After an impressive growth in the industrial sector, the government has optimistically revised its growth target to 6.8% for the fiscal year 2014-15. Over the fiscal year 2013-14, industries grew by 5.8% overall, surpassing the growth target for the year by 1%.
The Minister of Finance highlighted in his budget speech that growth in the industrial sector this year was highest in six years.
The manufacturing and construction subsectors of the industrial sector, both of which have significant impact on the economy, surpassed their respective growth targets by 1% and 5.3% in 2013-14.
Owing to the optimistic growth in these subsectors, the government has set a 6.9% growth target for manufacturing sector overall, compared to a 4.5% target last year.
The growth target for the large scale manufacturing (LSM) sector, which contributes more than 10% to the GDP and surpassed last year’s growth target by 1.3%, has been set at 7% for fiscal year 2014-15.
The government now aims for a GDP growth rate of 5.1% in the fiscal year 2014-15, compared to last years target of 4.4% which the economy failed to meet by 0.3%.
Within the automobile sector in 2014-15, light commercial vehicles, trucks, buses and motor cycle posted growth rates of 27.95%, 30.94%, 11.25% and 3.38% respectively, while tractors registered a negative growth of 33.57%.
Meanwhile, the Ministry of Finance has proposed to withdraw the 10% excise duty on locally made 1,800cc cars.
Since the textile sector contributes more than 50% to national exports, the government has decided to introduce a support and incentive package for this sector, Minister of Finance Ishaq Dar said in his budget speech on Tuesday.
The chart below shows textile exports over the years in millions of US Dollars. Figures for fiscal year 2013-14 are only from July to March.
Draw-back for local taxes and levies is to be given to exporters of textile products on FOB values of their enhanced exports if their exports increase beyond 10% (over last year’s exports). The mark up rate for Export Refinance Scheme of the State Bank of Pakistan is being reduced from 9.4% to 7.5% from July 1, 2014.
The minister also informed that he had directed the FBR to dispose of all their pending Sales Tax refund claims before September 30, 2014, and that in the future all admissible refund claims of exporters shall be disposed off within 3 months.
Dar also informed that the duty free import of machinery under textile policy 2009-14 will be extended for another two years in order to take full advantage of the GSP plus facility.
A Rs4.4 billion vocational training scheme will be launched with the aim of training 120,000 individuals over a five-year period. The scheme will offer an Rs8,000 monthly stipend to the trainees and will run for a period of three months.
The Textile Industry Division of the Public Sector Development Programme (PSDP) in Budget 2014-15 has been allocated Rs329.3 million. These funds are intended to be used for formulation of textile industrial policy, training, skill development, research for quality improvement and productivity enhancement throughout the production/value chain.
Additionally, the textile industry will benefit from Rs6 billion in fiscal year 2014-15 under the Textile Policy 2009-14. During the fiscal year 2013-14, this amount was Rs7.5 billion.
This story will be updated as more analysis comes in.
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