The government is to project 3.4 percent growth in agriculture, 3.1 percent in industry and 5 percent in services during the financial year 2011-12. Growth for 2011-12 is targeted at 4.2 percent with contribution of agriculture, industry and services sectors by 3.4 percent 3.1 percent and 5 percent respectively.
Nominal GDP is targeted to increase by 17.2 percent and GNP per capita would be around Rs 121,591. According to the Annual Plan 2011-12, available with Business Recorder, the target set for agriculture growth for fiscal year 2011-12 is 3.4 percent, with contribution of major crops 3 percent, minor crops 2 percent, livestock 4 percent, fishery 2 percent, and forestry -1 percent.
The growth target has been set at higher level considering the recent trend of post-flood revival seen in agriculture production and surge in international commodity prices, which is an incentive for farmers to boost production in the short run. Moreover, increase in fertility of land after floods has increased the expectation of healthy major crops and horticulture.
Livestock is expected to improve due to availability of fodders and green pastures. Increased demand for processed food and dairy products is stimulating the private sector to increase investment in livestock and dairy sectors.
Pakistan is the 4th largest milk producer in the word. Yet its share in the global milk market is negligible, and only 3 percent of milk production is being processed. Overall, the contribution of dairy sub-sector to the national economy is Rs 540 billion (with 97 percent as informal non-documented economic activity) and is expected to grow at 4 percent. An estimated 20 percent of current milk production is lost due to inadequate infrastructure, required for a highly perishable commodity like milk.
Industry: Industrial sector has shown revival and is expected to grow at 3.1 percent with projected contributions of mining and quarrying 1 percent, manufacturing 3.7 percent, construction 2.5 percent, and electricity, gas, and water 1 percent. Increased demand for construction activities and uninterrupted electricity supply tariff for industrial zones is expected to improve performance. Moreover, Private Power Infrastructure Board''s (PPIB) energy outlook for next year is also showing improvement in electricity supplies.
Services: Services sector is projected to grow by 5 percent with contribution of transport, storage and communication 4.5 percent, wholesale and retail trade 5 percent and finance and insurance 0.2 percent.
The Planning Commission is of the view that revival in the commodity producing sector would support growth in the services sector via rejuvenation of transport and finance sub-sectors, especially after floods. Recovery in agriculture and industry will impact the performance of the services sector via improvement in wholesale and retail trade.
Savings and investment: The projected investment-to-GDP ratio is 13.7 percent, with fixed investment at 12.1 percent and changes in stock at 1.6 percent, whereas national savings is projected to be 13 percent of GDP with the national investment and savings gap at 0.7 percent.
According to the Planning Commission, the role of investment in the form of foreign director investment (FDI) will be highly dependent on the law and order situation, infrastructure investment, introduction of reforms to create conducive environment and also on increased competition in the domestic market. Moreover, this will be supported by domestic entrepreneurship and innovation in line with Pakistan Economic Growth Framework. The Planning Commission has anticipated that FDI will come for oil and gas exploration, trade, financial business, telecommunication, construction and chemicals in view of the measures aiming at opening up markets for private investment and limiting the role of government for bringing change in the form of increased competition and better services at micro level of the economy.
Fiscal development: Main focus of fiscal policy during 2011-12 would be to bring fiscal deficit to manageable level by building consensus among all stakeholders, for imposition of RGST, wealth tax, capital gain tax, bringing the untaxed services sector under tax net, and tax on agriculture income in order to broaden the tax base and addressing governance issues in resources mobilisation. The Planning Commission has suggested that strengthening tax administration reforms, reducing tax slippages and enforcing tax compliance need to be undertaken in earnest. Provincial governments must take initiatives to increase their own tax collection to demonstrate fiscal responsibility.
On the expenditure side the government is expected to manage its current expenditure by implementing austerity measures, minimising untargeted subsidies, and restructuring public sector enterprises like power sector, PIA, Railways, Pakistan Steel Mills, etc. Development expenditure would be redirected towards priority sectors like energy, water, human capital, innovation and technology transfer to lay foundation of long-term sustainable economic growth.
The Planning Commission has recommended that to promote rule-based fiscal policy, strict adherence to Fiscal Responsibility and Debt Limitation Act 2005 needs to be observed in view of the enhanced provinces'' share (to 57.5 percent in divisible pool) to help facilitate to limit the fiscal deficit at a sustainable level and to attain higher tax-to-GDP ratio.
Monetary Developments: Monetary expansion for the year 2011-12 will be in with the projected growth of 4.2 percent and CPI inflation at 13 percent. To keep M2 growth rate in the vicinity of the targeted level and to encourage private sector credit, it is imperative that government borrowings be limited to about 10 percent of revenue of the previous year. This is expected to help decease the CPI inflation and increase the GDP growth rate.
Inflation: The target rate of inflation (CPI) for 2011-12 is set at 13 percent as against expected CPI inflation of 15 percent for 2010-11.
Trade Account: Exports (fob) for 2011-12 are projected to grow by 5 percent to $25.8 billion from $24.6 billion estimated for 2010-11. Imports during 2011-12 are projected to increase by 6 percent to $38.1 billion from $36 billion estimated for 2010-11. Hence, the trade account is projected to be in deficit by $12.2 billion in 2011-12.
Current Account Balance: The current account deficit is targeted at $1.4 billion in the Annual Plan 2011-12.
Capital Account: Gross aid disbursement during 2011-12 is expected to remain at the same level of $3.6 billion estimated for 2010-11. Allowing for other capital inflows, the overall balance is likely to be in surplus by $7.4 billion for Annual Plan 2011-12 compared to an estimated surplus of $6.9 billion in 2010-11. Net foreign exchange reserves of SBP (excluding reserves with the banks) are likely to be around $15 billion in 2011-12, compared to a level of $14.6 billion in 2010-11.
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