A consensus is building among policymakers, economists and businessmen on the need to pull the economy out of the slow growth trap and that the growth be inclusive as well as sustainable — a blend that sets the quality of socioeconomic development.

How much of the focus will shift towards growth will, however, depend on how quickly the policymakers can take the advantage of the lower oil prices with improving macroeconomic indicators to combine growth with stability.

For too long, there has been no worthwhile trade-off between growth and stability. And growth has been a low priority and stability an imperative for public policy resulting ‘ in crisis following crisis in rapid escalation’.

Last Monday, Finance Finance Ishaq Dar informed the Economic Advisory Council that the next budget would focus on increasing economic growth while the EAC members recommended that the government should also pay attention to regional development.

There is a likelihood that given the level of stability achieved over the past two years — helped by falling international oil prices — more fiscal space would be available for the government’s development spending. It would be interesting to see how much money the government can spare for building infrastructure, specially energy projects, which will be cosponsored by the Chinese. The figure being officially floated to match the Chinese funding for joint projects in the next year’s budget is Rs250bn and the overall size of the federal public sector development programme is being stipulated at Rs580bn.

To supplement the government’s efforts, the EAC members suggested that the private sector’s participation should be encouraged in infrastructure development. They also stressed that fiscal measures should be used to bolster economic activities and job creation.

The combined federal and provincial allocation for development cannot push up significantly the growth rate unless the budget for the next fiscal year provides the much-sought stimulus for the private investment. With expectations from the PML-N over the past two years remaining unfilled, the private sector is finally pinning its hopes on some incentives for investment, exports and growth in a difficult domestic and external environment.

Going by the State Bank’s latest assessment for the current year’s economic performance, the commodity producing sectors — farm and factories — are under-performing. The much talked about inclusive economic growth requires harmonious development of all segments of the economy and reduction in individual, household and regional income disparities.

In this transitional phase of economic development, the old ways of production are proving inadequate to improve productivity and the quality of goods and services, and the harnessing of the much needed high-tech for making products globally competitive is slow, keeping in view a fast changing global environment. This is one reason why the country’s exports are not picking up fast, keeping the economy perpetually dependent on heavy external dependence.

So the fiscal incentives should be strictly linked to value-addition, productivity and quality. And the tax exemptions which have fostered a rent-seeking culture need to be phased out as quickly as possible.

A sustainable economic growth is,however, not possible without equity. Over concentration of wealth leads to recession or slow growth, and wide distribution of income increases the number of affluent consumers eager to buy both domestic and imported goods and services. The accumulation of capital is required for fresh investment — which is at a low ebb — and the dispersal of wealth is vital for building a prosperous domestic market. Currently, the country’s manufacturing capacity is underutilised, indicating sluggish local and foreign demand.

Finally, economic growth does not measure the living standards of the people and records only national income.Thus banking on growth alone to provide jobs or reduce poverty does not work so well. Growth may or may not produce jobs or enough jobs. Growth can come from better utilisation of existing capacity or capital intensive enterprises without any significant rise in employment.

Job creation has to be a key objective in any inclusive economic growth strategy. Growth should enable the common citizen to fend for himself and should be socially sustainable. It should also measure social indicators along with the changes in the national income.

Published in Dawn, Economic & Business, May 25th, 2015

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