Although the real national income of Pakistan, on an average, is revealed to be increasing each year from the past 25 years, the concentration of income in the hands of a few has also taken a leap. According to figures revealed by the government of Pakistan, the reported income of the richest 20 percent of households has been almost 7 percent higher than the poorest 20 percent households over the last 25 years.
A more accurate way to determine the income disparities in Pakistan is the calculation of the Gini coefficient. It takes upon values between zero and one; the closer the number is to zero, the greater is the equitable distribution of wealth in the country and vice versa. In a report released by the US State Department, Pakistan’s Gini coefficient is 0.68 which depicts the huge income disparity that exists in the country. The Gini coefficient was reported to be 0.30 in 2002, reflecting the huge increase in income disparity over the last ten years.
Income inequalities in Pakistan also reflect the disparities in the distribution of assets. The poor of Pakistan are largely involved in the agricultural sector of the country with little involvement in the tertiary sector. Moreover, the wealth of agricultural sector is restricted to a few landlords with the average poor earning the minimum wages. The feudal lords have also continued to burden the poor labor with debts. As a result, the income distribution remains skewed. Although, it is reported that federal and official bodies have taken steps such as development of plots and projects for the common people, the efforts have not been able to bear the fruit, primarily because of the corruption that exists in the internal system.
Another major reason behind the increased income disparity in Pakistan is that the share of agricultural sector in domestic production has been observed to decline while the tertiary sector’s share is reported to have increased over the years. Hence, a shift from investing resources in the agricultural sector to the tertiary sector is being observed in Pakistan which shifts the poor further above the level of poverty.
One of the most devastating factors for increased income and wealth inequalities in Pakistan is the establishment of the regressive tax system. Statistics have revealed that the taxes on the poor in the last 10 years have increased by almost 35 per cent, while the rich are paying minimal direct taxes on their massive income and wealth. Hence, the policies of the federal government have also been designed to benefit the rich, keeping the poor at a disadvantage.
Economic disparities are bringing along shortage of food and lack of essentials services for the poor population of country. What is even more worrisome is the heating up rage of the poor against the rich. Analysts fear that the great divide between the rich and poor of Pakistan might eventually lead to civil war if the government does not take serious measures to prevent the increasing disparity.
It is suggested that the government should invest in human resource development of the agricultural sector to give the poor a chance to step forward. Moreover, credit schemes for small entrepreneurs should be introduced that might help them in acquiring wealth. The government policies also need to be revised to bridge the gap that exists between the rich and the poor of Pakistan.