After the reduction of policy rate by 4.25 percentage points, rate of profit on National Saving Schemes have be lowered by 2 percent. Since 2004, the of rate monthly return on regular income saving schemes and six monthly ones have been lower trice with the sole objective of providing easy credit to business community.
But each time the intended objective of spurt in investment and national output has not been achieved as other variables such as regressive high rate sales tax, turnover tax, irrational rate of withholding tax and above all technological stagnation, high cost of imported raw material and intermediate goods kept the economic environment unfavourable.
It merits mention that record low policy rate of 5.5 percent could not help break the recessionary cycle in the last government of mercantile Prime Minister Nawaz Sharif as other important variables of fiscal policy had served as landmines to blast the economy under the grip of stagflation.
The national saving-GDP ratio had dropped from 13 percent to dismally low 8 percent. The same failed recipe must not be repeated. It was the policy of less reliance on regressive taxes for revenue generation in President Zia era that investment rate was satisfactory in physical assets and high rate of return on bank deposits and national saving schemes attracted hot money from abroad in the instruments of portfolio investment .
