The Pakistan Economic Survey 2014-15 reveals that the government has gained provisional growth rate of 4.2 percent against a target of 5.1 percent in the last year’s budget. According to financial experts, the fiscal year 2014-15 carried a mixed bag of hope and despair as the country is lagging behind other economies in South Asia, including Bangladesh. However, the economy performed better than the previous year in which the rate of growth remained 4.03 percent. The desired rate of growth is 5-7 percent to absorb new entrants into the labour force to check rising unemployment. The real GDP growth is, however, greater than the previous years, but the government needs to set realistic and achievable targets for economic performance.
The Bangladesh economy has been growing at the rate of about six percent for the last few years and India is able to maintain its average growth of five percent during the last five years. The survey reveals that inflation has fallen during 2014-15, with the pace of decline quicker than that of some regional peers. The decline is triggered by fall in oil prices while CPI inflation remained the lowest, at 4.8 percent, falling drastically from previous year’s 8.6 percent. The State Bank of Pakistan has been pursuing a loose monetary policy and has slashed interest rate for a fourth consecutive time since November 2014 — this time to a 42-year low of seven percent. The survey says that the interest rate has fallen 300 basis points between November 2014 and April 2015. The government is now in a position to spur economic activities without worrying about higher prices. Finance Minister Ishaq Dar believes that the lowering of interest rate manifests improvement in macro-economic conditions as reflected in multi-year low inflation and considerably improved external accounts. The survey reveals that Pakistan is the only country in which tax revenues have declined from 10.2 percent in 2013-14 to 7.5 percent in 2014-15. Other larger South Asian countries such as India and Bangladesh have also been struggling to maintain tax-to-GDP ratios which remained flat during the last decade.
While devising the tax policies, the government officials fail to adopt realistic approach as tough laws result either in capital flight or closure of industrial units. It is to be noted that major European and American companies have established their setups in China due to tax exemptions. The economy of the Gulf States is an example of the business and industrial boom where tax relief is available in every sector.
