Dr Ashfaque Hasan Khan

The government has claimed that current year’s 5.8 percent growth is the “highest in 13 years”. Firstly, this number is highly fragile because it is based on 6 to 8 months preliminary information. Secondly, growth of four sub-sector (agriculture, large-scale manufacturing, wholesale and retail trade, and general government services) accounting for 57 percent of GDP are grossly overstated to achieve “13 years highest growth rate”.

Agriculture grew by 3.8 percent in 2017-18—“highest in one decade”. It is well-known that fertilizer is the key input to agricultural production, contributing 30 to 50 percent, on average, to crops yield. Water is yet another critical input to agricultural production. To our surprise, both critical inputs used in agriculture were less this year as compared with last year and yet we achieved “highest agriculture growth in one decade”. Fertilizer off-take was down by 4.0 percent in 2017-18. Similarly, water availability for Kharif and Rabi seasons was down by 2.0 percent and 18.5 percent, respectively. Overall, it was less by 10 percent against the normal availability—highest shortages in the last five years.

It is a well-known fact that sugarcane is being cultivated in cotton growing belt. As a result, the area under Sugarcane crop continued to rise from 1.131 million hectare in 2015-16 to 1.313 million hectare in 2017-18. Area under cotton crop on the other hand, continued to decline from 2.96 million hectares to 2.489 million hectare by 2016-17. Accordingly, sugarcane production continued to rise while cotton production continued to decline. The bottom line is that substitution between cotton and sugarcane areas continued to take place until 2016-17. It is surprising that in 2017-18, the area under both the crops has increased substantially. The area under sugarcane crop increased by 7.8 percent while it increased by 8.4 percent under cotton crop. How can this be possible when both the crops are grown in the same season (Kharif). It appears that the production of these two crops is overstated.

The large-scale manufacturing (LSM) grew by 6.24 percent during July–February 2017-18 as against the corresponding period of last year. Three things need to be noted here. Firstly, there is a consistent trend in the growth of Quantum Index of Manufacturing (QIM) observed during the last five years. The index starts rising at a greater pace since November and ends in March to get higher overall industrial growth number which will be used for the calculation of overall GDP growth. Once PES is released, from April and until September–October, the index exhibits a declining trend. Similar technique was adopted during 2017-18. The index after fluctuating in a narrow range from June 2017 to November 2017, exhibits an accelerating trend – growing 15 percent on month on month basis in December 2017 over November 2017 and another 14 percent in January 2018 over December 2017. In the month of February 2018, it remained more or less at January level. These two months’ average growth rate contributed to take LSM growth to 6.24 percent during July–February 2017-18. It clearly represents overestimation of LSM.

Secondly, the “impressive” growth of LSM during 2017-18 owes heavily to industries which are highly energy-intensive, such as automobiles, iron and steel, electronics, engineering products, non-metallic mineral products etc. What is indeed surprising is that the energy consumption by industry during July – February 2017-18, as reported by PES, presents contradictory facts. Oil/petroleum consumption by industry is down by 3.8 percent; gas consumption by industry is down by 7.4 percent and electricity consumption by industry is down by 2.5 percent. Did the industry use air or water to produce output? Is this energy consumption consistent with the “impressive” growth in LSM? Is this not a manipulation of statistics?

Value-added in wholesale and retail trade grew by 7.5 percent in 2017-18. Those who know how national income accounts are measured know it very well that the growth of this sector is greatly influenced by agriculture and manufacturing. If agriculture and LSM growths are overstated, the growth in wholesale and retail trade is bound to be overstated.

Thirdly, the readers should know that cigarettes production increased by 78 percent during July–February 2017-18. Such an idiosyncratic growth in cigarettes production totally distorted LSM growth. Is this a production growth or simply declaring production by cigarettes industries? The readers should know that the Federal Board of Revenue (FBR) reduced the tax rate on cigarettes which encouraged cigarettes industries to reveal their ‘true’ production. They were producing more or less same quantity of cigarettes year after year but they were hiding their true production to pay less taxes. With reduction in tax rates, they were encouraged to report their “true” production. Should we call it ‘growth’ in cigarette production? Or, ‘declaring the true’ production? Tobacco is the basic input to cigarettes industries. The production of tobacco, as reported by the PES showed zero growth rate in 2017-18 and yet cigarette production was up by 78 percent.

There is nothing more hilarious than the reported ‘growth’ of cigarette production. This hilarious growth alone contributed 0.84 percent to overall LSM growth. In other words, excluding cigarettes, overall LSM growth declines to 5.4 percent.

There is yet another jugglery of figures one can find in LSM growth numbers. This deals with the growth in Iron and Steel products, which is reported as 30.85 percent during July-February 2017-18. It is a known fact that Pakistan steel—the largest steel producing until of the country is closed and not producing any steel. How this negative contribution of Pak Steel counted in Iron & Steel growth? My fear is that the Pakistan Bureau of Statistics (PBS) has taken out Pak Steel from the base year (2005-06) of QIM. If that is true then overall growth of LSM has been grossly overstated. Iron and Steel has alone contributed 1.0 percentage point growth to overall LSM growth. If we adjust LSM growth by excluding cigarettes and Iron and steel production, the “impressive” growth of LSM comes down from 6.24 percent to 4.4 percent. The readers would see how little adjustment to various industries growth can make a large difference.

Finally, as regards general government services, the 11.4 percent growth with almost 8 percent share in GDP represents clear overestimation of this component of GDP. This number is not at all consistent with budgetary numbers. The combined current expenditures of federal, provincial and local governments grew by only 8 percent in real term in 2017-18. How come general government services in national accounts grew by 11.4 percent? This has been done to build the latest narrative, that is, “highest growth in 13 years”.

Our estimates suggest that real GDP growth has been in the range of 4.7-4.9 percent in 2017-18 and not 5.8 percent as reported by the government. Like previous four years, the PBS did not cook data intelligently. Pakistan’s economic growth during the last five years has hovered in the range of 3.0 to 4.9 percent. Whenever a new a finance minister takes charge, his foremost job should be to find out where do we stand in terms of GDP growth, budgetary numbers, unemployment and poverty. All these statistics are deliberately destroyed in the last five years.

(The writer is Principal & Dean at NUST School of Social Sciences & Humanities, Islamabad. Email: [email protected])