Need to reform growth model

ISLAMABAD:

The real per capita income of Indian Muslims is 24% less than that of Pakistan, which indicates discrimination towards Muslims but the country now needs to move away from its debt-financed economic growth model and embrace reforms, says a group of leading Pakistani economists.

“The real Indian per capita income is higher than Pakistan but in the case of 213 million Indian Muslims it is below our average,” revealed Dr Hafiz Pasha, former finance minister, while speaking at a national seminar, organised by the Planning Commission and the Pakistan Institute of Development Economics (PIDE) on the 75th anniversary.

The thinkers evaluated Pakistan’s performance over the past 75 years and the need to change the course of policies.

Some of the economists and thinkers, who spoke on Thursday at the seminar, have held key positions in the past including the finance minister, deputy chairman of the Planning Commission, planning minister and State Bank of Pakistan (SBP) governor.

Pasha said that, according to research conducted by the Beaconhouse National University students, Indian Muslims were largely concentrated in seven states, which were among the less developed units of India.

The real per capita income of 213 million Indian Muslims was 24% less than that of Muslims of Pakistan, which was “an indication of our hard work during the past 75 years”.

“Pakistan’s real per capita income has risen 4.5 times since 1947,” said Pasha. He added that the sub-continent, which once comprised Pakistan, India and Bangladesh, achieved an average growth rate of around 5%.

India performed rather poorly in the first three decades. In parallel, Pakistan’s growth rate in the initial decades went above 6%.

“Poverty in Pakistan was 35% at $3.20 per day purchasing power parity while this ratio was 52% in Bangladesh and 62% in India,” he said.

In the long run, the economic growth rates of India, Pakistan and Bangladesh were almost identical, said Pasha. He said that Pakistan’s tax-to-GDP ratio, which was around 10.3%, should be increased.

“Pakistan has done well in the past by borrowing money, building infrastructure and then hoping for growth but it is time that it moves away from the debt-funded physical projects to indigenous policy and embraces reforms,” said Dr Nadeemul Haq, Vice Chancellor of PIDE. His views were also endorsed by other economists.

Sartaj Aziz, a veteran politician, bureaucrat and long-time observer of the vicissitudes of Pakistani history, highlighted the five major failures and suggested ways to change the course of the country.

Aziz said that the country remained unable to evolve an affordable energy policy due to its decision to depend on imported fuel-fired power plants. It also failed to adopt an effective population control policy and also could not enhance productivity.

There was serious institutional decay and the country also failed to evolve an inclusive and democratic process due to direct and indirect military control of the democratic system, observed Aziz.

Aziz, former finance minister and former foreign minister, said “we need a new charter of governance based on fair elections”. “Gender rights, human rights, health and education, all depend on the governance system,” he added.

Pakistan needs to adopt a new charter of democratic governance, based on the constitution and adopt new rules of the political game, said Aziz.

Dr Nadeemul Haque lamented that the economy is not in dire straits but it certainly is in a difficult situation.

“Pakistan’s economy has always performed strangely. We are still stuck in the realm of extractive institutions and a colonial state. Stabilisation of the economy is not a joke. The economy is what people produce through their exchange with incentive-based institutions, but if we continue holding on to colonial institutions, there will be a problem,” said Haque.­­

Published in The Express Tribune, August 26^th, 2022.

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