With the release of the Economic Survey on the 4th June, 2006 the most important topic being discussed in the press is the government's claim that the poverty has come down from 34.46 percent in FY-01 to 23.9 percent in FY-05.
It will be recalled that in June, 2004 the government had claimed that poverty was reduced by 4 percent. But nobody was prepared to believe that as the conclusion was based on the survey of merely 5000 households which could not be deemed representative for the country's population of about 150 million.
As the Survey tells us, the coverage was spread over 14,706 households - 5808 households in urban areas and 8898 households in rural areas. The poverty line base of the poverty survey was daily intake of 2350 calories per adult equivalent.
To give credence to the poverty survey findings, government has this time got the results endorsed by the World Bank, Asian Development Bank, United Nations Development Programme. The endorsement by these international organisations is based on the individual income and not on the calories intake.
However, it was in 2005 too that the World Bank and the European Union had observed that during the last two years, poverty has increased in Pakistan as well as the gulf between rich and the poor.
Notwithstanding the aforesaid endorsement, the following points need to be looked into by the economists and researchers for elaboration:
The scope of the poverty survey conducted in 2005 is very limited. 14,706 households mean nothing viz-a-viz the population of over 153 million [end June,2005].
Many heterogeneous groups of population may have been included in the survey of a particular locality, thereby distorting the data. To arrive at a right conclusion, at least 10-15 percent of the population in each homogeneous locality need to be surveyed.
How can the moderately educated members of the survey teams correctly gauge the calories intake. Did these team include in them experts on nutrition? If not, the results based on calories intake would not be verifiable and could be merely termed as guestimates. Contrary to that the income base is conveniently verifiable.
The population needs, in addition to food, clothing and shelter, which cannot be had without money. Had the government, before initiating the poverty survey in 2005, determined at the prevailing market rates, the cheapest cost of 2350 calories with a view to determining that the population did have the money for clothing and shelter after 2350 calories intake, it could create some credence. If not, what is the rationale in assessing that in 2005, 76.9 percent of the population has crossed the poverty line?
The public has been hearing from different forums for many years in the past that a person having an income of $1 a day falls under the category of "extremely poor" and those having daily per capita income of $2 are "poor" . This means that extreme poverty line threshold is Rs 1800 per capita per month.
It is believed that this poverty line has world-wide acceptability. It is not understood on what basis, the Planning Commission, Government of Pakistan has brought down this threshold to merely Rs 878.64 per capita per month for 2005 which works out to 48.8 percent of the internationally accepted principle for "extremely poor".
Apart from that, the said income threshold has been determined for "adults" only. What about the minors forming substantial portion of the population and dependant on the adults. If this factor is taken into account, how much this paltry amount will come down further is known to the government alone.
Of course, if the assessment of poverty is made on the basis of much lowered income threshold, more people will rise above the poverty level. But will such assessment be genuine? Certainly not.
The reasons for endorsing the results of the current poverty survey will, therefore, be better known to these endorsers.
The poverty assessment results pertain to the fiscal year 2004-005. In that year GDP growth was estimated at 8.6 percent while the agriculture sector grew by 7.5 percent [page 15 State Bank of Pakistan's (SBP) annual report for 2004-05]. In the outgoing fiscal 2005-06, there was a decay in this sector showing growth of 2.5 percent only and it too was based mostly on live stock sector.
As out of the total population of 153.96 million, 101.55 million lives in rural areas, the sharp decline in the agriculture sector growth must have increased the poverty in the rural Pakistan.
It may be mentioned here the GDP of the country during the fiscal 2005-06 has been estimated at $130 billion [$847 per capita GDP x population 153.96 million]. The Agriculture sector's share in the GDP given in the current Economic Survey is 22 percent, which works out to $28.6 billion.
Assuming that there is even distribution of the national income among the population, the per capita share of the rural population of 101.55 million in the agricultural sector GDP would work out to $281.16. Thus there is a vast difference between the per capita income in the rural areas and the overall figure of $847.
Then who is reaping the benefits of the higher per capita GDP- upper 5-10 percent class of the population reflecting lack of equity in the distribution of the national income among various sections of the populace? Will the government find time to frame policies to bring equity in this regard or will continue to side with the affluent sections of the society as before?
If we translate the rural sector per capita GDP in Pakistan rupees, it would work out to Rs 1405.80 per capita per month which is still much below the "extremely poor"threshold of $1 per person per day.
However, when we exclude the income of big feudal lords from the agricultural sector GDP, the common man's share shall fall much below Rs 1405.80 per capita per month and may even be lesser than the government's depressed threshold of Rs 878.64 per capita per month.
Therefore, instead of rejoicing the guestimates of over 10 percent cut in the poverty level, the government needs to take a fresh stock of the situation and re-assess the poverty level in the country during the fiscal 2005-06 using the proper income threshold instead of using the depressed one put at Rs 878.64 per capita per month or unverifiable system of calories intake.
In view of the factors discussed above, nobody will believe in the poverty reduction data announced by the government.
The public already does not have faith in the data compiled by the government from time to time. Over the past many decades, the inflation data compiled by the government was challenged by the independent economists who have been asserting that actual inflation is twice as much as assessed by the government agency.
It is, therefore, imperative for the government to endeavour to build public confidence by providing genuine statistics in future.