GNP TO DECLINE IN 2009
AGRICULTURE SECTOR FREE FROM POLITICAL CONSIDERATIONS CAN BAIL OUT OF THE ECONOMIC CRISIS
Sep 29 - Oct 12, 2008
Despite having an impressive industrial, agriculture and even consumer base Pakistan , confronted with a variety of economic and financial issues of which some are due to global economic recession and some are self generated due to reasons best known to the policy makers.
Pakistan's national income or GNP, not an exception to the globally persistent economic and financial turmoil and consequently is likely to drop in 2009. Luckily Pakistan's robust services sector which is the largest contributor to the national income has come to rescue to the weakening GDP and GDP, while the economy was hit severally on goods or manufacturing side due to poor management of exchange rate, unusual decline in rupee value and also unusual rise in interest rate on the back of tightening of monetary policy by the central bank in Pakistan. It is a matter of great concern that the most vibrant automobile sector currently facing a steep drop in sales volume.
This drop in sales is mainly due to higher interest rates and increasing number of defaults in bank financing. As a result of increasing number of non-performing loans, the banking sector has almost stopped the car financing. These are some of the glimpses of the economy due to unplanned policies or because of taking dictations from international donor agencies which have their own parameters. These agencies including World Bank cannot have a feeling of the local environment and its requirements.
The interest rates of the banking sector were increased to contain ever rising inflation in Pakistan . Yet the inflation was driven by global oil and food prices, one fails to understand how you can contain inflation through domestic tools of interest rates. In fact, the interest rates as well as the fiscal measures should have been taken with a consensus and coordination between the state bank and the ministry of finance. But it seems the central bank in Pakistan has taken the responsibility of tackling the inflation all alone through rising interest rates.
The increase in cost of bank financing has killed the spirit of economic activity and goods and services which provide the real basis for GNP growth in every society. It is surprising that on one hand we failed to check inflation and also disturbed the economic activity, consumer market, and manufacturing sector by raising cost of production and financial costs etc.
This inactivity in certain manufacturing sectors especially the labor oriented construction industry can make or mar economic activity in around 84 allied industries which rise and fall with the construction and real estate building.
At present the construction industry and the real estate sectors are the worst hit areas of the economy render thousands and thousand job less. Such policies which can throw the vibrant sectors like real estate and automobiles out of business serve no purpose but to add to the sufferings of the poor.
Actually, GNP per capita and income per person is quite suspicious in Pakistan as the figure $1100 quoted as per capita income or per person is highly misleading and does not mirror the toil and sweat of the poor who are forced to live below poverty line on the back of unfair distribution of national resources or national income.
Those economies in our region which fair play is the rule of the game, the situation is quite different from what it is prevailing in our country. ćA slight increase in per capita GNP gives a robust growth to overall size of the national income especially in those countries which population is higher than rest of the world. For example, if a $100 increases in China's GNP per capita income it will result in a $131 billion addition to China's GNP due to size of the population. Similarly, that same $100 improvement per capita will add $110 billion to India's GNP, a 3.2% rise. In Pakistan is claimed that the per capita income has gone around $1100 but it is not visible as a ground reality because the national sources are concentrated in a few hands.
The steep depreciation of rupee against the US Dollar (26% decline in the Rupee since Jan-08). There were some positive repercussions of Rupee weakness for export earnings however this positive impact is feared to be muted on account of steep inflation. Jan-Aug 08 CPI inflation stands at 18.11%.
Due to rising production cost mainly due to rupee depreciation, increasing cost of electricity, gas and other inputs, the impact on the national income could be even sharper at the end of the year, as the currency depreciation highlighted as the top concern of the market and is feared to shatter the confidence of the investors.
The textile sector which is leading contributor to the national income is likely to go through hot waters in 2009 when it will be facing cut throat competition in the international market following relaxation to Chinese goods in the European markets.
It is worth mention that the competition would rise following the withdrawal of the textile safeguards on Chinese goods which had limited China's export growth to the U.S and EU textile and apparel markets in key product categories will expire on Jan 1st 2009.
In 2005 that China was allowed unfettered access, prices of textile and apparel products from China fell by 40% while exports of key products increased by as much as 1,500%.
We have to look at the given resources within the country instead of looking towards the developed economies or the international donators for financial assistance. This attitude is not appreciable and evens not a permanent solution of the economic issues.
Actually the key to the economic issues already with us and that is our rich agriculture lands, and reasonably ample water resources. Our agriculture sector is in fact a gift of the nature for the people of this country. This natural gift can do a magic to our economy provide the agriculture sector is not allowed to get infected from politics. A large m majority of the members of our provincial and national assemblies hail from rural areas of the country. Most of them have political affiliation with different parties. They should keep away politics from agriculture crops which is actually belong to the people of Pakistan not any politician party. Hence the agriculture sector should be above the political considerations.
GNP OF TEN LARGE POPULATED ECONOMIES
China ... $7,739,305,169,570
Japan ... $3,799,690,243,910
India ... $3,417,498,224,400
Russia ... $1,383,209,467,200
South Korea ... $1,002,825,276,190
Indonesia ... $854,175,531,720
Turkey ... $543,595,755,760
Thailand ... $512,528,548,350
Philippines ... $442,869,951,150
Pakistan ... $359,793,725,200