THE budget for the year 2009-10 is about to be presented to parliament. There are huge expectations, given the scale of the economic crises the people are facing. These cannot and should not be subsumed as an appendix to the crises the economy is facing.

For the economy, there are concerns about revenue generation, budget deficit, current account deficit, foreign exchange reserves, GDP growth rates, industrial growth rates, stock market indexes, corporate profits, etc. It is, however, important for budget-makers to be reminded of the real purpose of all economic-planning exercises, including budget-making the welfare of the people. And the variables that concern the people directly are unemployment, poverty and inequality.

The years 2000-2007 saw some stellar statistics, including record high GDP growth rates. However, the composition of growth brought little solace to half the population and, in fact, misery for the bottom quarter.

GDP growth rates are a weighted average of growth rates of its component sectors, some of which are labour-intensive. Growth in sectors like agriculture, small-scale manufacturing and construction generate jobs and are said to have high employment elasticity. By contrast, financial sectors are said to have low employment elasticity. A bank that increases its volume of transactions does not need to increase staff. After all, the additional money does not arrive in boxes that need additional hands to count the amounts. All that is needed are a few additional entries in the bank's computers.

Thus, in the period when the agriculture sector grew by 1.5 per cent and the banking sector grew by 30 per cent, GDP growth rates averaged impressively around seven to nine per cent. However, this was jobless growth. It was profit-centred and not wage-centred. It ensured that stock market indexes and corporate profits boomed but was meaningless for the people, who are now faced with the stark reality of unemployment and declining real wages.

Of course, official labour force statistics have reported a decline in unemployment. That, however, is a product of blatant data manipulation that the previous regime had come to specialise in. It is expected that the forthcoming budget will herald a decisive shift in the composition and direction of growth. In particular, it is expected that there will be meaningful measures to promote commodity-producing sectors relative to services sectors.

Unemployment means the absence of income or poverty. Apart from lack of job creation, poverty was also compounded by the monetary policy pursued by the State Bank. Opening the window of consumer financing enabled the banks to convert their zero interest earning excess liquidity to highly lucrative interest earning loans and credits. However, downloading the excess liquidity onto the market also implied a rise in money supply, which led to high inflation. The year 2005 saw the beginning of double-digit food inflation.

Here lay the rub for the poor. Those who were endowed enough to satisfy the banks about their ability to repay, improved their standard of living — albeit, on borrowed money. Others — unemployed, contract workers, temporary workers, part-time workers, home-based workers and the like — stood no chance of being entertained by any of the mushrooming banks or availing any of the privileges of consumer financing. However, they paid the price as high food inflation eroded their purchasing power and their already low standard of living. Food inflation hit them harder as food accounts for 50-70 per cent of their household budget.

Admittedly, monetary policy is not the domain of the budget-makers; however, fiscal policy is and it is expected that measures will be introduced to, at the least, halt the flow of resources from the pockets of the poor to the pockets of the rich.

There is evidence of this perverse shift of resources. An analysis of the burden of taxes shows that the richest 10 per cent of the population pay 12 per cent of their income as taxes to the state, while the poorest 10 per cent pay 16 per cent of their income as taxes to the state. Clearly, the state taxes the poor more than it taxes the rich. Not surprisingly, for every rupee of increase in national income, 34 paisas goes into the pockets of the richest 10 per cent of the population and a mere three paisas into the pockets of the poorest 10 per cent. It is expected that the forthcoming budget will herald a decisive shift in the incidence of taxes and expenditures in favour of the poor.

Inequality across income groups is compounded by regional inequality. Rural poverty rates are about 25 per cent in Punjab, 30 per cent in the NWFP, 40 per cent in Sindh and 50 per cent in Balochistan. The entire western salient, comprising the mountain districts of the NWFP, Fata, Balochistan, and parts of Sindh report extremely poor economic, social and human development indicators. That most of these areas are also in the throes of varying degrees of insurgency is not a mere coincidence. It is expected that the forthcoming budget will contain tangible measures to begin to reduce regional inequality.

The previous regime had declared that poverty had declined from 34 per cent to 23 per cent. And household data collected in 2007 shows that poverty has dropped further to below 20 per cent! The statistical shenanigan is certainly not amusing for those who have killed themselves or their children out of abject hopelessness and despair. According to the latest UN assessments, poverty has intensified to the extent that in over half the country, hunger stalks one-fifth of the population and malnutrition about two-fifths. Anecdotal evidence from Badin showed families consuming more tea than roti. On enquiry, it was revealed that spending Rs2 for a cup of tea numbs hunger and saves Rs20 for a meal! Many low-paid employees now walk to work — some as long as eight to 10 kms — to save on transport fares. And so on.

The tribulations of the poor are historical. However, a new phenomenon of 'middle class poverty' has emerged. There are the cases of those who have paid jobs, but on occasion find they do not have enough money for transport fares or petrol for their motorbike to enable them to get to work. There are college girls who have dropped out, not because their parents cannot afford the college tuition, but because “we cannot afford the Rs50 a day transportation and snack cost”. There are now cases of mothers who have just a fistful of rupees in their hands and have to make the painful choice of either buying milk or medicines for her child, who is sick and hungry.

The situation is grim and calls for a major paradigm shift. The PPP manifesto has made a commitment to place social and human development above the mere pursuit of economic statistics. There is a commitment to provide for productive employment and a dignified source of income. Reference here is to the imperative of creating a dynamic economy that creates jobs and enhances incomes. The framers of the budget will do well to remind themselves of these commitments. June 13 will be keenly awaited and monitored.

The writer was formerly national coordinator of the Benazir Income Support Programme.