167 GROWTH WITH EQUITY: POLICY LESSONS FROM THE EXPERIENCE OF PAKISTAN Sayyid Tahir and Salman Syed Ali* INTRODUCTION Analysis of poverty and income inequality has a long tradition in Pakistan. This study breaks some fresh ground in a number of respects. Following the summary of the economic background in chapter I, a consistent series of poverty estimates from 1963/64 to 1993/94 (14 observations) is developed in order to facilitate the analysis of poverty trends, together with data on income inequality in chapter II. Chapter III integrates an analysis of trends in poverty with those of inequality and growth. A closer look is then taken at the impact of changes in major domestic policies (fiscal, monetary and selected sectoral policies as well as important policy initiatives) on poverty and inequality in chapter IV. The paper concludes by drawing some policy lessons in chapter V. I. ECONOMIC CHALLENGES AND MAJOR CHANGES IN THE ECONOMY A. Economic growth The real gross domestic product (GDP) growth rate in Pakistan averaged 4.38 per cent during the 25 years from fiscal years 1972/73 to 1997/98. However, it varied considerably during that period. After an impressive performance in the 1960s, the rate declined to as low as 4.3 per cent between 1969/70 and 1974/75. That was the period during which East Pakistan separated to become Bangladesh, and the policy of nationalization of business units was pursued on a large scale. The average GDP growth rate for the 1970s was 4.8 per cent. A significant improvement in the GDP growth rate took place during the Zia-ul-Haq regime in 1977-1988. The growth rate was 6.7 per cent from 1979/80 to 1984/85, but it averaged 6.1 per cent over the 1979/80 to 1989/90 * International Institute of Islamic Economics, International Islamic University, Islamabad.