Poverty is a curse which breeds the germs of socio-economic evils of high magnitude and multi-dimensional implications. The recent wave of rising crimes can largely be attributed to the growing incidence of poverty in the society.
In fact, the fight against poverty is the greatest challenge of the current era. Some progress, however, has been witnessed in alleviating poverty. The proportion of people, living in extreme poverty has been reduced from 28% in 1990 to 21% in 2001. In sub-Saharan Africa, the level of poverty has substantially increased.
However, the incidence of poverty was severely felt in the US, Europe and the Middle East, in the wake of the recent Occupy Wall Street movement, eurozone crises and Arab Spring. Meanwhile, in Asia remarkable success has been achieved by China in reducing the level of poverty, followed by the East Asian countries, through rapid and sustainable economic growth, combined with family planning.
The criterion to determine the poverty was only one dollar a day. In Pakistan, it is estimated that during 1998-99, 36% people were living below the poverty line while in 2005-06, it was 22.3% (around 27% in the rural and 13.1 urban). According to a World Bank report, 60.2 percent of Pakistan's population had a daily income of $2 a day in 2008.
As against this, the Asian Development (ADB) report published in September 2010, envisages that 23.2 percent of people in Pakistan live on less than $1.25 a day, 36.6 percent of people survive on $1.25 to $2-4 a day and only 7.33 percent of population have income of $4 or more.
On the contrary, all empirical evidences, based on reduced rate of economic growth and ever-increasing cost of living suggest that even on the basis of yardstick of $1.25 a day, the percentage of poor will not be less than 60% and of those living below the poverty line will be within the vicinity of 40%.
The persistent depreciation in the value of the rupee in terms of dollar makes the authenticity of the estimates still dubious. Generally, poverty is linked with economic growth.
The economic performance during the last four years has been lacklustre due to a variety of reasons, including the war against terror, floods, abnormal increases in the prices of petroleum products, unabated energy crises, considerable decline in domestic and foreign investment, mounting fiscal deficit, galloping inflation etc. Resultantly, the GDP, which was 6.8 percent in 2006-07 slipped down to 2.4 percent in 2010-11.
Since these irritants/constraints continue to exist, no respite from their negative impact is in sight.
Pakistan's population in 2011 was estimated at 177.1 million, out of which 111.8 million is rural and 15.3 million is urban. Pakistan has one of the highest growth rates in the world.
Population growth decelerated from 3.06 percent to 2.07 percent in 2011, while in Bangladesh, it is 1.7 percent and in India 1.5 percent. As such, the positive impact of economic growth on poverty alleviation, is nullified or marginalised due to higher rate of population growth.
Therefore, the current socio-economic scenario demands the adoption of double-edged strategy, on the lines of China, which on the one hand, induces acceleration of economic growth and on the other, contributes to substantially reduce the population growth rate. Agriculture, which is the mainstay of the economy and provides employment to about 45% people, suffers from structural weaknesses.
The land reforms made in the country for the judicious distribution of lands, with a view to reducing income disparities, failed. According to a study, 67% households own no lands, 18.25 percent own less than 5 acres of land.
Barely one percent households own 35 acres or above. Agricultural income is not being effectively mobilised by the provinces, which can be evidenced from the fact that the total income from income tax of all the provinces, which was Rs 1243 million or 0.28 of total taxes in 2000-01, has declined to only Rs 938 million and continues to be 0.8% of all receipts of the provinces.
This is indeed alarming in the face of rise in agricultural production, combined with rise in the prices of its products. This phenomenon has paved the way for shifting resources from the urban to rural sector.
This trend which will not be helpful in raising tax-GDP ratio either, could be attributed to a defective tax collecting mechanism and lack of political will. Agriculture which accounts for nearly 25% of the GDP, contributes hardly 1% to the total tax revenue.
While landlords are the beneficiary of the increase in income in the rural areas, the landless farmers continue to face the severity of inflation. The main cause of poverty is landlessness in rural areas which encourages people to move to cities in search of work.
The increase in urbanisation has raised the proportion of people living in the urban areas. The proportion of people living in the urban areas of the total population has increased from about 32.5 percent in 1998 to 37 percent in 2010-11.
This demographic phenomenon is evidenced from the growing number of slums and katchi abadis in the big cities like Karachi, which weigh heavily on the already short-in-supply civic amenities, besides giving rise to environmental problems.
The industrial sector, another source of providing employment to both skilled and unskilled workers and adding to the supply of consumer goods, is confronted with a series of serious problems for the last few years.
Acute shortages of energy (both electricity and gas) and a deteriorating law and order situation are the most critical and crippling factors. According to a study, 801 industrial units were closed in Sindh alone during the last six financial years.
The state of the industrial sector in Khyber Pakhtunkhwa is worse, as it is a victim of terrorism for the last few years, resulting in the closure of thousands of industrial units. The state of the industry in other provinces is not better either.
Balochistan is passing through its worst phase in history. Small and medium enterprises have been hit hard. Thus, thousands of workers have been rendered jobless, adding to the spectre of poverty. Almost all public enterprises and organisations, including Steel Mills, Wapda, PIA and Railways, which were considered to be the hub of job-creation, are struggling for survival, mainly due to lack of good governance.
According to a labour force survey 2009-10, the unemployment rate was 5.6%, which would have been substantially increased by now. The country has been experiencing double-digit inflation which is a mix of both demand-pull and cost-push factors.
The rate of inflation rose to 14.1 percent in FY-11. Food remained the major driver of inflation, being 18.4 percent. According to a study, a rise in inflation deteriorates the poverty situation by 2.7 percent.
Food inflation is also caused by unplanned export of some food-related items. It must indeed be a cardinal principle of our export policy that only the surplus of domestic demand for vegetables, fruits, animals, meat and meat preparations etc be exported.
Education is another denominator of poverty. The rate of literacy is hardly 57% in our country, whereas in India, it is 80 percent. Our public expenditure on education is only 2% of GDP.
Likewise on health, it is less than one percent. According to a finding of the National Commission for Human Development, there are 17 million uneducated people in the country. The poverty-reduction schemes including the Benazir Income support Programme (BISP), Pakistan Bait-ul-Mal (PBM), People's Work Programme (PWP), etc were initiated and billions of rupees were spent on these schemes, but due to the floods of 2010 and soaring food prices, their positive impact on poverty alleviation was fully or partially offset. Poverty is a sum total of a variety of factors and can be tackled through an integrated policy, by addressing all issues which directly or indirectly impact poverty. Indeed, rapid and sustainable growth which creates employment opportunities and raises the income of people, is essential.
Nevertheless, if the economic growth strategy is devoid of distributive justice and the trickle-down effect, then its impact on poverty reduction will be marginal. India witnessed rapid economic growth and emerged to be the third developed country in Asia. But the people living below the poverty line there is still 25 percent and there have been reports of suicides by farmers.
It did have a revolution in the IT industries, but since these were capital-intensive and based on hi-tech and automation, the impact of such industries was jobless growth.
As against this, China opted for a labour-intensive approach for investment and thus succeeded to contain the level of poverty to a great extent, with the support of the one-child-based family planning.
The poverty-reduction strategy, in the forthcoming budget, must be governed by accelerating the process of economic growth, by investing heavily in human capital, by enlarging the social safety net and by making family planning a success through education and persuasion.
The budget must avoid the imposition of indirect taxes as much as possible because these are ultimately borne by the consumers and raise the cost of living.
Lastly, it must be stressed that unless the ongoing energy crises are effectively controlled and efficiently managed during a short span of time, the accomplishment of targets of economic growth and poverty-reduction will remain a far cry. There is no dearth of good ideas, but the hallmark of our next fiscal policy must be action and action alone. An Urdu couplet along with its translation is quoted herewith to identify the grievous impact of poverty.