ISLAMABAD, March 21: The government has revised downward agriculture growth target from 4.8 per cent to three per cent, making the task of its planners almost impossible to achieve a seven per cent GDP growth target for the fiscal year 2005-06.
The decline in production of three major crops — wheat, sugarcane and cotton — suggests that the government is facing an uphill task to achieve even 6.2 per cent GDP growth rate in 2005-06 as against 8.4 per cent achieved last financial year. Earlier, it was being anticipated that the government would end up managing 6.4 per cent growth rate during the current financial year.
According to the Planning Commission’s new summary, submitted to the National Economic Council (NEC) and also obtained by Dawn, sugarcane’s latest estimates were 40.947 million tones against the previous 45.886 million tons, showing a decrease of 10.8 per cent.
Similarly, there will be 12.7 million cotton bales against the target of 15 million. Wheat production will be close to 22 million tons against the target of 22.1 million tons.
“Thus the total decline in sugarcane production over the last year works out to be 13.3 per cent. This will result in a significant decline in production of sugar. As the sugar carries 4.15 per cent weight in the Quantum Index of Large Scale Manufacturing (LSM), the decline in sugar production would have significant negative impact on the LSM growth,” the summery added.
Secondly, less than targeted production of cotton will lead to reduced production of cotton yarn and cotton cloth and resultantly will pull down the LSM growth. Earlier, the government had estimated 6.4 per cent GDP growth during 2005-06 on the basis of 12 per cent growth in LSM as provided by the Federal Bureau of Statistics for July-November. “There are, however, indications that the LSM growth may be even smaller than 12 per cent, probably 10 per cent on account of less sugarcane and cotton production,” the summery observed.
It is worth mentioning that the production data for 39 items provided by the ministry of industries and production for July-December 2005 is showing a 6.7 per cent increase. “If the LSM growth is assumed at 10 per cent, the overall GDP growth would further come down to 6.2 per cent,” the commission estimates revealed.
The summary said that the ministry of food and agriculture had provided provisional estimates for major crops — sugarcane, rice, maize and cotton — and the revised target of wheat. On the basis of these five crops, the major crops have been estimated to grow at 1.9 per cent in 2005-06 against the target of 6.6 per cent.
IFLATION: The rate of inflation (CPI) for the year 2005-06 was targeted at eight per cent. On the basis of July-January 2005-06 data, the annualized rate of inflation measured by the CPI stood at 8.5 per cent as against 8.8 per cent recorded during the corresponding period of 2004-05.
“The Wholesale Price Index (WPI) inflation of 11 per cent during the same period is significantly high compared to the last year,” the summary said, adding that this was mainly due to increase in prices of fuel, lightening and lubricants group that amounted to 31 per cent during the six month period. After a quarter or slightly over it, this would have an indirect effect on the CPI, the summary admitted.
The Sensitive Price Index (SPI) during July-January 2005-06 reflected an impressive improvement and registered an increase of only 6.6 per cent as against 11.9 per cent during the corresponding period last year.
The group-wise increase in the Consumer Price Index is transport and communications (6.39 per cent), house rent (10.65 per cent), food and beverages group (12.31 per cent), fuel and lighting (2.60 per cent), education (2.54 per cent), household, furniture and equipment (6.17 per cent) and cleaning, laundering and personal appearance (4.66 per cent).
TRADE: As per the Medium Term Development Framework (MDTF), imports and exports for 2005-06 are forecast to grow by 12.9 per cent and 11.9 per cent, respectively, in normal dollar terms. As a result, the trade account projected to be in deficit by $4.2 billion in the fiscal year 2005-06 against a deficit of $3.6 billion in 2004-05.
The foreign capital requirements are expected to increase from $3.9 billion in 2004-05 to $4.6 billion in 2005-06. During July-December 2005, imports stood at $13.6 billion, showing an increase of 53.1 per cent over July-December 2004 and representing 68.9 per cent of the full year target of $19.8 billion. “Thus during July-December 2005, imports payments (cif) exceed the export receipts (cif) by $5.5 billion. Higher import bill has been largely on account of increase in machinery group imports and petroleum crude.
REMITTANCES: Prospects for the invisible balance will continue to be governed by the behaviour of workers’ remittances and other private transfers. For 2005-06, remittances are projected at $4 billion. During the first half of the current financial year, workers’ remittances stood at little over $2 billion as against $1.9 billion during the same period last year, showing an increase of 5.6 per cent. The United Stated continues to be the major country of origin of remittances followed by Saudi Arabia.