Zafar Iqbal
The latest release of the Pakistan Economic Survey for the fiscal year 2023-24 in June has opened the window to a comprehensive array of estimations that shed light on the multifaceted dimensions of Pakistan’s economy. These estimates hold the potential to facilitate cross-referencing of crucial economic indicators. In this article, we delve into the official estimates presented by the Pakistan Bureau of Statistics (PBS) regarding the GDP growth rate across various sectors, to gain a deeper understanding of the economic landscape of Pakistan.
According to the Pakistan Economic Survey (PES) for 2023-24, the GDP growth rate by sector is projected to stand at 2.38% at constant basic prices of 2015-16. Notably, the agricultural sector has made a disproportionate contribution of nearly 61% to the GDP growth, while the services sector follows closely at around 30%, and the industrial sector lags behind at approximately 9%.
The staggering growth in the agricultural sector has largely been attributed to the exceptional surge in the production of major crops, recording a remarkable 16.8% increase, marking one of the highest growth rates on record. However, this unprecedented growth can partly be attributed to the ‘low base effect’ resulting from the 2022-23 floods, which led to almost zero growth in the major crop sector.
In a bid to validate the accuracy of the acreage and production estimates, a comparison was performed with the United States Department of Agriculture’s (USDA) estimates for major crops in Pakistan. The close proximity of the USDA estimates to the figures in the PES serves to reinforce the credibility of the data presented.
An exceptional increase in major crop yields, even after accounting for the low base effect, must be acknowledged. Perhaps the most striking example is that of rice, which witnessed a 10.3% increase in yield in 2023-24, following a 6.6% decline in the previous year. Similarly, wheat and sugarcane also registered substantial yield increases of 4.7% and 5.6%, respectively.
The substantial surge in crop yields can be attributed to several factors, with the foremost being the remarkable escalation in procurement/support prices, such as a 77% increase for wheat, 33% for sugarcane and 70% for cotton. This led to a robust response from farmers, evident in the nearly 20% upsurge in fertilizer off-take and a 34% rise in credit disbursed to farmers. However, it is concerning that the excessive import of wheat, combined with the surge in output, resulted in a significant drop in wheat prices, potentially discouraging future wheat planting in the forthcoming Rabi season.
Pl, subscribe to the YouTube channel of republicpolicy.com
Shifting the focus to industrial production in 2023-24, the sector witnessed a modest growth rate of 1.21%, primarily attributable to the near-zero growth in large-scale manufacturing and an almost 11% decline in value added by the electricity, gas, and water supply sector.
The relative stagnation in the large-scale manufacturing sector, despite the remarkable upswing in agricultural production, warrants close examination, given the strong interconnectedness between agriculture and manufacturing in Pakistan. With agro-based industries constituting nearly 40% of large-scale manufacturing, the underwhelming performance of these industries in the face of surging output in wheat and rice is baffling. In particular, the negative growth rates in wheat and rice milling, along with subdued growth in sugar and cotton industries, raise concerns about the sector’s performance.
Similarly, some surprising outcomes have emerged regarding the growth rates of sub-sectors within the industrial domain. Unbelievably, small-scale manufacturing is purported to have surged by 9% since 2020-21, while the construction sector allegedly achieved a robust growth rate of 5.9% in 2023-24, amidst a decline in the use of construction inputs. These conflicting figures cast doubt on the accuracy of the reported growth rates for these sub-sectors.
The services sector, which accounts for 57.7% of the national economy, exhibited significant variation in sub-sectoral growth rates during 2023-24. Notably, education reported the highest growth rate at 10.3%, followed by health at 6.8%. However, the veracity of the double-digit growth rate in education is questionable in light of stagnant or declining numbers of teachers and schools, coupled with a reduction in public spending on education as a percentage of the GDP.
Conversely, several sub-sectors within services recorded meager growth rates, with wholesale and retail trade, transport and storage, information and communication, finance and insurance, and public administration and general government reporting either paltry growth or negative growth. Notably, the negligible growth in wholesale and retail trade, despite the exceptional growth in the agricultural sector, raises concerns about the accuracy of the reported figures.
Import volume has reportedly increased by 4.7% in 2023-24, further accentuating the potential underestimation of the wholesale and retail trade sector’s growth. When accounting for this increase, the estimated growth rate of the sector would likely reach 2.3%, significantly higher than the 0.3% reported by the PBS.
In summary, the disparities in sectoral and sub-sectoral growth rates within the GDP for 2023-24 indicate potential overestimations for certain sub-sectors, including small-scale manufacturing, construction, education, and health, while underestimations may have occurred in wholesale and retail trade and transport. As the PBS revises the GDP growth rate estimate for 2023-24, critical scrutiny of these sectors is essential to ensure the accuracy and reliability of the economic data presented.
