State Bank of Pakistan has released quarterly report on the state of economy, projecting less than 4 percent economic growth rate for the current fiscal year. The inflation rate will remain high within the range of 11-12 percent. The only positive macroeconomic indicator is the continued decline in the current account deficit which will be 1.35 to 2.5 percent of the GDP.
Major contributory sectors of the economy such as agriculture and manufacturing will remain under stress. Areas under cultivation of major crops have been increased but the production will remain low. The paltry increase in the support price of wheat does not offer attractive incentive to growers in Punjab. Despite the repeated demands, support price for rice and cotton has not been approved. The cost of inputs including better quality seeds, fertilizers, insecticides and pesticides has tremendously gone up, impacting the yield per acre. Small farmers can not avail agriculture credit due to high rate of interest.
The industrial sector will remain sluggish. In the month of October alone, production in large scale manufacturing dropped by 8 percent. Largely hit are the automobiles and textiles. Currency depreciation against the US dollar by over 30 percent and other global trading foreign currencies has made the import of completely knocked down and semi knocked down kits for the automobile very expensive. The sale of cars, trucks and tractors has nosedived. The vendor industry that produce small auto parts has shut down, rendering 40 thousand daily wage workers jobless. The employment of regular employees in auto sector is also at risk if the production does not pick up. The situation in medium scale industry is also discouraging.
The frequent hiking of electricity and gas tariffs and regressive taxation regime are also taking toll on the manufacturing sector. If amendment in the NEPRA Act as recommended by ECC is approved by the parliament, then regular increase on month on month basis in the rates of electricity, fuel price adjustment, , capacity trap payments to IPPs and charges on account of technical losses in the transmission and distribution system shall be independently notified by the regulator, hitting hard the industrial and other categories of consumers. It will have a multiplier adverse effect on both agriculture and industry. The policy of masterly inactivity of the ruling political leadership will prove detrimental to the next phase of industrialisation in the country for which foreign direct investment is being sought far.
