KARACHI, Oct 30: Thanks to the economic policies and government decisions, the wholesale and retail markets are now gradually wearing ghost look as buyers are deserting because of empty pockets, and there is not sufficient supply of industrial goods or agricultural commodities.

But in this otherwise dismal economic scenario, public administration and defence has shown an unprecedented growth of 18.2 per cent in 2001-02 from 1.15 per cent rise a year earlier and subsequently its share in the overall services sector has increased to 14.3 per cent from 12.7 per cent a year ago in 2000-01.

Troops deployment on borders with a big rise in pay and pensions of the employees of the federal and provincial governments and setting up of district governments and 02 presidential referendum have been mentioned as the main contributing factors for making public administration and defence a dominating segment of the services sector during 01-02.

The State Bank of Pakistan’s annual report for 01-02 reveals a conspicuous shrinking of the wholesale and retail marketing both in terms of growth and share in the services sector. Its growth has dropped to alarming level of 2.24 per cent in 01-02 from 5.24 per cent a year earlier. Its share in the overall services sector has come down to 29.6 per cent from 30.5 per cent a year ago in 00-01.

The wholesale and retail trade offers both forward and backward linkages to a very big portion of the domestic economy. It is the single largest segment of services sector and is second to agriculture in terms of employing labour force.

“The slower growth of wholesale and retail trade appears to reflect the combined impact of the deceleration of activities in the commodity producing sector of the economy, as well as in external trade, during 02,” explains the State Bank report. It points out that value addition in wholesale and retail trade is measured by the trade margin, which is the difference between the prices for the first seller and the final buyer. The total value added thus depend on margins, as well as on quantum of the commodities traded in the market.

“The market has shrunk,” remarked a well known business leader of the Federation of Pakistan Chambers of Commerce and Industry who said that market has shrunk on account of a sizeable cut in supply of goods and services and also because of a slash in number of buyers. Unemployment, lay-offs in government and private business firms and persisting drought has played havoc with the economy creating a situation which is unprecedented in Pakistan. “Prices are not increasing and inflation appears to be under control because the number of buyers have come down,” the businessman said..

In the year 01-02 the growth in services sector has overtaken all other sectors of the economy. The State Bank report calculates growth of services sector at 5.1 per cent, industry 4.4 per cent and agriculture 1.4 per cent. The fact that the growth in services sector has come mainly from public administration and defence manifests an alarming picture of the national economy.

The SBP report says that the services sector has been steadily gaining a larger share of the domestic economy over the past few years.

A chart shows that services sector was 49 per cent of the GDP in 1999 and 2000, which increases to a little over 50 per cent in 2001 and almost touched 51 per cent of GDP in 2002.

In the year 02, the 5.1 per cent growth of services sector contributed 72 per cent of the increase in value addition in the economy. Bulk of this has come from the cost incurred on troops deployment, rise in pay and pension of government employees and the price of city governments and presidential referendum.

Transport, storage and communication is the other segment of services sector which showed a dismal growth of 0.13 per cent in 01-02 as against 5.01 per cent in 00-01. Its share in services sector has come down to 19.9 per cent from 20.89 per cent.

But finance and insurance have shown a steady growth of 3.77 per cent from 2.75 per cent while its share in the overall services sector has been maintained at 4.5 per cent.