Pakistans nominal per capita income rose 16.9 percent to $1,254 in 2010-11 from $1,073 in 2009-2010, according to the Economic Survey of Pakistan. Using the IMF's purchasing power parity exchange rate of Rs. 34 to a US dollar (versus official exchange rate of Rs. 85 to a US dollar), Pakistan's per capita income in terms of purchasing power parity works out to $3,135.00.
Although Pakistan's per capita GDP rose by only 0.7% in real terms, the much higher 16.9% nominal per capita income increase reflects a combination of the nation's double-digit inflation rate and the the rupee's stable exchange rate with the US dollar which has been losing ground to most major world currencies in 2010-2011.
The idea of PPP or purchasing power parity is quite simple. A US dollar can be exchanged today for about 85 Pakistani rupees. But with Rs 85 you can buy more goods and services in Pakistan than one US dollar can buy in the United States. So Pakistan's GDP expressed in dollars at current exchange rates is about 40% of what it is when adjusted for PPP. The current ratio for both Indian and Pakistani GDP conversion from nominal US dollars to PPP dollars is about 2.5, calculated as follows:
Country......Official Rate....Purchasing Power.....Ratio
India...........INR 45.................INR 18..........2.5
Pakistan.......PKR 85................PKR 34..........2.5
Looking at the increase in per capita income alone is quite misleading in judging the health of Pakistan's economy. Other indicators, such as real GDP growth and investments, show that the state of the economy is very poor. The nation's GDP grew only 2.4% in real terms in 2010-2011. Domestic investment dropped to a 40-year low of 13.4% of GDP, and foreign direct investment (FDI) declined by 29 percent to $1.232 billion during July-April 2010-11 from $1.725 million in the same period a year earlier.
In addition to improved security environment, Pakistan has an urgent need for serious economic reform, greater social justice and better governance. Unless the PPP government acts to improve this situation, no amount of foreign aid, external loans and other help will suffice. The first step in the process is for the ruling elite to lead by example by paying their fair share of taxes and adopting less extravagant personal lifestyles to get Pakistan's fiscal house in order.
Haq's Musings: Pakistan's Per Capita Income Exceeds $3,100 in 2011
Although Pakistan's per capita GDP rose by only 0.7% in real terms, the much higher 16.9% nominal per capita income increase reflects a combination of the nation's double-digit inflation rate and the the rupee's stable exchange rate with the US dollar which has been losing ground to most major world currencies in 2010-2011.
The idea of PPP or purchasing power parity is quite simple. A US dollar can be exchanged today for about 85 Pakistani rupees. But with Rs 85 you can buy more goods and services in Pakistan than one US dollar can buy in the United States. So Pakistan's GDP expressed in dollars at current exchange rates is about 40% of what it is when adjusted for PPP. The current ratio for both Indian and Pakistani GDP conversion from nominal US dollars to PPP dollars is about 2.5, calculated as follows:
Country......Official Rate....Purchasing Power.....Ratio
India...........INR 45.................INR 18..........2.5
Pakistan.......PKR 85................PKR 34..........2.5
Looking at the increase in per capita income alone is quite misleading in judging the health of Pakistan's economy. Other indicators, such as real GDP growth and investments, show that the state of the economy is very poor. The nation's GDP grew only 2.4% in real terms in 2010-2011. Domestic investment dropped to a 40-year low of 13.4% of GDP, and foreign direct investment (FDI) declined by 29 percent to $1.232 billion during July-April 2010-11 from $1.725 million in the same period a year earlier.
In addition to improved security environment, Pakistan has an urgent need for serious economic reform, greater social justice and better governance. Unless the PPP government acts to improve this situation, no amount of foreign aid, external loans and other help will suffice. The first step in the process is for the ruling elite to lead by example by paying their fair share of taxes and adopting less extravagant personal lifestyles to get Pakistan's fiscal house in order.
Haq's Musings: Pakistan's Per Capita Income Exceeds $3,100 in 2011
