fallacy of poverty reduction:
An analysis of the sources of growth during the period 2000-01 to 2004-05 shows that the composition of growth during the period was pro-rich rather than pro-poor. It was fuelled mainly by the services sector, (particularly banking and communications) which contributed 60 per cent of GDP growth during the period and the manufacturing sector – primarily manufacture of automobiles, luxury consumer electronics, cement and textiles – which contributed 30.4 per cent of GDP growth during this period.
(...) It is clear that GDP growth during the period was overwhelmingly pro-rich since none of the sectors which mainly constituted the growth were either producing goods for the poor or directly providing employment to them.
(...) Our own poverty estimate also takes account of the inconsistencies in the Sindh sub-sample and yields a poverty reduction estimate of only 0.6 percentage points with poverty declining from 31.3 per cent in 1998-99 to 30.7 per cent in 2004-05. One can conclude therefore that, there has been no significant poverty reduction during the period 1998-99 to 2004-05. This conclusion is consistent with the sources of growth analysis based on national income data.
(...) In the three years after 2004-05 the demand-supply imbalances in the economy resulting from design errors of the economic policy led to accelerated inflation, particularly food inflation, severe shortages of flour, electricity, gas and fuel. The accelerating inflation rate particularly for items in the poor man’s basket would be expected to have worsened the poverty situation.