The GDP growth for FY 03 was projected at 4.5 per cent in last year’s budget speech. There were indications that GDP growth is likely to be higher. It has now been finally estimated at 5.1 per cent.

Unfortunately, the increase is due to statistical trick as last year’s growth has been reduced from a 3.6 per cent to 3.4 per cent and from a lower base the GDP growth becomes higher. If last year’s growth was to remain at 3.6 then the current year’s GDP growth would have been at 4.6 per cent.

Mr Ashfaque in response to the critiques of the Budget has admitted that the Ministry of Finance has been revising downward past year’s growth in nine out of 12 years while it remained more or less unchanged twice and increased only once in 1991-92. This frequent resort to decreasing the base year is not correct.

Hence, there is clear admission that current year’s GDP is purposefully increased and last year’s GDP is intentionally decreased. The quarterly report of the SBP released on 26th June showed GDP growth at 4.6 per cent as they correctly showed the percentage change in provisional figures in FY 03 over provisional figures of FY 02. The State Bank’s 3rd quarterly report of FY 03 states that, “Notwithstanding the impressive performance of the economy, the estimated 5.1 per cent growth in real GDP (against the 4.5 per cent annual growth target) requires some explanation...It appears that a part of the above target growth is simply a function of prior year adjustment that altered the base for the FY 03 growth. Adjusting for these, the estimated real GDP growth for FY 03 comes down to approximately 4.6 per cent line with SBP projections and still above the FY 03 growth target (reflecting the actual improvement in the economy).”

However, the following day the SBP issued a clarification as follows; “Some reports on the SBP’s 3rd quarterly report for the fiscal year 2002-03 give an impression that the SBP place Pakistan’s real GDP growth rate at 4.6 per cent for the full year, which is lower than the 5.1 percent estimated growth reported in the Economic Survey 2002-03.

Such an impression is factually incorrect. The estimated real GDP growth for FY 002-03 is indeed 5.1 per cent. It is clear to everyone that it is weak and belated attempt by SBP to toe GOP’s line even at the cost of sacrificing its credibility.

The contentious area in the National Accounts of FY 03 is the output of wheat. Mr Ashfaque has stated that the National Accounts Committee consists of more than 40 members representing all stakeholders including federal and provincial economic ministries, trade bodies, research and academic institutions etc. hence, the estimates are carefully calculated.

However, it is reported by an insiders that in the last meetings of the NAC in which the estimates of the current year were finalized, spokesman of Ministry of Agriculture surprised everyone by stating that the latest wheat estimate is one million ton more than the earlier estimate. An increase in the wheat output by one million tons translates into GDP increase of half a percent.

It seems that this abrupt increase in estimate by one million tones was contrived, as the market conditions indicate a wheat crop lower than last year. Last year wheat was selling below the support price of Rs300 per 40 kg. This year it is selling as high as Rs340. Therefore the figure of 19.2 million tones wheat output is not likely to be realized. Hence, devoid of this artificial jump the GDP increase is more likely to be in the region of 4.6 per cent.

The second riddle is regarding textile exports, Mr Ziauddin has correctly pointed out that when the growth of textile and apparel sector as given in Table 3.1 of economic survey is only 5.2 percent than how can textile exports and overall exports can increase by 20 per cent. Mr Ziauddin is correct in raising this question but equally incorrect in doubting the correctness of exports figures.

Export figures are double entered and cannot be fudged. There is not even iota of doubt that Pakistan’ exports have increased by 20 per cent and as the weightage of textile exports has increased to 68 per cent in FY 03. The textile exports have increased by more than 20 per cent. In his rejoinder, Mr Ashfaque stated that Table 3.1 giving group-wise growth performance of different industries is a quantum index and the value of exports is derived by increase in quantities and unit values. There was considerable increase in unit values but mostly less than 10 percent.

Only in ready-made garments unit value increased by 34 percent. The percentage increase in a year has nothing to do with the remoteness of its base year 1980-81. It is the comparison of output of FY03 over FY02. The most important point is that the output of bedwear, knitwear, towels and ready-made garments, which have been the most buoyant export items, are not included in the quantum index of textiles and hence, large-scale manufacturing. Only cotton cloth and yearn are included in this index. It is obvious that if the entire output of value added items like bedwear, towels, knitwear and ready-made garments is included in the quantum index of textiles than the rate of growth would have been much more than 10 per cent. In this context Mr Ziauddin’s point is absolutely correct.

This year exports will increase by almost $2 billion and Pakistan’s GDP is about $70 billion. Exports alone has given a push of about 3.0 per cent to the GDP leaving aside services which constitute 50 per cent of GDP and which have risen by at least 5.0 per cent in all estimates and also leaving aside in growth in non-traded commodities.

It is unfortunate that Pakistan’s statisticians and policy-makers have not been able to incorporate the 20 per cent export growth into national accounts. By having a comprehensive index of textile output, which include bedwear, knitwear, towels and =ready-made garments. If these items are included in the textile index than the growth performance of textile sector will not at 5.2 per cent but more than 12 per cent.

Economic growth literature shows very high correlation between GDP growth and export growth. It is difficult to visualise an economy whose GDP is growing at 4.6 per cent and exports are growing at 20 per cent. Both the riddles of GDP growth and the textile exports can be solved together if instead of concocting one million tons of wheat we had recalculated our industrial output with a comprehensive textile index. The GDP growth with full incorporation of export growth and related industrial output would be more than 5.5 per cent. Our policy makers have become spin-doctors failing to realize that an outstanding performance as in FY 03 does not need a spin but a straight, simple and intelligent explanation.

The author is a former Secretary, Planning Division.