July 21 - 27, 2008

Pakistan's Gross Domestic Product (GDP) volume reached a new peak level of Rs.5,492 trillion during the financial year 2007-08 showing an increase of over Rs 300 billion over Rs 5,192 of previous year. It is mainly due to robust performance of the services sector which presented the highest sector wise growth of Rs 332 billion equivalent to 6-8 percent against average growth of 5.7 percent.

Growth in agriculture sector remained the lowest at 1-8 percent with contribution of Rs 1.48 trillion to GDP volume. Manufacturing sector also presented a feeble growth because of internal and external shocks besides the tight monetary policy. Accordingly to economic analysts the GDP size could be more were it not received the internal and external shocks and suffered from poor law and order situation and short supply.

The sector-wise provisional data released by SBP says that though, as a whole, economy grew a little less than six percent, yet the most worrisome flashback of the economy during 2007-08 was the declining agricultural growth.

The decline in agriculture may be blamed for lower than expected growth in crops production. All the major and minor crops showed a negative 1.1 percent growth. Major crops production was declined by 2.96 percent. In monetary terms it bogs down to Rs 388.90 billion against Rs 400.79 billion last fiscal. Minor crops production however grew by 4.89 per cent to Rs130.96 billion against Rs124.86 billion in last fiscal. Livestock-grew by 3.78 per cent to Rs599 billion, last year its volume was Rs577 billion. Fishing sector also grew by 11 per cent to Rs18.43 billion while forestry sector declined to Rsl1.35 billion from Rs12.4 billion with a decrease of 8.46 per cent. The industrial sector during FY 2007-08 grew by 4.63 per cent to Rs1.42 trillion against Rsl.36 trillion last fiscal. The manufacturing, which accounts for 18.2 per cent of GDP, registered 5.39 per cent growth and stood at Rs1.04 trillion.

Large Scale Manufacturing (LSM) grew weaker than expected at 4.84 per cent to Rs Rs728.40 billion against Rs694.77 billion last fiscal. Small scale manufacturing during this fiscal increased by 7.51 per cent to Rs240 billion, up from Rs223.35 billion last fiscal.

Mining and quarrying registered growth of 4.93 per cent and stood at Rs138.77 billion during the last fiscal against Rs132.25 billion in FY2006-07. Construction continued its strong showing, partly helped by activity in the private housing market and spending on physical infrastructure, and reconstruction activities in the earthquake-affected areas. The construction sector grew by 15.16 per cent to Rs146.96 billion in 2007-08 against last year's Rs127.62 billion. Electricity and gas distribution showed a negative growth of 14.75 per cent and declined to Rs93.86 billion in FY 2007-08 from Rsll0.10 billion last fiscal. In sharp contrast, the services sector relating to finance and insurance, retail and wholesale trade, transport and communication, etc., posted an impressive growth of 8.16 per cent in 2007-2008 and its volume grew to Rs2.92 trillion. In this sector, wholesale and retail trade grew by 6.36 percent to Rs939.75 billion, transport storage and communication by 4.42 per cent to Rs551.81 billion, finance and insurance by 17 per cent to Rs356.81 billion, ownership of dwelling by 3.5 per cent to Rs145.52 billion, public administration and defence by 10.87 per cent to Rs358.12 billion and community, social and public services grew by 9.37 percent to Rs571.44billion.

The growth in GDP size had, however, no positive impact on the general public which continued to suffer from high inflation specially the food inflation which crossed over 20 percent-almost four times more than the GDP growth. There was almost no growth in tax to GDP ratio which remained at the level of 11 percent which is lowest in the region. The chairman FBR admitted at a public forum in Islamabad that there had been no improvement in the tax to GDP ratio and agreed that it has to be enhanced from 11 to 15/16 percent for reducing the gap of Rs. 400 to 500 billion in the revenues.