A universal commitment to a high economic growth rate is understandable because it creates more national wealth and prosperity for some, if not for many. So, a growth rate of 6-6.4 per cent is good news.

But a high growth rate often tends to dull sensibilities to the growing imbalances and inequities developing in the economy and the society. The boom does not last long. National economies with virtues perform better.

The frequency with which economic cycle of boom and bust occur these days, the world witnessing one crisis a year, can be explained by market orthodoxy inimical to democracy and social inclusion.

Welcome and vitally necessary as it is, a high economic growth brings in its wake many challenges that are supposed to be tackled by policies and programmes executed through annual budgets. The acid test of the next year's budget would be in the measures it unfolds to bridge income, fiscal and output gaps.

A wide range of imbalances that need to be addressed include a gap between the rich and poor, disparity in incomes between rural and urban dwellers and equitable distribution of resources among various regions and districts.

Such imbalances as trade and fiscal deficits are a continuing focus of official policy-making because the fundamentals of the economy are not strong. The boom is explained by external capital inflows.

A key issue is to strike a balance between labour-intensive economic activity, that creates employment and capital-intensive enterprizes, that shed jobs by induction of high- tech.

There is harmony and conflict between development of the national market and globalization that needs careful adjustments. And within the domestic market, the paramount problem is to manage a harmonized growth in all segments of the economy for sustainable growth.

In the next budget, policy makers would try to strike a reasonable balance between revenue and expenditure amidst various pulls and pressures ranging from the needs of social and physical infrastructure, security concerns to the demand for tax relief from industrialists and farmers.

Official development spending will be increased from budgeted Rs160 billion for this fiscal to Rs202 billion for next year on building of social and physical infrastruture.

Security concerns on both the eastern and western borders have raised defence spending by a significant amount from budgeted Rs160 billion and is estimated at Rs190 billion for next year.

The defence system is based on conventional wisdom. That security best guaranteed by a nation's economic muscle is not recognized despite growing social exclusion and militancy in politics.

Industry is now pinning hopes for a cut in sales tax and the common man is looking for a relief in the next budget. For this, there is mounting political and public pressure that cannot be easily ignored. The concessions would come from the fiscal space left after the fiscal deficit target of four per cent.

The robust external sector that has helped the domestic economic recovery after 9/11 is also coming under increasing pressure. In the first ten months of current fiscal, the $12 billion import bill exceeded $10 billion export earnings by a widening gap of $2 billion. In nine months, the balance of payments was down by 75 per cent at $1 billion as compared to the same period last year.

Though these gaps are the outcome of a faulty trade policy/strategy, the immediate cause is the fast rising oil prices and increased imports of machinery, plants and equipments. Except for foreign investments in oil exploration and distribution, nothing has been done to cut imports. The engineering industry has not been developed.

In agriculture, crops like sunflower and connola have not been encouraged for cultivation to reduce imports of edible oil. Agriculture is in disarray. One million tons of wheat is planned to be imported to meet shortage in the domestic market. The outcome is widening trade and balance of payments gap which is likely to widen further as domestic investment levels pick up.

Global trade is now handicapped by lack of global democracy. The absence of democracy has made the task of multilateral agencies somewhat difficult. As it appears, for sometime to come, free trade may prosper within national markets with no too congenial an environment in the international market. America's unilateralism must be replaced by multilateralism for global trade to expand rapidly.

The prospect of foreign investment is not too bright as the deterioration in law and order in Karachi and America's second Afghan war cast shadows on political stability. The focus should be on domestic investment.

In the current situation, when the economy is poised for a take-off, any political breakdown would be a misfortune. The solution lies in replacing the archaic political system by representative democracy. This is the only route to political stability.

In fact, both economics and politics needs to be democratised. It means growth with equity: distribution of resources among the largest number of the people supported by a national income distribution policy. The market reforms require a human face.

The distributional politics would not go away with a high growth rate whose first outcome is a rising inflation that hurts the poor the most. The government has failed to stabilise prices as production picked up on rising domestic demand.

There has been an abnormal rise in food prices. The market needs to be regulated through updated anti-cartel and anti-monopoly laws. Oligopolies must be curbed effectively.

To lighten the burden of taxes on the common man, the sales tax and excise duty needs to be cut. This will enhance the purchasing power of the consumer and enlarge the market for industrial products. The withholding tax that contributes nearly 75 per cent of the direct taxes is essentially an indirect tax. It should be gradually eliminated.

In an emerging market, the local private sector is weak and cannot act as engine of economic growth in the same manner as in developed economies. The government must therefore play a much larger role in economic development.

It is no wisdom to hand over the entire petroleum sector to foreign interests through privatization. Oil is a strategic commodity. The domestic private sector is not strong enough to buy Pakistan Petroleum and the Pakistan State Oil, both profitable enterprizes. There should be a right balance between government and the market.T he private sector investment should be encouraged in creating new capacities.

Similarly, the growth in various sectors of the economy, like agriculture, industry and services and within sub-segments of each sector, has to be harmonized to have a balanced and self-reliant economic growth.

About two-third of the population lives in the countryside and depends primarily on farm output whose share in Gross Domestic Product has fallen to 23.5 per cent. The gap between the rural and urban incomes can be closed by modernising agriculture including land reforms.

Some of the issues relating to distribution of resources in various regions and districts have been taken care by devolution. But the districts still work under federal and provincial controls and do not enjoy fiscal and administrative autonomy.

There has to be a balance between centralization and autonomy. The problem can only be resolved under federal democracy with districts and provinces enjoying full autonomy. Over-centralization and good governance do not go together.

Whereas all nation building activities are the responsibility of the provinces, the bulk of the national resources are appropriated by the federal government. This imbalance needs to be removed for a balanced economic growth and better distribution of national resources. To sum up, the budget for next year must take the first step towards economic development with equity.