According to the Global Wealth Report of 2015 released by Credit Suisse in October 2018, Pakistan has the 18th largest middle-class consumers population. The share of the middle class in the adult population of 111 million was 5.7 percent whereas in India it was only 3 percent. Positive growth of the middle-class population until recently was achieved despite growing macro-economic imbalances and terrorist activities along with misery invoked through the onslaught of Covid-19 and the countrywide disastrous flood experienced recently giving rise to food insecurity and extreme poverty.
The country has recorded a significant increase in the urban middle class making it almost 35 percent of the total population. This can be attributed to the widespread use of advanced information technology in the financial, manufacturing, and service sector creating substantial employment opportunities for educated youth. This prompted a sizable chunk of the educated rural population also to migrate to urban areas, particularly to big metropolises.
It is difficult to assess how many people fall into this category. A basic criterion in this regard is the people between the poor class earning less than $2 a day and the 5 percent rich/elite class. According to the Human Development Report of 2009 (focusing on Pakistan), those who earn more than $2 a day can be placed in the lower middle class and those earning up to $10,000/- can be grouped into the upper middle class. According to credit Suisse, a Pakistani must have wealth at least equivalent to $14,413/ keeping in view the level of per capita income.
In other words, the middle class represents persons who are demanding an increasing amount of goods and services that contribute towards the overall well-being of society.
The growth rate of the middle class in Pakistan is faster than in other developing countries of South Asia and African countries. The size of the middle class in African countries, particularly in Nigeria, Ethiopia and South Africa is growing since the early eighties and by 2010 it comprises almost 26 percent of the total population on average.
According to UN Report on Human Development, in the whole of the Sub-Saharan region, those earning between $1,460 and $7,300 a year can be categorized as middle-class people.
In India, which is considered a hub of information technology, 75 percent of its population is earning less than $2 a day. As the such representation of the middle class in the total population is hardly 20 percent.
Increasing job opportunities in manufacturing, financial and service sectors and above all poor class access to the formal financial sector needed for promoting entrepreneurship has prompted educated rural youth between the age group of 25 to 40, which is an acquiring phase of life to migrate to urban areas. This, in turn, has enhanced not only entrepreneurship but also consumer spending relating to housing, goods of comfort, and devices relating to information technology particularly cell phones, etc.
Promotion of entrepreneurship
Despite persisting problems like growing poverty, poor law and order situation and inadequate infrastructure in all sectors of the economy urban middle class is taking initiatives to promote entrepreneurship in areas of the service sector and manufacturing of value-added and designer goods, which will ultimately promote inter-regional and global integration through the enhanced international trading spectrum of the country.
Due to inconsistent economic policies of the government, total neglect of the energy sector, and other infrastructural needs GDP growth rate has sharply declined in recent years and for the current fiscal year also, it is not likely to touch even three percent. No doubt the majority of the lower middle-class population is deployed in the informal sector causing tremendous growth of the informal economy until the advent of Covid-19, which has hampered the steady growth through IT lead technology. However, government initiatives for fostering consistent economic policies ultimately leading to a congenial business environment in all sectors of the economy will enable this class to upgrade themselves and be a part of a formal/documented economy.
Advancement in communication and information technologies has given a boost to the financial sector. E-banking has enabled both conventional and microfinance banks to have wide-spread reach to the poor and lower-middle-class population giving impetus to entrepreneurship development for the youth of this segment of the population.
Information technology innovations and the rise in software development pursuits have enabled even education, communication, agriculture, and other services to make use of these advanced technologies and improve business growth rates.
If sincere efforts are made at the government level to promote inter-regional as well as global trade relations that would automatically boost local as well international demand for manufactured goods and services and will also attract foreign direct investments thus giving a fillip to employment opportunities for country’s work-force, which will ultimately result in bolstering consumer spending and augmenting middle class.
There is a need to designate big cities as innovative hubs for advancement in the use of technology and entrepreneurship dynamism among youth making them a real economic force.
Growth of agriculture
There is ample potential for growth of the agriculture sector, which remains untapped and at the same time-frequency of natural calamities like floods and drought conditions coupled with a sharp rise in prices of all agriculture inputs has stagnated the growth rate and country despite having an agrarian economy contribution of agriculture to GDP seldom exceeded 19 percent, whereas according to World Bank report globally agriculture sector has recorded an improvement by 145 percent since 1960.
Findings of Research studies conducted by agriculture universities and various agriculture research institutes in the country for improving yield as well as the quality of agricultural produce need to be disseminated at the village level for the knowledge of poor cultivators enabling him to make use of suggested methods of production and technology available at village level.
Shortage of fertilizers and availability at a very high price for the last five years has adversely affected the yield of all major crops. Consequently, a major chunk of the rural population remains trapped in a vivacious circle of poverty and quite a number of middle-income level growers a drifted back to poor income levels. To ensure a regular supply of fertilizers in the market government’s serious intervention is needed to combat unethical hoarding and black marketing activities.
There is also a need to put in place improved food processing and storage plants so as to enhance the export of vegetables and fruits. In view of the expected fall in agriculture product prices globally; the interest of the cultivator is to be protected by ensuring their easy access to all agriculture inputs at reasonable prices.
Improve education and skills
Professional colleges and educational institutions need to focus on technical and entrepreneurial skills education along with conventional academic courses to make the student an agent of change in the real sense.
No doubt now quite a number of universities have introduced textile designing and related courses and the number of enrolment in these courses is gradually increasing, but in order to make it more accessible to youth of smaller cities and rural areas such curriculums must be introduced in all colleges.
Monetary allocations for public sector infrastructure projects development must be utilized within a specified time and the project executed in conformity with the project design.
Priority needs to be given to energy, water supply, and communication projects, which will induct a large number of youth not only at the stage of the execution process but also fast growth of all sectors of the economy needing these basic infrastructures will generate more employment opportunities thus giving rise to the middle class in the country.
The increasing inflow of overseas’ remittances is yet another factor responsible for a significant increase in a number of the middle-class population. A satisfactory level of spending on education and health care of children and other family members has enhanced the percentage of an educated and energetic workforce – capable of getting work opportunities in all sectors of the economy.
The government needs to provide incentives to migrants and their families in Pakistan, particularly in the form of tailor-made profitable businesses and exclusively developed saving schemes with handsome returns to enhance the income status of poor migrant families.