National income accounts allow authorities to keep a finger on the economic pulse of the nation. In recent years, the process of distorting national accounts appears to have gathered storm. For example, in order to arrive close to the ‘desired’ economic growth of the finance minister (4 percent) for the year 2011-12, the Pakistan Bureau of Statistics (PBS) used large-scale manufacturing growth for the period of July-February 2011-12 (1.8 percent) instead of July-March (1.0 percent) which was available at the time of preparing national accounts.

Furthermore, livestock accounts for 55 percent to agriculture and 12 percent to GDP, the growth rates of its components and sub components (17 all together) for the year 2010-11 were repeated in 2011-12 to arrive at the ‘desired’ growth rate for the year.

Taking a longer term view, real GDP grew at an average rate of 3 percent per annum over the last five years with agriculture and manufacturing growing by 2.2 percent and 2.7 percent, respectively. In the midst of such a dismal performance of the major component of real GDP, social and community services, a relatively unknown component, have been exhibiting a stellar performance over the last five years. It has grown at an average rate of 8 percent per annum and accordingly emerged as the fourth largest component of the GDP after agriculture, manufacturing and wholesale and retail trade. The social and community services include the activities of the NGOs, security providers etc. The way this sector is ‘growing’, over one-fifth of Pakistan’s GDP will be originating from this sector by 2020.

The contribution of social and community services is also visible in investment. In 2007-08, investment in this sector was one-half of the investment in manufacturing but now equals to manufacturing in just five years. Its contribution to total investment more than doubled in just five years (from 8.7 percent to 18 percent). Furthermore, the investment in small-scale manufacturing has exceeded the investment in large-scale manufacturing by 28 percent in 2011-12. It was only one-third of large-scale manufacturing some five years ago.

It appears that the contribution to production sectors is vanishing while that of services, particularly social and community services is growing rapidly. Similarly, investment by NGOs and security providers has overtaken the investment of combined manufacturing. Does it make sense?

I would urge the government, particularly its economic team to look into the affairs of the PBS and save Pakistan’s key statistics from a total destruction. Simply by changing the name from FBS to PBS and making them autonomous on paper have not changed anything on the ground. Certainly, the staff are professionally weak and needs urgent training. I would urge the economic team to seek assistance from the IMF Statistics Department for training the staff, looking at the methodology and the way these statistics are being compiled in PBS. The service structure of the PBS needs improvement as well.

Let me say a few words on poverty statistics. Since the present government’s ascension to power, it has made the poverty statistics controversial through acts of non-transparency. It has released neither the poverty estimates for the year 2007-08 nor the micro level data for the year 2010-11, apparently due to the fear that someone will estimate the poverty ahead of the government. The government formed its own team to estimate poverty and the micro level data were provided to them. In order to arrive at the ‘desirable’ numbers, the team members went overboard and came up with poverty estimates which flouted established economic theory. The government is now in a fix to justify that over seven million people were brought out of poverty in just three years of its tenure.

In defence of their estimates, the team has argued that poverty has declined due to higher support price of major crops, higher inflow of remittances and impact of flood-related assistance. How childish is this defence. Empirically, it has been proven that the support price of wheat is highly inflationary. Furthermore, Professor A K Sen (a noble laureate) and Jean Dreze have termed support price as “implicit mass murder” of the farmers and argued that it benefits only the large farmers, which happened to be only 12 percent in Pakistan.

With regards to remittances, not every household counted in the survey received remittances. In the 2007-08 survey, less than 15 percent households received remittances that include those sent from within and outside the country. Can this small number of recipients make such a huge difference in poverty? With reference to the impact of flood assistance on poverty reduction, it is cruel to suggest that such assistance has brought seven million people out of poverty.

If seven million people are brought out of poverty in the last three years in the midst of an average real GDP growth of 2.6 percent, population growth of 2.1 percent and inflation averaging over 15 percent, there is something fundamentally wrong in either methodology or in data. Given the economic conditions that have prevailed over the inter-survey period, poverty reduction is just unthinkable.

I would urge the economic team to seek assistance from the World Bank experts to look into the methodology, the frame of the survey, the commodity basket and the price effect. It is shameful that Pakistan has no official poverty estimates for the last six years. We have no idea as to where we stand in poverty reduction target of the MDGs. We must take this seriously and act fast.

The writer is principal and dean of NUST Business School, Islamabad. Email: ahkhan @nbs.edu.pk