's Real GDP:
Many economists believe that Pakistan’s economy is at least double the size that is officially reported in government's Economic Surveys. The GDP has not been rebased in more than a decade. It was last rebased in 2005-6 while India’s was rebased in 2011 and Bangladesh’s in 2013. Just rebasing the Pakistani economy will result in at least 50% increase in official GDP. A research paper by economists Ali Kemal and Ahmad Wasim of PIDE (Pakistan Institute of Development Economics) estimated in 2012 that the Pakistani economy’s size then was around $400 billion. All they did was look at the consumption data to reach their conclusion. They used the data reported in regular PSLM (Pakistan Social and Living Standard Measurements) surveys on actual living standards. They found that a huge chunk of the country's economy is undocumented.
Pakistan's service sector which contributes more than 50% of the country's GDP is mostly cash-based and least documented. There is a lot of currency in circulation. According to the State Bank of Pakistan (SBP), the currency in circulation has increased to Rs. 7.4 trillion by the end of the financial year 2020-21, up from Rs 6.7 trillion in the last financial year, a double-digit growth of 10.4% year-on-year. Currency in circulation (CIC), as percent of M2 money supply and currency-to-deposit ratio, has been increasing over the last few years. The CIC/M2 ratio is now close to 30%. The average CIC/M2 ratio in FY18-21 was measured at 28%, up from 22% in FY10-15. This 1.2 trillion rupee increase could have generated undocumented GDP of Rs 3.1 trillion at the historic velocity of 2.6, according to a report in The Business Recorder. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size. Even a casual observer can see that the living standards in Pakistan are higher than those in Bangladesh and India.
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