It is said that temptation became the undoing of Man in the garden of Eden. The controversy surrounding the GDP estimates announced by National Accounts Committee over the weekend looks no different. As one commentator noted that the economy posted a decent recovery anyway; sadly, the desire to make the figures look “best-ever” spoiled the show.
Consider the case of agricultural sector output. The incumbents are not the first to show a rosy picture using overly-optimistic growth factors for livestock, forestry, fishery, and other crops segment that together constitute 76 percent of agri-GDP (and 14.6 percent of national economic output). As BR Research has previously explained, output growth in these segments is near impossible to measure in absence of periodic census and surveys, which have not taken place ever since Agriculture was fully devolved to provinces.
Yet, it appears that the financial masters have responded ‘creatively’ to mounting pressure from supporters and critics alike to ‘demonstrate performance’. The media onslaught during past two years over inflation in food items and episodic flour and sugar shortages clearly worsened the performance anxiety. The outcome? Agricultural output growth on steroids.
Consider the case of wheat, with its 40 percent share in “Important Crops”, and 1.8 percent share in national GDP. Based on crop estimates announced by Federal Committee on Agriculture (FCA) last month, national wheat output grew by 1.7 percent; third-highest ever, and only 4 percent shy of highest ever output in FY17.
But now, output estimate has been placed at 27+ million tons, a fanciful exaggeration that will make import requirement of 3-4 million tons - stressed by the new FM just two weeks ago – impossible to justify.
Spurious evidence is being advanced in favour of the exaggerated wheat output claims, such as the relative ease with which Punjab Food department has achieved its procurement target. Never mind that both provincial and national wheat procurement targets are 25+ percent lower compared to last season; or that the wheat procurement price has been increased by 29 percent; naturally making farmers much more willing sellers to the government!
Similar is the case of maize/corn, where news from rural areas suggests that brakes were hit on unbroken output growth momentum of the past decade. In both cases, freak weather events and climate change – and not the government – would be at fault for decline in output. For example, many maize farmers in Punjab reported productivity losses from extreme heat. Even though maize output witnessed a slight shortfall over last year - according to an earlier press release by FCA - crop output was still second highest, owing to increasing popularity and adoption by farmers (due to higher profitability).
Yet, ‘pressure to perform’ has resulted in NAC recording a 7.38 percent increase in crop output. Well, kudos if maize output has miraculously rebounded. But now, officials will face a much-harder and odious task of explaining why domestic wholesale maize prices were marred by double-digit increases all of past year. Especially given that demand from poultry sector had remained subdued due to ban on social gatherings. The reference to trends in global commodity prices makes little sense, considering that foreign trade in maize is virtually non-existent; thus, domestic prices cannot be pegged with import parity.
The case of sugarcane is no different. Where long after the crushing season is over, the industry association is convinced that crop was nowhere close to “highest-evers”. Official sources from Punjab’s Sugarcane Research & Development Board also back this claim.
As the chair of National Price Monitoring Committee, the new FM will have to explain why retail prices of wheat flour and refined sugar continue to trend upwards if raw material supply is at its peak. Surely, the government can find an unenviable justification for the out-of-control food inflationary pressures in the form of minimum support prices, which it has increased to the (apparent) benefit of farming community.
The PM has also hinted as much in many of his recent addresses, where he has claimed that farmers have earned record profits under PTI regime. Yet, consumers continue to be battered as a consequence, as household food basket becomes more expensive. Would that make for a desirable – nay, even sensible – policy admission?
Meanwhile, if major crop outputs have not increased by all that much – as is being feared by farmers as well as sources from provincial crop survey departments alike – then government has passed on the price benefit to farmers without much to show in the form of improved productivity. Exaggeration today may also cause policy inertia later when supply gap creates price pressures. Bureaucracy may end up resisting removal of import tariffs if official estimates show commodity surpluses.
The publication of Annual Economic Survey by finance ministry is probably still a fortnight away. If crop estimates have indeed been massaged, window of opportunity still exists for a realistic revision. Hope sense and reality-check prevails in Islamabad.
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