Democracy in Pakistan is historically linked to lower GDP growth rates, widening deficits and instability. And yet people of the country seem to prefer the democratic route. Politicians might have a vested interest but why are citizens invested in a democracy that fails to deliver?

The Budget 2018-19 provides some clues to the answer. Opinions can diverge on different aspects of the budget but no one can refute the fact that it is ‘people centric’. Whatever the agenda, no political party in this well connected world can hope for any future if it alienates itself from the public. Democratic governments therefore are forced to care for the masses.

A budget this close to the next general elections was expected to be appealing to the electorate. Even conservative estimates project that the proposed measures will increase the income of an average urban Pakistani family by about a quarter. This translates into a precious Rs15,000-Rs45,000 per month for middle class families.

According to an informal study by Dawn, Pakistani middle class families fall in the monthly income bracket of Rs75,000-180,000. At the lower end of this income band the annual tax liability has been brought to Rs1,000 while at the higher end the tax will be less than half of the year before because of the sharp cut in rates.

The upward salary/pensions revision by 10pc and increasing of the minimum family pension at the lowest rung from Rs4,500 to Rs7,500 will generate political capital for the party in power.

After a detailed exercise Dawn last year identified seven broad categories of family spending with weightage. The new budget has created some fiscal space to add a new category of miscellaneous with 5pc weight. The figure shows how average families are expected to consume money they will save from lower tax liability and increase in their income.

For citizens the litmus test is their personal experience and the perceived impact of budgetary policies on the wellbeing of their families. As the proposed measures translate into a hike in the disposable income of urban households, they will support it

The kitchen budget might increase more than the rate of inflation to improve the quality of intake. Rentals are not expected to increase as real estate measures can bust the property price bubble. Transport and utility cost may increase marginally while additional family resources can provide a buffer to better manage health and education needs of children.

The government had to retract the change in income tax exemption limit. In the recent economic package the limit was raised from Rs0.6 million to Rs1.2m. Dr Miftah, in his budget speech proposed a flat tax of Rs1,000 per annum on income in the band of Rs0.4m to Rs0.8m and Rs2,000 per annum for income brackets of Rs0.8m-Rs1.2m.

Besides the financial cost, if implemented, the earlier proposal would have halved the number of income tax payers that are already shamefully low at 1.4m to 0.7m in a population exceeding 200m.

In comparison to urban dwellers, the rural population was not offered direct benefits in the form of increase in support prices though some measures were announced to moderate the cost of farming by duty cuts on key inputs such as fertiliser and seeds. It is, therefore, difficult to project increment in their monthly income.

“The sense of freedom is valuable for argumentative Pakistanis but for the majority struggling for a decent life the baseline is economic. For people it is probably the quality more than the pace of growth that matters. A classic example of voters’ behaviour from the region is the 2004 BJP election debacle in India following the party’s high growth glorification through the ‘India Shining’ campaign”, commented an expert.

Some economists dismiss the thrust of the current proposals as ‘expenditure centred’ and ‘populist’ citing weak fundamentals. Mounting twin deficits, piling debt, weakening currency and draw down on reserves pose a risk, they say, to the sustainability of the 13 year high real sector growth.

The rural population has not been offered direct benefits in the form of increase in support prices though some measures were announced to moderate the cost of farming by duty cuts on key inputs such as fertiliser and seeds. It is, therefore, difficult to project increment in their monthly income

For citizens, who often find it hard to demystify economic jargon, the litmus test is their personal experience and the perceived impact of budgetary policies on the wellbeing of their families. As the proposed measures translate into a hike in the disposable income of urban families — through direct salary increase, subsidies, price control and cut in income tax — they will support it.

“It is simple. People sentiments matter in a democratic order. Politicians are aware that through the ballot voters can turn tables. A political government, therefore, has no option but to pay attention to the population’s lot.

“A ruling party that aspires for favourable election results knows nothing is more convincing than tangible economic relief to win popular support. It, therefore, makes perfect sense for people to root for democracy,” a market watcher responded.

The management of the external front and the expanding resource gap will surely be a huge challenge for the next caretaker and the government that assumes power after the elections.

If implemented, the Abbasi government’s budget will be well received by ordinary people, most businessmen, traders, bankers and brokers. Realtors are understandably irked and people associated with the construction industry complain of not getting the attention their sector deserved.

Published in Dawn, The Business and Finance Weekly, April 30th, 2018