Dr Ashfaque H. Khan in his article "Who is the Spin Doctor?" published in Business Recorder on June 16, 2016 has levelled a number of allegations against the government. The writer has stated that the GDP growth number is grossly inflated for the year 2015-16. He mentioned that this is not the first time that the minister forced the PBS to get the desired number.
In fact, the real GDP growth for the last three years has been inflated to misguide the people of Pakistan and to inject a false sense of prosperity. He also claimed that the readers would know that for the last three years, we have been experiencing three types of economic growth. One is the 'asking rate of growth', asked by the finance minister. Second is the 'delivered rate of growth', delivered by the PBS and the third one is the growth estimated by independent economists. In the year 2015-16, we have added a fourth rate of growth, that is, 'forced rate of growth,' forced by the finance minister.
The allegations made by the writer are totally baseless and misleading. The assumptions made by the writer and SPDC are totally refuted. It seems that the writer is fully influenced by the SPDC report. The writer who himself remained involved in computation of growth numbers should be well aware of the system of computing GDP and the international methods used in its estimation. It is not an impartial work of research as it has set preconceived outcome in mind without gathering the required data and facts. It is an international practice that national accounts are first presented as provisional accounts based on the available data. These are then revised over a period of one year (provisional actual) and thereafter presented as final (actual) after another year. This is the system under the System of National Accounts (SNA) 2008 and is followed in Pakistan.
The data used to compute the GDP numbers is provided by a host of agencies, public and private as well as federal, provincial and local authorities. These data sources are fixed as approved by the National Accounts Committee. The data providers are the members of the National Accounts Committee meeting and in the meeting these members further rectify the data. The data is available for nine months and in some cases for six months, however is annualised and used provisionally. The numbers for government sector are taken from federal, provincial and local government budgets, as approved. Once parliament or assembly or house approves the revised budget, the revised numbers are adopted.
In light of the fact that the methodology is fixed and the data is provided by a large number of specified organisations, PBS has no space to compute numbers according to the desires of others. These numbers are based on hard and verifiable sources.
The data presented is provisional for 2015-16, which will be revised in 2016-17 and finalised in 2017-18. This is being adopted by PBS from decades and has not been adopted for any single year as has been portrayed by the writer for the year 2011-12.
It is interesting to note that the writer while quoting the growth rates of 2011-12 criticises the government that the growth rates were changed in 2013-14, however when the revised and final figures for 2013-14 remained unchanged and he is again unhappy. There are many fluctuations in the sectoral estimates while revising the GDP. In an effort to confuse the readers he further says that the provisional and revised figures for 2014-15 are identical, whereas, the fact is that provisional figure was 4.24 which is now at 4.05 as revised estimate.
Moreover, the worthy writer, while describing the agriculture sector in 2015-16, claims a negative growth of 34% in cotton, rice -2.7 and wheat 0.0%. However, the hard numbers from the sources reveal that cotton is -27%, rice -2% and wheat is positive 1% instead of 0.0% knowing the fact that wheat has a weight of 42% in important crops. The writer and the SPDC report are time and again stating that this year there is negative agriculture growth (-0.19) percent. This is not the first time that Pakistan has witnessed negative growth in agriculture. The country earlier also experienced negative growth of -4.28 percent in 1983-84, -5.29 percent in 1992-93, -2.18 percent in 2000-01 and now -0.19 percent in 2015-16. The agriculture growth is weather dependent and any untoward weather change affect the growth, but if other sectors of the economy like industry and services sector perform better, the losses of agriculture sector are somehow compensated.
The writer has also claimed that while inflating GDP number, the PBS forgot that as a result of their manipulation the MPC has turned out to be 1.23, which is against all economic wisdom. When GDP number was inflated, given the other components of GDP which were estimated, the residual got inflated, which, in our case, is the consumption expenditure. Even if we exclude government consumption expenditure and concentrate only on household final consumption expenditure, the MPC is estimated at 0.94 percent which is very high from developing countries' prospective.
It is for the information of the writer that students in economics are aware that the MPC is defined as by how much household consumption at constant prices will increase (decrease) by an additional one unit (or one percent) increase (decrease) in household purchasing power, the latter is measured by households disposable income adjusted for increases in consumer prices. An estimate of the country's MPC can only be estimated by estimating a consumption function using statistical (econometric) methods. In Pakistan, no data for households' real disposable income are available. Pakistan's MPC can therefore not be reliably estimated. Regarding Consumption to GDP ratio, although it has little meaning but it can be greater than 1 when imports are high relative to investment and exports.
It has been observed that MPC was 1.20 for 2004-05 when the worthy writer himself was looking the state of affairs. Even in the new base this ratio has been above 1.0 during 2007-08, 2009-10, 2010-11 and 2011-12. The reason behind this is that the household final consumption expenditure is taken as residual, as has been pointed out by the writer himself and any negative change in exports, imports or gross capital formation results in higher household final consumption expenditure. In view of the above facts it is clear that the facts and figures quoted in the article are highly misleading and an attempt to portray a dismal picture of economy.
The writer also claimed that private sector borrowing from commercial banks as percentage of GDP is on the decline over the last one decade. This ratio was 27.1 percent in 2007-08 which declined drastically to 15.0 recent by 2012-13 and declined further to 14.3 percent in 2015-16. In 2015-16 when both private sector borrowing from commercial banks and PSDP as percentage of GDP are on the decline.
It may be noted that in 2007-08, the GDP was Rs 10,637.7 billion. The credit to private sector (CPS) stock was Rs 2,888.0 billion while in 2015-16, GDP was Rs 29,597.9 billion and CPS stock as in May 2016 stood at RS.4,263.1 billion. It will definitely give low reading in 2015-16 if to compare to 2007-08 because of low GDP. The CPS stock growth from 2007-08 to 2012-13 was 16.25 percent while during 2012-13 to 2015-16, it increased to 27 percent and as in May 2016 CPS stock increased to 48 percent compared to 2008.
During current year (July-March) FY 2016 the loans to the private sector business increased to Rs 319.8 billion showing an increase of 73 percent over last year; of which the working capital increased by 136 percent and fixed investment increased by 78 percent, while trade financing increased by 0.4 percent. The total manufacturing credit increased by 97 percent and working capital increased by 336 percent which shows that capacity utilisation in manufacturing increased implies improvement in output gap in manufacturing.
The development budget has been gradually and adequately raised in order to meet the investment requirements. Against the revised estimates of Rs 348.27 billion for federal PSDP during FY2013, it was raised to Rs 700 billion in FY2016, showing a cumulative increase of 100 percent.
Regarding writer's observation that government is pursuing the anti-growth, anti-job and anti-people policy, it is important to note that government has taken various policy measures to boost economic activities in all major sectors of the economy. To mitigate the challenges of decline in the prices of global commodity markets, the government announced a package for the relief in the forms of duty and taxes as well as stabilised local market of agricultural commodities. Provincial governments also substantially enhanced the development expenditures with a focus on construction of farms to market access roads. In the Vision 2025 cluster based approach is adopted to transform agriculture into a modern sector and Planning Commission is working on it to realise the planned objectives. During the first nine months of current fiscal year (Jul-March 2016) the banks have disbursed agriculture credit amounted to Rs 385.54 billion which is 64.26 percent of the overall annual target of Rs 600 billion and 18.26 percent higher than disbursement of Rs 326.01 billion made during the corresponding period last year.
State Bank of Pakistan has also reduced discount rate gradually and reached 5.75 percent, which is also a major inducement for business and investor's community to increase economic activities in the country.
Moreover, the Prime Minister youth scheme which is an umbrella program for the youth to involve them actively in economic activities along with skill development in youth as per requirements of labour markets. All these initiatives reflect that the government policy is growth friendly with a focus on job creation as well as welfare of common man so Dr Ashfaq claim is not valid by any parameter. The economy is making historical achievements which are being widely acknowledged by international global media.
It is important to mention here that earlier the writer also tried to "mislead" people by raising the question "Have Dharnas adversely affected the economic activities in the country?" People have witnessed that the economic recovery was undermining by dharnas.
It is advised for the writer to accept the reality that economy has stabilised and moving towards high economic growth on sustainable basis. The government has chalked out a roadmap for next three years to achieve high, inclusive and sustainable growth, not like that one which nose-dived to 0.36 percent in 2009 from 8.96 percent in 2005, just with one global shock.