Nothing below 7pc GDP growth will work: business
BUSINESS and industry leaders are unanimous in their view that without achieving the required level of economic growth rate, the country would not be able to overcome the issues like poverty and unemployment. The GDP has to rise by seven per cent to have an impact on the common man’s life, they believe.
Mian Muhammad Adrees, of the Federation of Pakistan Chambers of Commerce and Industry, said the FPCCI had already advised the government through a comprehensive research document titled, ‘Revival of Pakistan Economy’, that in order to overcome current deep-rooted crisis, the country would need to achieve 7pc+ GDP growth. Anything less than that would not do, he asserted.
The FPCCI document, he said, has also identified various bottlenecks that are impeding economic growth. Most of these issues are related to fiscal, monetary and taxation polices.
In the past Pakistan had been achieving the required level of GDP, but fiscal and monetary policies did not help the cause of trickledown effect. As a result, he said, a very small segment of society having extra money, instead of investing in real sectors like industry and agriculture, preferred to make quick profits through commercial activities.
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| Iftikhar Ahmed Vohra, President KCCI |
Besides, monetary policies with high interest rates encouraged the rich to put their money in non-productive channels. The persistent fiscal measures of collecting revenue through indirect taxation have burdened the middle class, thereby pushing them back to the poor category.
Overseas Investors Chamber of Commerce and Industry (OICCI) President Atif Bajwa said the country was experiencing a lower economic growth of 4.1 per cent against its long-term average of 5pc+ rate. When combined with a high population growth rate of 2.6 per cent, any meaningful benefit to get translated into income growth per capita requires a higher growth rate. With estimates that there is a need of five million new jobs every year to cater to the young population, particularly the educated youth, there is a need of higher economic growth about 7pc+ annually, he said.
Moreover, because of narrow taxation policies, most of income growth may have been concentrated in the non-taxed sectors of the economy, resulting in significant asset price inflation (i.e. real estate, stock market) and benefiting holders of capital market. This has not trickled down to the masses whose share of capital assets remains low.
Bajwa said that heavy reliance on indirect taxation by government means that taxation in the country remains regressive, impacting the lower to middle income brackets more than the higher income brackets.
At the same time, he said, the business sentiments remain subdued due to a number of serious concerns at the very slow pace and even sometimes lack of will to address several apparent macro as well micro economic issues.
KCCI President Iftikhar Ahmed Vohra said that besides the low GDP growth rate, the concentration of wealth in a few hands had been another major factor.
He further said that low-level skills amongst workforce is another reason why growth in GDP does not pass onto the lower cadres of society.
The KCCI chief was of the view that the presence of a plethora of middlemen in the supply chain, lack of enforcement of relevant price control rules and widespread corruption together contribute towards high inflation which reduce the disposable income of the masses and effectively restrict them from growing along with the national GDP growth.
Published in Dawn March 22nd , 2015