Economic growth with industrial bias – DAWN.COM

The tilt in the economic policy to facilitate urban sectors under the Nawaz Sharif government got a positive response from industry and services, which were somewhat unnerved by the PPPs policy to reverse the process of transfer of resources from the rural to urban sector.

Headline GDP for the first quarter of this fiscal was pleasantly surprising. The reported 5pc growth was better than most optimistic economic forecasts so far. The SBP, in its first quarterly report for 2013-14, released late last month, did raise questions about the sustainability of the trend and hinged the growth prospects on the implementation of structural reforms in the fiscal and energy sectors.

With fertiliser and paint industry leading, the large-scale manufacturing (LSM) sector posted an impressive growth, and with the help of the services sector, enabled GDP to grow by 5pc in the period under review. They also more than made up for the lag in growth of the agricultural sector.

Construction, retail and communication sectors are believed to have contributed to growth in services sector. According to the SBP report, nothing significant can be inferred about services till detailed information is available.

Experts attribute the better-than-expected performance of urban sectors primarily to two factors: better energy supply (gas/electricity) to industry, and the confidence of the business community in the Nawaz Sharif government. Their mistrust of the PPP manifested in the slow business expansion during the partys tenure of office.

During the PPPs rule (2008-13), the performance of the agricultural sector was way better than its mean annual growth over the preceding decade from 1998-2008.

The fast moving consumer goods (FMCG) sector is said to have immensely benefited from the rural growth, as the purchasing power of the neglected population increased on the back of higher support prices of wheat and sugarcane. The demand for basic consumer items like soaps, toothpaste, washing powders, etc. is said to have risen dramatically.

The rural prosperity was also shared by businesses dealing with farm inputs like fertiliser, seeds etc., as a result of price hikes. Mechanisation of farming got a boost from increased subsidised tractor sales.

The freeze in the support price of wheat, besides other factors, experts believe, contributed to the underperformance of agriculture in the first quarter of the current fiscal.

Meanwhile, the State Banks first quarterly report for FY14 says, industry and services were the major drivers of growth as agriculture underperformed.

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Economic growth with industrial bias - DAWN.COM