December 03, 2018 (MLN): Growth is considered to be an essential condition for reduction in poverty, but growth does not necessarily imply that it will lead to improvement in the quality of living standards of everyone.
Growth does benefit and improve standards of living, but if it leads to increase in benefits for few section of the society only, it may lead to increase inequality.
Pakistan historically has seen episodes of high growth but those unfortunately were not coupled with such macroeconomic conditions as are required to achieve lower poverty levels.
Therefore, Pakistan has always been facing the challenge of achieving rather more inclusive growth that has its benefits spreading to all classes of society.
Pakistan is confronting the daunting challenge of economic growth, which is neither sustainable nor inclusive, moreover its performance on important social indicators is significantly below as compared to its income level due to skewed distribution of income or resources, as high income inequality is not favorable to either economic growth or reducing poverty.
Economic growth in Pakistan has been quite unpredictable so has been its implications on poverty and income inequality.
Sector-Wise Economic Growth
Over the period from 1950 to 2017, services sector took the lead followed closely by industrial, manufacturing and then finally agriculture sector.
High economic growth could be a sign of income inequality, due to the fact that income has been stagnant in few hands.
This has implication up to some extent as significant portion of population in Pakistan resides in rural areas and are linked with agriculture sector but the slow growth in agriculture sector is due to the skewed pattern of land distribution which increases inequality.
Source: UNDP DAP Report 2017
According to the eleventh five year plan (2013-2018), achieving inclusive growth is one of the major target to be achieved, however, the outcomes reveal that significant decline in poverty has been observed but it has brought huge income inequality.
People living below national poverty line
Source: WDI data
Over the period from 1990 to 2014 the percentage of people lie below poverty line has been reduced but the widening gap between rural and urban areas and the incidence of poverty in rural region is high as compared to urban region, reflects the sign of income inequality.
Source: UNDP DAP Report 2017
Industry-Wise Employment in Pakistan
The employment level over the period from 2008 to 2017 has shown an increasing trend, as the number of employed persons in Pakistan increased to 62230 thousand in 2017 from 58530 thousand in 2016, reaching an all-time high of 62230 thousand in 2017 and a record low of 5580 thousand in 2012.
However, sector-wise employment doesn’t show significant variation over the years, as the agriculture sector continues to absorb above 40% of the labor force followed by services sector above 30% of the total labor force.
Interestingly, employment in industrial sector has been shown an increasing trend since 2007, however, the employment elasticity in the industrial sector is low because of the incidence of small scale industries, high cost of inputs low skilled workers, limited use of modern technology and capital intensive mode of production.
Trend Analysis of the Employed persons in Pakistan
Distribution of Employment by Economic Sector (%)
The inclusiveness of the economic growth in Pakistan can be visualized under the outlook of the CPEC, as the partnership aims to bring inclusive growth through different channels such as improving infrastructure, improving trade, optimal utilization of available resources and providing incentives to small framers, producers or sellers to make their access easy in national and international markets.
Besides this, in order to make growth inclusive and sustainable there is a need to understand that inclusive growth linked with both macro and micro determinants along with structural transformation to bring competition and economic change.
The key instrument to achieve this is to increase employment generation in all sectors of the economy along with improvement in productivity.
Moreover, human capital development is also necessary to achieve sustained inclusive growth, as energetic and highly skilled work force is needed in the face of fast changing technologies in all areas of production.
In order to improve living standard of the people in the country on continuous basis and to reduce gap between rich and poor, it is suggested to adopt inclusive growth strategies.
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