Pakistan ranked 52 in the Inclusive Development Index (IDI) 2017 while India ranked at 60 among 79 developing countries - a ranking that makes Pakistan proud given the recent display of India's considerable economic might in the international community reflected by its capacity to purchase from a recession-ridden West. Inclusive growth, by definition, is a much more desired goal reflective of all socio-economic groups particularly the disadvantaged.
Pakistan's IDI score in 2017 was 3.56 while India's was 3.38 though disturbingly while Pakistan's ODI trend (percentage) was a negative 0.03 percent India witnessed a positive 2.50 percent or Pakistan's IDI trend is defined as stable but India's is defined as slowly advancing. Pakistan's IDI trend rank was 38 much lower than India's 16 and Pakistan's Gross Domestic Product per capita (trend rank) was 54 - again much lower than India's 7.
So what are IDI's determinants and why did Pakistan perform so much better than India? As per the report, IDI presents a policy framework encompassing seven principal pillars and sub-domains of each pillar: (i) education with sub-domain access, quality and equity; (ii) basic services/infrastructure with sub-domain basic and digital infrastructure and health-related services and infrastructure; (iii) corruption/rents with sub-domain of financial intermediation of real economy investment and concentration of rents; (iv) financial intermediation of real economy investments with sub-domains financial system inclusion and intermediation of business investment; (v) asset building and entrepreneurship with sub-domain including small business ownership and home and financial asset ownership; (vi) employment and labour compensation inclusive of productive employment and wage and non-wage compensation; and (vii) fiscal transfers inclusive of tax code and social protection.
While Pakistan was not selected in the report for data analysis, yet India was and the report states that India ranked low "despite the fact that its growth in GDP per capita is among the top 10 and labour productivity growth has been strong. Poverty has also been falling, albeit from a high level. On the other hand, its debt-to-GDP ratio is high, raising some questions about the sustainability of government spending. With regard to framework indicators, educational enrolment rates are relatively low across all levels, and quality varies greatly, leading to notable differences in performance among students from different socio-economic backgrounds. While unemployment is not as high as in some other countries, the labour force participation rate is low, the informal economy is large, and many workers are in vulnerable employment situations with little room for social mobility. A more progressive tax system would help raise capital for expenditure on infrastructure, healthcare, basic services and education. India scores well in terms of access to finance for business development and real economy investment. However, new business creation continues to be held back by corruption, underdeveloped infrastructure, and the large administrative burden involved in starting and running companies."
The foregoing is indicative of why Pakistan ranked better than India in IDI. First and foremost, based on IDI determinants, it is fairly evident that the Benazir Income Support Programme (BISP) established during the PPP-led coalition government's tenure in 2008, the high minimum wage which is not implemented by the parallel informal economy estimated at 50 percent of the formal economy as well as in some areas of the formal economy and large subsidies that are yet to be targeted are major contributors to our higher ranking relative to India. And Pakistan's tax structure remains heavily reliant on indirect taxes whose incidence on the poor is greater than on the rich; the filer/non-filer distinction is particularly burdensome on those who are exempt from filing returns like housewives, students, pensioners. And finally, the Pakistan Bureau of Statistics under the administrative control of the Ministry of Finance has been accused of manipulating GDP and debt-to-GDP ratio by overstating the former and understating the latter for political considerations. Failure to undertake a census since 1998 accounts for education and health availability data that is a projection of the growth rate at the time of the last survey - a rate that is likely to be inaccurate.
To conclude, there is no room for complacency and the Pakistan government needs to ensure that a census is carried out this March as envisaged and it focuses attention on restructuring the tax system to make it more equitable which will go some ways towards ensuring inclusive growth.