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“Economic growth in Lahore leads the economic growth of Punjab, Pakistan”

Interview: Dr Nadia Tahir

“Economic growth in Lahore leads the economic growth of Punjab, Pakistan”

Dr Nadia Tahir is Director, Research and Development, Lahore Chamber of Commerce and Industry. Having twenty years of teaching and research experience, she has done postdoctoral work at the University of Cambridge. The News on Sunday talked to her about a recent study mapping the economy of Lahore titled The Size and Growth of the Economy of Lahore. The excerpts follow.

The News on Sunday: What is the purpose of sizing up the economy of Lahore and its structure?

Dr Nadia Tahir: Ideally, the official statistics agencies like the Pakistan Bureau of Statistics (PBS) or the Punjab Bureau of Statistics should compile production and income accounts independently for the major cities and districts. In today’s fast changing world, cities compete with each other for attracting business. They are the level at which the ease of doing business is judged. This makes the measurement of the size of the economy of cities and the understanding of its structure extremely important.

In the absence of official estimates, the only possible approach is to break up national data by using secondary sources. The starting point of our study is the national GDP of 2010-11 and the end point is the national GDP of 2014-15. The predecessor of PBS had prepared sub-national estimates for the then provinces of East and West Pakistan in 1964. In 2005, Dr Kaiser Bengali and Mahpara Sadaqat estimated the provincial GDPs for the period 1973-2000 for the provinces of what is now Pakistan. In 2015, Dr Hafiz A. Pasha estimated the GDP of Punjab. The Lahore Chamber of Commerce and Industry has taken the lead to ascertain the GDP of Lahore by following this methodology with some modifications.

Lahore has a large economy of over a trillion rupees. In 2010-11, the size of the economy of Lahore was around Rs945.6 billion. It went up to Rs1,227 billion in 2014-15.

TNS: What are the basic sources of information that helped you compile this report?

NT: First, we ask how much of the national GDP can be attributed to Punjab. On the basis of appropriate official datasets, suitable allocators are determined and applied to18 subsectors to arrive at the share of Punjab in the national value added in each subsector. An aggregation of the results in each case gives the GDP of Punjab. Next, we repeat the same exercise to find the share of Lahore in Punjab’s value added in each subsector and sum it up to arrive at the GDP of Lahore.

Data sources include the Punjab Development Statistics, Household Income and Expenditure Survey, Pakistan Social Living Standard Measurement Survey, Labour Force Survey, Livestock Census and Census of Manufacturing Industries, Agricultural Statistics Yearbook, Yearbooks of the Federal Board of Revenue, Oil Companies Advisory Committee, Pakistan Telecommunications Authority and State Bank of Pakistan.

TNS: How will this study help us understand the likely dynamics of Lahore’s growth?

NT: The most important result of the study is that Lahore has a large economy of over a trillion rupees. In 2010-11, the size of the economy of Lahore was around Rs945.6 billion. It went up to Rs1,227 billion in 2014-15. This means that the share of Lahore in the Punjab economy increased from 17.7 per cent in 2010-11 to 18.9 per cent in 2014-15. The corresponding shares of Lahore in Pakistan’s GDP were 10.4 per cent and 11.5 per cent.

Not only the economy of Lahore is large, it is also a thriving economy. In the period of the study, the annual GDP growth rate of Lahore was higher than that of Punjab and Pakistan. But for Lahore’s growth of 6.7 per cent, provincial and national growth would have been lower than the realised growth of 5 per cent and 3.9 per cent respectively. Economic growth in Lahore, thus, leads the economic growth of Punjab and Pakistan.

TNS: How do we compare Lahore’s GDP and its share in the national GDP with that of other top 10 cities of the country?

NT: This is the first study of its kind. It needs to be extended to other cities before making comparisons with Lahore. Many policy insights would emerge if study of the industrial triangle of Lahore, Gujranwala and Sialkot is carried out. The latest ease of doing business index places Lahore six notches above Karachi. Faisalabad tops the list. Estimation of GDPs of these and other cities will furnish an informed basis for industrial policy.

TNS: How will this study help the policy-makers formulate future economic policies?

NT: Services growth creates employment and promotes enterprise and innovation. Density rather than sprawl is much better for realising the economies of scale and agglomeration. It makes the city more productive. As Edward Glaeser aptly put it, “There is no such thing as a poor urbanised country and there is no such thing as a rich rural country.” Economic policy thinking will be enriched by studying the sources of growth in the cities.

TNS: Within Punjab, Lahore’s growth of 6.7 per cent is way above the growth of 4.6 per cent in the rest of Punjab. This raises a distributional issue. Do you think development and investment being done in Lahore is at the cost of other underdeveloped areas in Punjab?

NT: National aggregates like growth rate and GDP per capita hide the variations at subnational level. The subnational income accounts enable us to know the differences between provinces and the districts and cities within the provinces. The information is helpful in formulating policies for equitable development and inclusive growth. Resource distribution criteria also benefit from this information. The high growth of Lahore does suggest a relatively higher proportion of public investment in the city.

TNS: Are other cities in Punjab also following the development patterns of Lahore?

NT: With economies of scale and agglomeration, a high growth of Lahore will contribute to high growth of Punjab and a high growth of Punjab will lead to a high growth of Pakistan. The Census 2017 suggests how important it has become to study city economies in their own right. With an urban population growth of 4.02 per cent, the Lahore district is now 99 per cent urban. Servicing this large population has changed the structure of the economy as well. The predominant sector of the economy of Lahore is now the services sector. Whether other cities have developed similar dynamic requires new studies to estimate their GDPs.

TNS: As agriculture has a larger share in the rest of Punjab than industry, even a higher industrial growth of 4.8 per cent could not compensate for the low agricultural growth of 1.7 per cent. Why has Punjab suffered from a low growth in agriculture?

NT: Agriculture has a larger share in the rest of Punjab than industry. If the larger sector has lower growth, the higher growth of the smaller sector cannot compensate for it. Low agricultural growth in Punjab is the result of failure to develop new seed varieties, poor access to credit and institutional obstacles.

TNS: A shift from manufacturing to the services sector has been the most notable feature of urban growth and development. How will this fact impact Lahore’s economic outlook?

NT: Services sector is the largest and the highest growing sector of Lahore. Its share in the GDP is 81 per cent. The sector has grown at an annual growth rate of 7.7 per cent. The city, it seems, has become the focal point of the growth of post-industrial and postmodern services. IT development, innovation and rapidly increasing start-ups don its future outlook.

TNS: The rising growth of services sector challenges the existing urban governance and planning practices. How?

NT: We need to understand the policy implications of the rising share and growth of services. The city will have to effectively manage environment, infrastructure, investment, consumption and other services to remain competitive. The experience from other countries tells us that autonomous and self-governing cities are a better environment for growth. Cities are known by the Mayors the keep.

Mazhar Khan Jadoon

The author is a staff member.

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