Pakistan's GDP grows 1% YoY in 2QFY24 - that's contraction not growth!

March 29, 2024 (MLN): Those who are still rejoicing that the economy has shown some signs of positive growth are living in a denial. As a country, the first parameter to assess growth metric is population growth. Pakistan is constantly bloating with 2.4-2.5% population growth with higher population growth in lower income strata. On per capita basis, we have contracted and contracted badly. 

Secondly, the GDP growth is not a reflection of equality in the economy either. With agricultural growth of ~9% is handsome and appreciated but concentration of land within the control of landlords, tribal leaders and fake khatas for front men of rich landlords question paradox behind in. 

Has agri growth increased purchasing power, living status and future prospects of poor farmers? Until we see farm to market and end to middle men culture, that is not happening.

Until you see farm mechanization, removal of minimum support price, focusing on efficient utilization of water and modern value addition techniques, the benefit will remain with top few that too without incremental taxation benefit. 

The -0.2% decline in industrial sector seems overly optimistic as most of the industries apparently are crying due to excessive electricity and gas rates, diversion of gas away from captive uses, exorbitantly high interest rate and increased duties on imports of raw material.

While LCs issues have moderated nevertheless the industries are reeling at the verge of survival only. No material expansion are reported in this environment as most have delayed their plans owing to macro economic instability. 

Reviving growth requires growth in domestic taxation, reduction in interest rates, ending cross subsidies, providing regionally competitive gas and electricity tariff to industries, reducing taxes on exports or value adding items, ending smuggling from across the borders and ensuring level playing field by ending tax evasion.

The author is an independent economic analyst and writes on Twitter and Linkedin.