Per capita income grows just 4.3% this year

Clocks in at $1,380 as total size of economy falls by Rs600 billion.

ISLAMABAD:

With discrepancies in the methodologies used to estimate this year’s total national income that wipe at least Rs600 billion off the economy, the per capita income has grown by an unimpressive 4.3% to $1,380.

To arrive at the per capita income figure, the Pakistan Bureau of Statistics – the government’s statistical arm – estimated a 2% growth in the country’s population that reached 183 million this year. It then divided the total national income with the number of people and got per capita income of $1,380, which is $57 or 4.3% higher than the per capita income last year.

However, the total national income has raised eyebrows as issues of double-counting, inflated figures and exclusion of parts of income from some subsectors of the economy have come to the fore. This comes amid claims from government officials that they have calculated the size of the economy according to latest international concepts.

According to estimates given by the PBS, the overall size of the economy has come down to Rs22.9 trillion despite addition of new goods and services as a result of rebasing of the economy from 1999-00 to 2005-06. Economic growth for the current year has been put at 3.6%.

Though the PBS has applied latest concepts for calculating the value of goods and services, it has failed to deliver because of capacity constraints, leaving the job to those who have little knowledge of national accounts, commented an official, who has been closely working with the PBS for years.



PBS has used basic prices and abandoned the factor cost valuation methodology for the economy, said officials. In factor cost, goods and services are valued according to the prices received by the sellers including additional costs while in the basic price concept, initial prices of goods and services without additional charges like taxes and subsidies are considered.

PBS Chief Statistician Asif Bajwa would clarify the distortions, if any, today (Wednesday), they said.

Distortions

The officials pointed out that the PBS has added production-related taxes like customs duties to basic prices and did not remove major parts of duties that the producers claimed as input adjustment. This has inflated the value of goods and services.

PBS has also considered budget estimates of indirect taxes for arriving at the national income, but actual revenue collection is expected to be at least Rs300 billion short of the target. It has added Rs1.54 trillion on account of direct taxes, but at the time of revision of these estimates the size of the economy will fall further. It is also said to have counted customs duties twice as part of indirect taxes.

PBS has excluded tariff differential subsidies while calculating the value addition in electricity generation and distribution, contrary to the past practice when they used to be part of the value addition by the power sector, as it was the cost of generation that the government was paying in place of consumers.

This has caused a negative 3.2% growth in this subsector in real terms, but in nominal terms the electricity generation and distribution sector grew 9.9%, showed PBS documents.

According to sources, the reason for doing this was to show comparatively higher growth this year. Had the government added power subsidies to the cost, this would have resulted in much higher growth for last year as well, leading to a comparatively low growth this year due to a higher base.

Last year, the government gave Rs536.6 billion in subsidies including roughly Rs500 billion in power subsidies. For this year, the PBS has used budget estimates of Rs185 billion for power subsides.

The officials added when these distortions would be addressed next year, the country would have to face credibility issues while seeking financial support from international financial institutions.

Published in The Express Tribune, May 8^th, 2013.

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