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LAHORE: Across the world, governments are rethinking the relationship between economic growth and income distribution.
Even countries with deeply entrenched market economies are increasingly debating wealth inheritance and windfall taxes to ensure that excessive wealth concentration does not undermine social cohesion.
Authoritarian states, despite operating under a different political model, have also sought to recover illicit wealth from corrupt elites and redirect public resources towards infrastructure and welfare. Despite their ideological differences, both approaches on wealth accumulation are the same.
Many recent policy decisions, whether driven by fiscal constraints, international commitments or domestic lobbying, reveal that they have had the cumulative effect of strengthening the economic position of large corporations and wealthy investors while reducing opportunities for small businesses, farmers and low-income households. The result is a widening gap between the rich and the poor, reflected in declining purchasing power, shrinking social mobility and growing public frustration.
A striking example is the taxation of hybrid vehicles. In the latest fiscal measures, hybrids were subjected to taxes substantially higher than those imposed on fully electric vehicles, reportedly in line with environmental objectives and International Monetary Fund-supported reforms. Now, the government is considering reducing these taxes even on premium hybrid vehicles. While encouraging cleaner transport is a legitimate policy objective, extending tax concessions primarily to expensive vehicles disproportionately benefits higher-income consumers who can already afford such purchases. The poor, who rely on public transport or inexpensive motorcycles, derive little direct benefit from these incentives.
Trade policy presents another example of uneven outcomes. Pakistan has entered into preferential trade arrangements with countries such as China, Indonesia and Malaysia, lowering duties on numerous imported products. These agreements may reduce costs for consumers and improve industrial competitiveness. However, they have also exposed many domestic manufacturers — particularly small and medium-sized enterprises (SMEs) — to intense competition without providing comparable support to improve productivity or technological capability. Larger firms are generally better equipped to absorb these shocks than smaller producers.
The export incentive regime also deserves closer examination. Export rebates and tax refunds are typically linked to the value of exports. Consequently, large exporters receive substantially higher refunds, improving their liquidity and competitiveness. SMEs, despite accounting for a significant share of employment and contributing meaningfully to export diversification, receive relatively modest support because their individual export volumes are smaller. This unequal distribution of incentives limits their ability to expand production, invest in technology and enter new international markets. Pakistan cannot build a resilient export economy if policies overwhelmingly favour established enterprises at the expense of thousands of smaller exporters.
Furthermore, agriculture, which supports millions of livelihoods, reflects a similar imbalance. The government has announced attractive incentives to encourage foreign investment in corporate farming and large-scale agricultural ventures. However, comparable incentives are seldom available to the country’s small farmers, who constitute the overwhelming majority of agricultural producers and cultivate most of Pakistan’s farmland. The cumulative effect of these policies leads to higher inequality and reduced economic dynamism.
Pakistan undoubtedly needs foreign investment, fiscal discipline and industrial modernisation. However, these objectives should not come at the expense of inclusive development. Public policy should level the playing field rather than tilt it further towards those already enjoying economic advantages.
A more balanced strategy would ensure that SMEs receive proportionately greater export support, small farmers have access to the same incentives extended to large agricultural investors, tax preferences are carefully targeted towards broad public benefit rather than luxury consumption, and competition policy prevents excessive concentration of economic power. Such reforms would not discourage investment; they would strengthen it by expanding the productive capacity of a much larger segment of the economy.
Unless Pakistan reorients its policy priorities towards inclusive growth, poverty and inequality will continue to reinforce each other, threatening both economic stability and social cohesion.
