Punjab’s economic performance

Published: September 13, 2012
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pervez.tahir@tribune.com.pk

pervez.tahir@tribune.com.pk

How will the voting public judge the economic performance of a provincial government in the coming elections? In the case of the coalition government at the federal level, voters will have information on macroeconomic indicators like GDP growth rate, fiscal deficit, current account deficit and inflation. The statistical system of the country is geared towards producing these aggregate numbers, as the macroeconomy is the domain of the federal government. Provincial statistical systems feed into the federal system data on agricultural production in its entirety and on large-scale manufacturing to the extent of around 15 per cent of the Quantum Index of the Large Scale Manufacturing. However, they do not attempt to arrive at the provincial equivalent of the GDP. Such an exercise is hard to carry out for a number of technical reasons, but not impossible. The Institute of Public Policy (IPP) in Lahore has done the estimation for Punjab. According to these estimates, the annual growth rate in the province during 2006-07 and 2010-11 was a mere two-and-a-half per cent. It was lower than the average of 2.9 per cent for Pakistan and far below the average of 3.4 per cent for the rest of Pakistan. As a result, the size of Punjab’s economy shrank relative to the rest of Pakistan, as did its income per capita. Three out of the five years of estimation belong to the PML-N government.

Besides growth rate, a second indicator of interest is the gap between the revenues and expenditure, or the budgetary deficit. This analysis is possible from 2008-09 to 2011-12, i.e., the four years of the PML-N government. In the first two years, the gap was 4.9 per cent and 7.8 per cent. There was a surplus in the third year, attributable largely to the significant jump in the revenue under the new National Finance Commission award. But the overspending returned in the following year with a deficit of one-and-a-half per cent. Compared with a rising share in federal revenues, the effort to mobilise provincial revenues was non-existent. In fact, there was an absolute decline in provincial revenues from Rs99.2 billion in 2008-09 to Rs76.6 billion in the following year and further to Rs70.2 billion in 2010-11. As a percentage of total revenue, the provincial revenues have witnessed a sharp reduction from 27.2 per cent in 2008-09 to 12.7 per cent in 2011-12.

The gap between revenue and expenditure has not resulted from a larger development expenditure, which has decreased from 27.9 per cent of the total expenditure in 2008-09 to 26.2 per cent in 2011-12. Rather, it is the outcome of the failure to mobilise additional provincial revenue. Lower development expenditure is an important reason for the lower growth in Punjab. Total expenditure on education and health has been increasing but the development component decreased. In the case of education, it was seven-and-a-half per cent in 2008-09, 6.7 per cent in 2009-10 and 7.1 per cent in 2010-11. Development expenditure on health as a proportion of total health expenditure was slashed from 15.8 per cent in 2008-09 to nine per cent in 2010-11. Regional distribution of development expenditure has been uneven. The above-mentioned IPP study constructed a composite development index. All three divisions of South Punjab — Multan, Bahawalpur and Dera Ghazi Khan — were ranked at the bottom.

In terms of growth, financial management, development in general and regional development in particular, the record of the PML-N in government in Punjab creates doubts about the future promises being made by the PML-N in opposition.

Published in The Express Tribune, September 14th, 2012.

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Reader Comments (17)

  • Farrukh PTI
    Sep 13, 2012 - 11:21PM

    United Nation –>>> “Despite all the adverse situations, such as floods, law and order and global economic meltdown having an impact on the economy of the province, Punjab has performed better than other provinces. In many areas, the province’s performance is ahead of the national average”

    “the initiatives of the Punjab government have started yielding positive results and are improving the lives of the people.”

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  • Ibrahim Aslam
    Sep 13, 2012 - 11:29PM

    Jameel you forgot to mention this! British Council Chairman Sir Vernon Ellis appreciates efforts made by Punjab Government in the education sector. http://www.nawaiwaqt.com.pk/E-Paper/Lahore/2012-03-01/page-8/detail-3

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  • Majid
    Sep 14, 2012 - 12:37AM

    Dr Pervez Tahir with all due respect, you have lost your credibility by writing this article. And I am stating this with all the respect, no offence intended.
    You have just manipulated a few economics equations. You are so unable to find negatives in Punjab’s economic performance that you have even put raw equations in front of the readers. I don’t know if any reader would be able to understand your article aimed at showing your maths skills but to me, it is just a bad attempt to find some loop holes in a good performance.
    Punjab is doing well but they can have some bad practices somewhere and should be highlighted duly.

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  • Falcon
    Sep 14, 2012 - 2:09AM

    Interesting article. I think Punjab is doing better than other provinces but it certainly needs to do better specially on two fronts: revenue generation and better distribution of resources (Lahore and Raiwind are not the only two places in Punjab, far flung areas in Southern Punjab deserve a portion of state resources as well).

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  • meekal a ahmed
    Sep 14, 2012 - 2:12AM

    Good work, PT. Informative but not surprising!

    Of course there is nothing especially difficult about generating provincial data on output, etc. We just don’t want to do it in case it turns up some uncomfortable truths.

    It is self-evident that the moment and since the NFC lolly comes in, provincial own revenues will take a nose-dive.

    Ever heard of moral hazard?!

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  • Raw is War
    Sep 14, 2012 - 7:36AM

    since Karachi generates 60% of Pakistan’s revenue, not surprising.

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  • Mirza
    Sep 14, 2012 - 9:29AM

    Punjab is the best governed province of Pakistan, if you don’t believe me ask Sharifs!

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  • No BS
    Sep 14, 2012 - 10:45AM

    LOL…good governance of PMLN EXPOSED!!!

    The UNDP report is actually done by the P&D Department of Punjab and is not an independent assesment of the performance of PMLN

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  • zac
    Sep 14, 2012 - 1:31PM

    I think you are missing the point with the shortage of energy (electricity + gas ) as compared to other provinces the dismal performance was certain .. after 2008 FDI has flew away whereas with the introduction of 18th amendment the provinces has still learn how to generate revenue plus curb expenditures..coz so far there is no such mechanism these provinces have created to step out of populist politics… and with the 60% of population punjab still is performing well but all the benefits have divisible effects. we knew that federal govt has disappointed figures (-ve in large scale manufacturing) but they have manipulated it for next elections.. and mind you large scale manufacturing is directly effected by energy problems we are facing for last 4 years.Recommend

  • Asif Shah
    Sep 14, 2012 - 2:29PM

    i am sorry but i cant agree with your manipulated article. Punjab’s sole revenue is generated from agriculture and textile industry. which is destroyed just because of lack of electricity. Which is fault of Central government. What is in hands of punjab government they are doing the best to make our lives better. I am a citizen of punjab and i am happy with my government.
    this is not just the case for textile. in all other development projects in punjab which are funded by center are at a halt. only project that are working are funded by punjab government. so pleas stop this propoganda against punjab government

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  • adeel
    Sep 14, 2012 - 3:37PM

    Very interesting aspect of the IPP report by SIrtaj Aziz is that Punjab Agricultural Growth fro last 4 Years is only 1% as compare to rest of Pakistan 3%.

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  • No BS
    Sep 14, 2012 - 3:50PM

    @zac:

    Please read the IPP report, it is not manufacturing that underperformed but the agricutlure sector, which is not energy intensive….

    http://ippbnu.org/files/5AR2012.pdf

    The only business growing in Punjab is the Sharif Pvt Ltd & sons

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  • yousaf
    Sep 14, 2012 - 5:57PM

    @author::These statistical data have always been Greek to me.My way of measuring economic performance is that when after having paid all kinds of taxes and borne the brunt of every-day inflation I go some place beyond main roads of Lahore I assess the rate of development by the number of ditches I have to dodge on the road and the amount of toll taxes I have to let go while still feeling the pain in my back from the jumps in the road I could not avoid.To measure development I use the BASE PERIOD when GT road was single,simple and smooth from Peshawar up-to anywhere in PakistanRecommend

  • Abbas from the US
    Sep 14, 2012 - 10:36PM

    Dr Tahir:
    Appreciable effort.

    Now it is time to highlight the Federally funded development projects and their allocation in percentages to the various Provinces.
    Income tax revenue generated in percentages from various Provinces.
    As stakeholders in the future of Pakistan everyone needs to be reassured with a sense of balance.

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  • Maria
    Sep 15, 2012 - 8:35AM

    @Asif Shah: I went to Sialkot and Gujranwala districts which were still contributing much industry and goods in the manufacturing sector despite the neglect from the Federal government; In fact Sialkot alone contributes more than 15 % of Pakistan’s export revenues even though things get stamped at the port of exit in Karachi, they are made upcountry. It is good that the Punjab remains a stable and developing province even when the rest of the country is in more unstable conditions.

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  • Sep 15, 2012 - 6:09PM

    It would be useful if the economic indicators of Indian Punjab are compared with Punjab on this side, both short term and long term.

    I am told they are doing better than us.

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  • yousaf
    Sep 15, 2012 - 8:10PM

    @A.Bajwa::If we take the matters on government level then I am sorry to say that there can’t be made any comparison between the two sides.They on other side are much better-off than us.So far as western(Pakistan)side is concerned it is sheer-resilience of Pak industrialists(cottage) and farmers(small and medium) who are keeping the wheel of economy ‘running,despite ALL odds’.What you are told is very much true

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