Fsical year 2014-15 has been a mixed story of largely improved economic indicators, along with missed targets.

Almost all the key sectors of the economy — agriculture, industry, services — showed improvements in the first 10 months (July-April) of the year. But the commodity-producing sectors failed to meet their growth targets set at the start of the year by sizeable margins.

Real GDP grew by 4.24pc in the first 10 months (10MFY15), as provisionally estimated by the National Accounts Committee — a forum of the federal and provincial governments, and special areas like AJK, Gilgit-Baltistan and Fata.

This was slightly higher than last year’s revised GDP growth rate of 4.03pc, but substantially lower than the targeted 5.1pc.

This was contributed by a 2.88pc growth in agriculture, 3.62pc in the industrial sector and 4.95pc in services. This is despite the fact that the government had put the current year’s outlook for a recovery in the growth momentum by addressing persistent energy shortages and supply-side constraints.

Consequently, next year’s growth target has been pulled down to 5.5pc against the medium-term growth target of 6.1pc..

While Finance Minister Ishaq Dar and his team would cite numerous factors for the lacklustre performance, like floods, military operations, political tensions and so on, the fact remains that the government could not design policies to make the national economy take the full benefit of the historic fall in oil prices and the GSP Plus preferential trade arrangement.

Real GDP grew by 4.24pc in the first 10 months of this fiscal, contributed by a 2.88pc growth in agriculture, 3.62pc in the industrial sector and 4.95pc in services

The private sector remained constrained due to the availability of negligible credit — which has been largely captured by the government — and the saving-mode adopted by the power sector bureaucracy, which imported lesser furnace oil because of cash constraints arising out of low recoveries.

In other words, they reduced fuel consumption by bringing machines to a halt, instead of generating comparatively cheaper power and improving productivity.

This is clearly evident from the paltry rise of 1.94pc in electricity generation and the distribution of both power and gas — even worse than the 5.57pc growth registered last year, and much lower than this year’s target of 5.5pc.

Meanwhile in the agriculture sector, important crops grew by a nominal 0.28pc against the targeted 1.2pc, but this should be seen in the context of last year’s bumper wheat and sugarcane crops. Other crops also rose 1.09pc against the target of 4.5pc.

Yet, the cotton ginning sector posted a healthy increase of 7.4pc on the back of last year’s negative growth, and surpassed its 5pc target.

Major expansion was also witnessed in the livestock, forestry and fishing sectors, all of which surpassed their respective targets. Livestock grew by 4.12pc, while fishery and forestry increased 5.75pc and 3.15pc respectively.

The performance of the industrial sector was also dismal when seen in the context of its 6.8pc target. It grew 3.62pc in 10MFY15 — lower than last year’s 4.45pc. Except for construction and small-scale manufacturing, almost all the components of industry missed their targets by wide margins, confirming that energy shortages continue to affect growth.

Mining and quarrying grew by just 3.84pc against their target of 6pc, while manufacturing went up by 3.17pc against 4.5pc. Large-scale manufacturing grew by a paltry 2.38pc against its target of 4pc.

The services sector — which has been a saving grace over the last few years — remained far from robust this year. It grew by 4.95pc, marginally below its target of 5.2pc. Government services, finance and insurance, housing and other services either met or surpassed their targets, while wholesale and retail trade, transportation and communication services failed to do so.

Even then, the services sector contributed a major chunk of 2.89pc to the GDP growth of 4.2pc. Industry followed up with 0.74pc and agriculture 0.61pc.

The policymakers should be worried about the reduction in the contribution of the commodity-producing sectors to overall economic growth.

At 1.35pc, the combined contribution of the commodity-producing sectors — agriculture and industry — to this year’s GDP growth of 4.24pc is down from their last year’s share of 1.65pc in 4.02pc overall growth.

Meanwhile, the current account deficit reduced to $1.36bn in 10MFY15 against $2.93bn last year because of low oil prices and higher remittances. Another hallmark of the year has been the nearly $1.45bn inflows under the Coalition Support Fund from the US, against last year’s receipt of $1.05bn.

The IMF also its completed seventh programme review, as the government continues to reduce power sector subsidies and raise energy costs.

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

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