Economic Policy In Pakistan

SECTION-1

ECONOMIC POLICIES AND EFFECT ON INEQUALITY FROM 1947-1970

1.1 Decade of 1960s

Pakistan at the time of independence faced problems and challenges of an undeveloped economy. There was little or no public or private industrial setup and agriculture was the main stay of the economy. The country lacked the enterprise, technology, efficient resource allocation and physical infrastructure to support an industrial and even services base like banking. The emulation of developed world industrial structure was a daunting task .

The guiding principle was the developing world development model of public sector leading the industrial development as the private sector lacked financial resources and technical capabilities to undertake mega projects.

As mentioned earlier the key constraint to industrialization was lack of foreign exchange for import of industrial goods, machinery and equipment, simultaneously there is gap between income and expenditure resulting in low savings for further future investment. In practice while the policy of distributing incomes in favour of the economic elite succeeded, the assumption that it would raise domestic savings over time failed to materialize. It has been estimated that 15% of the resources annually generated in the rural sector were transferred to the urban industrialists and 63 to 85 percent of these transferred resources went into increased urban consumption

To establish backward linkages of export led agricultural growth it was imperative to have high yield crops, increasing production per acre, consolidation of land holding, making available farm and agriculture inputs and credits. Thus the state was weary of land reforms as it was assumed to reduce agricultural output efficiency. Prior to this commercialization of agriculture most of the agriculture land was cultivated by peasants working for large land owners and small subsistence farmers. This commercialization of agriculture resulted in two further inequalities. To remain productive and to produce high yield the farmer has to resort to high yield seeds and other agricultural inputs as well as elaborated system of water supply by irrigation and tube wells, all which needed credit and access to market, the subsistent farmer suffered on all these counts. Similarly, the commercializing of agriculture served as an opportunity for landed aristocracy, which resumed large land from tenants, which were later, forced as labourers without other means of livelihood. The real income of rural poor particularly on farm workers further deteriorated and sold their lands to meet livelihoods resulting in reduced farm areas whilst others became land less and were forced to become labourers on farms of large land