Urban Middle Class Estimates in Pakistan

[RiazHaq]

So Riaz, is the assertion that as per Birdsall, Pakistan has a large middle class and India doesnt??

World Bank has never clearly defined what constitutes middle class in developing nations.

For the first time, Birdsall has offered a definition to the World Bank as to who should count in the middle class in a developing nation....that's her main contribution. In addition, she has also worked out the size of the middle class in BRIC nations based on her definition and income distribution data. It is her finding that India does not have a middle class because everyone above $10 a day in India is in the top 5% of India's population which her definition excludes from the middle class.

I have used her definition to analyze the situation in Pakistan based on published data on income distribution from various sources that I have cited...such as Standard Chartered Bank, State Bank Governor, 2009 human development report, etc.


Haq's Musings: 1999-2009: Pakistan's Decade of Urban Middle Class Growth

 

[Skeptic]

So Riaz, is the assertion that as per Birdsall, Pakistan has a large middle class and India doesnt??

I actually got about it and read birdsall's paper. She asserts that "To belong to middle Class income needs to be over $10 per day in 2005 PPP terms." also you need to be outside the top 5% income group.

This was picked up by TOI mentioning that as per this defenition India has NO MIDDLE CLASS.

Then he picked up another report by SCB Pakistan. This mentioned that average income of some top 30 million Pakistanis is over $10000, never mentioning the income of 30th million in the queue. ex. Top 5 individuals may have income of over 1 billion dollars (PPP Terms) - that itself will greatly increase average income of rest of the group.

But this seems as ample proof to Mr. Haq as indicator of Pakistani middle class.

I suggested a common parameter of people under tax net, which has a uniform set of rules (well almost) in both nations, but that seems to be unacceptable, as it shows Pakistan in very poor light.

My simple question is - A pakistani earning over $10000 (PPP 2005 terms) would surely have income greater than minimum for tav slab (1.8 Lakhs Pakistani Rupeee).

How com income tax payees are only 2.28 million out of this vast 35 million people, about whom SCB seems to know but govt. is clueless.

 

[Skeptic]

World Bank has never clearly defined what constitutes middle class in developing nations.

For the first time, Birdsall has offered a definition to the World Bank as to who should count in the middle class in a developing nation....that's her main contribution. In addition, she has also worked out the size of the middle class in BRIC nations based on her definition and income distribution data. It is her finding that India does not have a middle class because everyone above $10 a day in India is in the top 5% of India's population which her definition excludes from the middle class.

I have used her definition to analyze the situation in Pakistan based on published data on income distribution from various sources that I have cited...such as Standard Chartered Bank, State Bank Governor, 2009 human development report, etc.


Haq's Musings: 1999-2009: Pakistan's Decade of Urban Middle Class Growth

How can you arrive at minimum income from a group of 30 million from just knowing the average?? Just tell me the methodology, you'd win a nobel prize if you can. How can you assert that minimum income from the group is higher than $10 per day. (PPP 2005 terms.)

 

[deepak75]

You are misinformed about Pakistan's GDP and the basis of using incomes to classify people as poor, middle class or upper class.

In developing countries, it's the PPP values that are used for this purpose. Pakistan's GDP in PPP terms exceeds $450 billion, not $144 billion as you erroneously assert.

As to your stretching of Nepal's "goat economy" description to include Pakistan's economy, you are simply confirming your own ignorance, if not your bigotry against Pakistan.

Regarding India's situation, there is plenty of data, documentation and literature that confirms India's deep poverty and vast rich-poor gap that leaves little room for middle class. Birdsall also makes a reference to this fact.

Haq's Musings: 1999-2009: Pakistan's Decade of Urban Middle Class Growth

Sir good that you dropped Mr. Pritchett's comments (spice in the original post?) from the discussion. But I am sure that you have no idea about what he has said about the efficacy of Aid and the "Goat Economy" otherwise you have found it relevant also to Pakistan. We can discuss that if you want. I will be happy to help you.

Now about takign the rest of the discussion forward, let us take this step by step:

First, it is good that you now have brought in PPP to this discussion. That is the first sane thing I have seen from you on this thread. Okay, so let us establish some facts before we continue with our discussion.

Your assertion: 30 – 35 Million people in Pakistani were earning USD 10,000 in 2007. (We have now established that this number needs to be per PPP so we will have to factor that in to your USD 10,000 statistic). Let us do those below:

So the number that you had quoted = 30 – 35 Million is the middle class in Pakistan earning above USD 10,000 initially. You now say that it is per PPP so let us discount that number also by the 2.97 factor to get the USD comparison so that is now = USD 3367 (throwing 10,000 up in the original post may have looked quite glamourous, No?) (Store this number please)

(The 2.97 factor retrieved from your source = Economy of Pakistan - Wikipedia, the free encyclopedia )

Now, first let me address your assertion that with Nancy Birdsall’s paper that Pakistan will have a great (35 Million) middle class which even Brazil, China, India, Mars & Venus also will not have:

Nancy Birdsalls qualification for Middle class = USD 10 daily income. This would require a household to earn USD 10 x 365 = USD 3650 annually. So if you bring back to your memory the stored number above = 3367, by your own admission of numbers, by Nancy’s parameters, you have no middle class!!!!

Toinnnggggggggggg!

Hint for you: Now you have to get back to me saying that she is may be talking about USD 10 (PPP) (which will be lower nominal USD value) for India too in her report and I will then tell you what kind of middle class India will have with that benchmark. NCAER has enough stats on that.

Okay, second let us take you up on the hypothesis that 30-35 Million people in Pakistan are earning 10,000 USD annual (PPP) in 2007. Let us look at it from two aspects.


http://www.sbp.org.pk/reports/annual/arfy07/Chp-8.pdf

Declared labour statistics: Pakistan had a total labour work force of 49 Million in 2006. Basis growth trend of SBP data (refer to enclosed link = table 8.7) is on the least 3%. So the total labour work force in Pakistan in 2007 should be at least 50.5 Million. So if 30 Million were earning 10,000 USD (PPP) this = 60% of the total workforce in Pakistan earning USD 10,000 (PPP) per year or USD 27.40(PPP) per day.

Yet you say to another friend on this thread the following:

Why is that surprising? According to available data, 60% of Pakistanis and 75% of Indians live on less than $2 a day.

List of countries by percentage of population living in poverty - Wikipedia, the free encyclopedia

Human Development Report 2009 - Population living below $2 a day (%)

Toinnnnnnggggggggggggggggg no. 2


Let us now consider it via a link that you provided = wiki again for another angle on this.

Economy of Pakistan - Wikipedia, the free encyclopedia

And I quote from the link as following:

Growing middle class
Measured by purchasing power, Pakistan has a 30 million strong middle class, according to Dr. Ishrat Husain, Ex-Governor (2 December 1999 - 1 December 2005) of the State Bank of Pakistan.[22] It is a figure that correlates with research by Standard Chartered Bank which estimates that Pakistan possesses a "a middle class of 30 million people that Standard Chartered estimates now earn an average of about $10,000 a year."[23] Latest figures put Pakistan's Middle Class at 35 million strong.[24] In addition, Pakistan has a growing upper & upper middle class, which was estimated at 6.8 million in 2002[25] and has now grown to 17 million people as of 2010, with relatively high per capita incomes.[26]
Unquote.


So GDP of Pakistan (PPP) in 2009 = 545.6 Billion

And the middle class declared per the source= 35 Million earns x 10,000 USD = USD 350 Billion (PPP)
Plus in the same link there is also reference that Pakistan has also a “rich class” which earns “relatively more” than the above and it is = 17 Million. So since that the “relatively more” number is not provided in your source, let us assume that it is a bottom level 20% more than the 10,000 USD (PPP) of the middle class so = 10,000 x 1.2 = 12,000 (PPP).

So what is the earning of this “rich class” of 17 Million = 17 million x 12,000 USD (PPP) = USD 204 Billion (PPP)

So total of only the rich + the middle class = 350 + 204 Billion = 554 Billion (PPP)

Now the total GDP as quoted above from your source = 545.6 Billion (PPP)

So the net balance for your corporate earnings + indirect business taxes + net institutional interest earnings + other Income factors + the earnings of the other poor brethren in Pakistan (us slumdog Indian types) = 545.6 Billion – 554 Billion = Negative 8.4 Billion PPP!!!!

Toinnnnngggggggggggggggggggggg – Toinnnnggggggggggggggg – Toinnnnngggggggg – Toinnnnnnggggggggggg……

Finally Sir, a lot of times, Wiki is used as a propaganda tool. If you check the links that Wiki refers to, you will understand the reality a lot. There are circular references or references in some cases to fanboy sites. It is like Goebbels’s theory = A lie if audacious enough, and repeated enough number of times, will be believed by the masses. Please do not take this forum for a ride. A lot of them are your countrymen.

Also, please do not believe everything that Shortcut Aziz and his team said in 2007, after-all he also said that he will entice Condi Rice with his “love stare” and solve all problems of Pakistan.

So by the way, where is he now? Anyone?

 

[Raghu]

Pakistan is more urbanized with a larger middle class than India as percent of population. In 2007, Standard Chartered Bank analysts and SBP estimated there were 30 to 35 million Pakistanis earning an average of $10,000 a year. Of these, about 17 million are in the upper and upper middle class, according to a recent report.

[/url]

This sort of writing is confusing and clearly demonstrated lack of knowledge in economics.

I can say the area where Ambani families live inclding the one living in slums across the road has earning of avg of 30000$ per year.

 

[deepak75]

actually my family per person income is only $13.25 per day. and i belonged from middle class family. u can calculate it. there r 4 member in my family. and i think there r millions are families in india whose monthly income is b/w 50000-100000 Rs. and one more thing $1= INR 44

My frined when elaborating, it is best to remove per capita and look at households becuase "middle class" is a household phenomenon. So your household income remains at about USD 53 per day as explained earlier

But you are correct and that too with common sense and even without any data that your family is part of the famed middle class of India.

I will be happy to share more with you basis NCAER statistics but first let us wait for our Mr. Haq to tell us more about the "slumdog" economy of India.

 

[Raghu]

Basically trying to find a common base for comparasion. Number of Income tax Payee would certainly be indicative of the size of middle class right. Corresponding figures in 2006 -
INDIA: 31.5 Million
PAKISTAN: 2.28 Million

Tax slabs are mentioned which are higher in India - Indicating a person who would be taxed in Pakistan wont be taxed in India.

So proportionally size of Incme tax paying population is much higher in India - Indicating a bigger middle class.

Number of Income tax Payee PAKISTAN: 2.28 Million

Pakistan is more urbanized with a larger middle class than India as percent of population. In 2007, Standard Chartered Bank analysts and SBP estimated there were 30 to 35 million Pakistanis earning an average of $10,000 a year. Of these, about 17 million are in the upper and upper middle class, according to a recent report

 

[Skeptic]

No, I don't. But I am going by Nancy Birsall's paper that says that all Indians making more than $10 a day ($3650 a year) are in the top 5% of the population, leaving no middle class in India by her definition.

What it means to me is that Indians earning $10,000 a year make up less than 5% of India's population.

India has no middle class? - India - The Times of India

Oops, I was wrong here.

You can read the paper here: http://www.cgdev.org/content/publications/detail/1423994

 

[deepak75]

I actually got about it and read birdsall's paper. She asserts that "To belong to middle Class income needs to be over $10 per day in 2005 PPP terms." also you need to be outside the top 5% income group.

Bro can you please let me have a link on the paper = "Equity in a globalizing world". I have to go thru it to understand what she is saying because NCAER (Shukla) study already states the income slabs in 2008 per which what Birdsall says is confusing on the least.

Thanks for the help in advance.

 

[deepak75]

As to India's much hyped middle class, a new report by Nancy Birdsall of Center for Global Development says it is a myth. She has proposed a new definition of the middle class for developing countries in a forthcoming World Bank publication, Equity in a Globalizing World. Birdsall defines the middle class in the developing world to include people with an income above $10 day, but excluding the top 5% of that country. By this definition, India even urban India alone has no middle class; everyone at over $10 a day is in the top 5% of the country.


This is a combination both of the depth of India's poverty and its inequality. China had no middle class in 1990, but by 2005, had a small urban middle class (3% of the population). South Africa (7%), Russia (30%) and Brazil (19%) all had sizable middle classes in 2005.

Haq's Musings: Urbanization in Pakistan Highest in South Asia

DAWN.COM | Columnists | The rise of Mehran man

India has no middle class? - India - The Times of India

So finally the truth behind your non-sense about the India part:

Time to take off the blinkers

In 2006:

18 Million People were earning annual more than 500,000 INR = USD About 11,260 absolute = USD about 40,000 PPP.
Additional 49 Million people were earning between annual 200,000 - 500,000 INR So interval lower limit = USD 4504 absolute = interval lower limit USD 16,000 PPP.
Additional 225 Million people were earning between annual 90,000 - 200,000 INR So, Lower interval limit = USD 2025 absolute = interval lower limit USD 7200 PPP.

These three income slabs covered a total of 18 + 49 + 225 Million = 292 Million People in 2006.

What Nancy Birdsall says = USD 10 absolute = USD 2.8 PPP per day = USD 1022 PPP annual in India will be middle class.

So we have at the last count in 2006 itself 292 Million people earning more than that number in India. In fact there is room to move down and cover more population with income up to 1022 USD PPP 2005!!

Now that number itself as a percentage of population of India = Currently say 1.15 Billion = 25%.

So basis this parameter India had a middle class of at least 25% in 2006 itself. In fact more!!

Mr. Riaz Sir, why this misinformation? Your numbers about Pakistan are bogus and then you make a false assertions that if going by Nancy Birdsall's new report parameters, India has no middle class because all 5% people earning over USD 10 basis PPP 2005 are rich in India.

I think that you got taken by the TOI report and jumped on it, added some anti India spice and some pro Pakistan Halwa and served it here.

 

[RiazHaq]

It seems to me that there is a deliberate attempt by some members to try and confuse the readers here by bringing up all sorts of frivolous arguments to detract from the main focus of my post.

Let me try and simplify it for those of you who want to seriously learn and understand the differences in income levels of various classes, poor, middle and upper, in India and Pakistan.

Regardless of the source of (UN, CIA, etc) any credible data, the following facts are generally accepted by almost all economists of various shades and nationalities.

1. India has a much bigger percentage of its population living on less than $2 a day than Pakistan.

http://hdrstats.undp.org/en/indicators/103.html

2. India has much bigger disparities in income and consumption than Pakistan as measured by Gini coefficient.

http://timesofindia.indiatimes.com/World/Inequalities_stark_in_US_cities/articleshow/3656239.cms

If you do not agree with the above two points, then we have nothing more to talk about.

But if you do agree, then it naturally follows that Pakistan should have a bigger percentage of its population than India that qualifies as middle class.

 

[RiazHaq]

So finally the truth behind your non-sense about the India part:

Time to take off the blinkers

In 2006:

18 Million People were earning annual more than 500,000 INR = USD About 11,260 absolute = USD about 40,000 PPP.
Additional 49 Million people were earning between annual 200,000 - 500,000 INR So interval lower limit = USD 4504 absolute = interval lower limit USD 16,000 PPP.
Additional 225 Million people were earning between annual 90,000 - 200,000 INR So, Lower interval limit = USD 2025 absolute = interval lower limit USD 7200 PPP.

These three income slabs covered a total of 18 + 49 + 225 Million = 292 Million People in 2006.

What Nancy Birdsall says = USD 10 absolute = USD 2.8 PPP per day = USD 1022 PPP annual in India will be middle class.

So we have at the last count in 2006 itself 292 Million people earning more than that number in India. In fact there is room to move down and cover more population with income up to 1022 USD PPP 2005!!

Now that number itself as a percentage of population of India = Currently say 1.15 Billion = 25%.

So basis this parameter India had a middle class of at least 25% in 2006 itself. In fact more!!

Mr. Riaz Sir, why this misinformation? Your numbers about Pakistan are bogus and then you make a false assertions that if going by Nancy Birdsall's new report parameters, India has no middle class because all 5% people earning over USD 10 basis PPP 2005 are rich in India.

I think that you got taken by the TOI report and jumped on it, added some anti India spice and some pro Pakistan Halwa and served it here.

I am not sure where you get your numbers from to claim 25% of Indians belong in the middle class. It just doesn't make any sense at all when you look at the widely published UN data that is considered more credible.

The fact is that 75.6% of Indians (vs 60% of Pakistanis) live on less than $2 a day, according to HDR 2009.

That leaves 24.4% at or above $2 a day. Are they all middle class? Is that your definition of middle class in India?

Human Development Report 2009 - Population living below $2 a day (%)

 

[TATA]

About 77 million Pakistan (48 per cent of the total population) had become food insecure in 2008,” they said.

Hand count poverty rose by 35 per cent, more than doubled from the 17 per cent figure reported for 2007/08. This would imply an additional 29 million below the national poverty line, they said.


Special window for trade: GSP Plus criteria

 

[TATA]

62 million people fall below poverty line in Pakistan

By: Ramzan Chandio | Published: October 31, 2009

KARACHI - The 62 million population of country has fallen below poverty line in FY09.
The State Bank of Pakistan in its annual report of economy of the county for last fiscal unveiled that World Bank’s task force on food security has estimated that the Head Count Ratio (HCR) regarding poverty increased in Pakistan to 33.8 per cent in FY08 and 36.1 per cent in FY09, indicating that 62 million population of the country might have fallen below poverty line in FY09.

SBP quoting the interim report of the Panel of Economists constituted by the government and Planning Commission, pointed out that as many as 10 million more people were expected to fall into the poverty trap. The interim report ‘Economic Stabilisation with a Human Face’ states that headcount ratio in the country may have risen by 3.5 percentage points in FY08 from 22.3 percent in FY06. Going ahead, a further rise is expected in FY09 by additional 2.7 percentage points. This brings the headcount ratio figures in the country at 28.5 per cent in FY09, SBP maintains.

The central bank pointed out that recent data suggests that between 2005 and 2009, more than 12 to 14 million people are expected to have slipped into poverty. Considering these figures, it is estimated that poverty may have risen between 30 to 35pc in FY09. SBP predicted that the global economic crisis, decline in manufacturing sector in the country and closure of industries due to power crisis is likely to push more people in poverty.

62 million people fall below poverty line | Pakistan | News | Newspaper | Daily | English | Online

 

[RiazHaq]

About 77 million Pakistan (48 per cent of the total population) had become food insecure in 2008,” they said.

Hand count poverty rose by 35 per cent, more than doubled from the 17 per cent figure reported for 2007/08. This would imply an additional 29 million below the national poverty line, they said.


Special window for trade: GSP Plus criteria

No one denies there is poverty and malnutrition in Pakistan, it's just that it's less severe than in India.

If you really want to distract from the discussion on middle class size, let's have at it. Here's some "food" for thought for you:

In IFPRI's most recent global hunger report, India still ranks at 65, worse than Pakistan at 58, and much worse than China at 5.

The first India State Hunger Index (Ishi) report in 2008 found that Madhya Pradesh had the most severe level of hunger in India, comparable to Chad and Ethiopia. Four states — Punjab, Kerala, Haryana and Assam — fell in the 'serious' category. Gujarat, 13th on the Indian list is below Haiti, ranked 69. The authors said India's poor performance was primarily due to its relatively high levels of child malnutrition and under-nourishment resulting from calorie deficient diets.

Haq's Musings: Right to Food in India, Pakistan and China