Wednesday October 27, 2021

Growth gripes

May 21, 2021

LAHORE: The growth pattern of the economy is skewed more towards the affluent than the working class, which is one of the main reasons we are lagging far behind in terms of inclusive development.

The large-scale manufacturing (LSM) statistics for July-April period released by the Pakistan Bureau of Statistics reveal cement sector registered 25 percent growth, cars, light commercial vehicles posted average growth of around 20 percent, motorcycle production surged by over 20 percent, while the production of tractors registered a 50 percent increase. Sugar and cigarettes also posted double digit growth.

If we look at the general consumption pattern of these items we will see that except for cigarettes and sugar all other products are out of common man’s reach. Vehicles are bought by the most affluent segment of society. In vehicles the highest growth was witnessed in high-end cars. Only the rich could afford them.

Tractors are bought by farmers having land holding of 25 acres or above. The farmers with land ownership of over 25 acres hardly constitute 13 percent of the farmers’ population.

More than 87 percent of the land is owned by those having 12.5 acres or lesser land. The subsistence farming starts with 12.5 acres or above. Farmers with lesser land live in poverty. In the same way cement is required mainly by families that construct new houses. The poor and the middle class citizens hardly need cement (minor repairs do not count in its consumption).

Cigarettes are consumed more by the poor than the rich. Cigarette consumption has an extremely negative impact on the health of smokers, beside its consumption by the poor drastically reduces the already meagre resources available with poor households. Sugar again is consumed both by the rich and poor. But its price has become a big issue for the poor households. Generally speaking growth in above sectors of LSM has almost exclusively benefited the rich.

The LSM growth remained negative in vegetable oil, cooking oil, and blended tea, all of which are the items used by both poor and rich. Negative growth has also impacted their rates. There was also a drop in the production of syrups and juices that the poor families serve to their guests in summer. The reduction in production shows that the consumption of these items has declined because of the inability of the poor to buy even a minor item that comes under luxury consumption by their standards.

There has been a decline in the production of upper leather, footwear, sewing machines, and many more that resulted in job losses for the poor. All these items are consumed by artisans for manufacturing different value added products.

The Covid-19 has not impacted the rich as is evident from the recent corporate results. When an economy is in recession generally the entire economy suffers. People lose jobs as they did in large numbers during recession and Covid-19. However at the same time the profitability of the corporate sector also declines as the uptake of their products is lower during recession but this has not happened this time in Pakistan. The corporate sector looks healthier than before but the commoners have suffered badly losing jobs as well as the incomes where jobs are intact.

For immunity against Covid-19 we pinned our hopes on the herd community while in case of economic wellbeing we depend upon the trickle down impact of accelerated growth. Unfortunately the accelerated growth looks like a dream in the short-term. With the type of growth we are currently witnessing almost entire benefits go to the rich and not even a trickle goes the poor’s way.

The situation would deteriorate sharply if a viable growth strategy is not introduced. This is a big challenge for the economic planners. They must realise we are in an unchartered territory.

The business and economic rules are being revisited the world over. The least we could do is not to deviate from the basics and eliminate rich bias in our planning. Countries that fail to include their poor in their business strategy would ultimately lose everything to their competing economies.