Misery Index: Who's Less Miserable? India or Pakistan?
By Riaz Haq
CA
Pakistanis are less miserable than Indians in the economic sphere, according to the Hanke Annual Misery Index (HAMI) published in early 2021 by Professor Steve Hanke. With India ranked 49th worst and Pakistan ranked 39th worst, both countries find themselves among the most miserable third of the 156 nations ranked.
Hanke teaches Applied Economics at Johns Hopkins University in Baltimore, Maryland. He explains the prevailing trends thus: "In the economic sphere, misery tends to flow from high inflation, steep borrowing costs, and unemployment. The surefire way to mitigate that misery is through economic growth. All else being equal, happiness tends to blossom when growth is strong, inflation and interest rates are low, and jobs are plentiful".
Hanke's Misery Index
Hanke's Annual Misery Index (HAMI) ranks Pakistan 49th (32.5) and India 39th (35.8) most miserable for year 2020. Bangladesh is significantly better than both India and Pakis¬tan with a misery index of 14 and rank of 129. Venezuela ranks number 1 as the world's most miserable country followed by Zimbabwe 2nd, Sudan 3rd, Lebanon 4th and Suriname 5th among 156 countries ranked this year. The rankings for the two South Asian nations are supported by other indices such as the World Bank Labor Participation data, International Labor Organization Global Wage Report, World Happiness Report, Food Affordability Index and Global Hunger Index.
Employment and Wages
Labor force participation rate in Pakistan has remained steady at about 40% during this period, indicating that the economy produced enough jobs to absorb new entrants to the job market. Even before the COVID pandemic, there was a steep labor force participation rate in India. It fell from 43% in 2005 to 27% in 2019.
The International Labor Organization (ILO) Global Wage Report 2021 indicates that the minimum wage in Pakistan is the highest in the South Asia region. Pakistan's minimum monthly wage of US$491 in terms of purchasing power parity while the minimum wage in India is $215. The minimum wage in Pakistan is the highest in developing nations in Asia Pacific, including Bangladesh, India, China and Vietnam, according to the International Labor Organization.
Global Food Security
Pakistan (with 52.6 points) has scored better than Bangladesh (48.8), Nepal (48.3) and India (50.2 points) in terms of food affordability. Sri Lanka scored higher with 62.9 points in this category on the GFS Index 2021, according to a global report released by Economist Impact and Corteva Agriscience recently.
Ireland, Australia, the UK, Finland, Switzerland, the Netherlands, Canada, Japan, France and the US shared the top ranks with the overall GFS scores in the range of 77.8 and 80 points on the index.
In overall food security, Pakistan ranked 75th with a score of 54.7, ahead of Sri Lanka (77), Nepal (79) and Bangladesh (84), but behind India ranked 71st with a score of 57.2 points on the GFS Index 2021 ranking 113 countries.
Pakistan improved its GFS score by 9 points (to 54.7 in 2021 from 45.7 in 2012) while India’s score improved only by 2.7 points to 57.2 in 2021 from 54.5 in 2012. Nepal improved by 7 points (to 53.7 points in 2021 from 46.7 points in 2012) and Bangladesh by 4.7 points (to 49.1 in 2021 from 44.4 points in 2012). China’s score improved by 9.6 points to 71.3 in 2021 from 61.7 in 2012, the report said. “The GFSI looks beyond hunger to identify the underlying factors affecting food insecurity around the world,” said Tim Glenn, Executive Vice-President and Chief Commercial Officer, Corteva Agriscience.
The cost of living in Pakistan is the world's lowest despite recent inflationary trends, according to the Cost of Living Index for mid-2021 published by Numbeo. Numbeo Grocery Index reports that the food prices in Pakistan are the second cheapest in the world.
Global Hunger Index
Global Hunger Index 2021 report has ranked Pakistan 92nd, ahead of India ranked 101st among 116 countries. Pakistan's other South Asian neighbors are ranked better: Nepal (76), Bangladesh (76), and Myanmar (71).
Pakistan has been reducing hunger at a faster rate than India but slower than other South Asian neighbors like Bangladesh and Nepal.
World Happiness Index
Amid the COVID19 pandemic, Pakistan's World Happiness ranking has dropped from 66 (score 5.693) among 153 nations last year to 105 (score 4.934) among 149 nations ranked this year. Neighboring India is ranked 139 and Afghanistan is last at 149. Nepal is ranked 87, Bangladesh 101, Pakistan 105, Myanmar126 and Sri Lanka 129. Finland retained the top spot for happiness and the United States ranks 19th.
One of the key reasons for the decline of happiness in Pakistan is that the country was forced to significantly devalue its currency as part of the IMF bailout it needed to deal with a severe balance-of-payments crisis. The rupee devaluation sparked inflation, particularly food and energy inflation. Global food prices also soared by double digits amid the coronavirus pandemic, according to Bloomberg News. Bloomberg Agriculture Subindex, a measure of key farm goods futures contracts, is up almost 20% since June. It may in part be driven by speculators in the commodities markets. These rapid price rises have hit hard the people in Pakistan and the rest of the world. In spite of these hikes, Pakistan remains among the least expensive places for food, according to recent studies. It is important for Pakistan's federal and provincial governments to rise up to the challenge and relieve the pain inflicted on the average Pakistani consumer.
Pakistan's Real GDP
Many economists believe that Pakistan’s economy is at least double the size that is officially reported in the yearly Economic Surveys. The GDP has not been rebased in more than a decade. It was last rebased in 2005-6 while India’s was rebased in 2011 and Bangladesh’s in 2013. Just rebasing the Pakistani economy will result in at least 50% increase in official GDP. A research paper by economists Ali Kemal and Ahmad Wasim of PIDE (Pakistan Institute of Development Economics) estimated in 2012 that the Pakistani economy’s size then was around $400 billion. All they did was to look at the consumption data to reach this conclusion. They used the data reported in regular PLSM (Pakistan Living Standard Measurements) surveys on actual living standards. They found that a huge chunk of the country's economy is undocumented.
Pakistan's service sector, which contributes more than 50% of the country's GDP, is mostly cash-based and least documented. There is a lot of currency in circulation. Currency in circulation, as percent of M2 and currency-to-deposit ratio, has also been increasing over the last few years. The difference between the average CIC/M2 ratio in FY18-21 at 28% to FY10-15 ratio at 22% of Rs1.2 trillion could have generated undocumented GDP of Rs 3.1 trillion at the historic velocity of 2.6, according to a report in The Business Recorder.
In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size. Even a casual observer can see that the living standards in Pakistan are higher than those in Bangladesh and India.
(Riaz Haq is a Silicon Valley-based Pakistani-American analyst and writer. He blogs at www.riazhaq.com)
