The writer is Professor and Associate Dean at Institute of Business Management (IoBM) Karachi.
The nation had huge expectations from the federal budget 2020-21 particularly the business community that was hoping that the government will provide significant financial relief but were disappointed after the budget was presented.
The textile, leather, agriculture and construction sector seem disappointed. The textile sector had given several budget recommendations which included repealing SRO 1125 related to zero-rating regime, reducing the 17% GST on textile imports to 2-3%, and converting it into a policy of refund to prevent imposition of additional taxes.
These deductions affect the textile sector hampering performance, but were conveniently ignored. Similar budget recommendations were also given for agriculture and those associated with the sector were anticipating some relief. The IT sector, which has made huge strides in recent years, had high expectations as well which could not be met.
The government has kept revenue target of Rs4.963 trillion for the upcoming year. The target last year was Rs5.555 trillion but the government managed to collect just Rs3.908 trillion. This implies that we suffered a loss of over Rs1600 billion but the revenue target is Rs1000 billion higher for the new fiscal year.
The government has allocated Rs200 billion for subsidies, but it is also important to note Rs3.2 trillion have to be paid in interest payments. Although Rs792 billion has been earmarked for public welfare projects, the government will have very little left for development projects. It seems there is no hope at all.
Under such difficult circumstances, we should not have high expectations about development projects. The government could have brought many sectors into the mainstream by offering subsidies particularly agriculture, textile and IT. Economic experts agree that the government can reduce the coronavirus-induced economic crisis by focusing on these sectors.
The agriculture sector needs more attention. It has ravaged by locusts while excessive rains and floods have been forecasts for this year which can destroy crops and bring more miseries to growers. This vital sector caters to food and textile and was yet completely negated.
The world is moving towards digitalization and the IT sector has made progress in Pakistan, but it does not seem to be a priority for the government. The government should reform the IT sector, bring further investments and address the problems of workers. It is unfortunate that the government did not blink an eye toward this sector.
SMEs are considered the engine of economic growth but no incentives were given to small industries. There is immense potential among SMEs but it needs attention. The fishing sector provides $450 million exports which can easily be increased with reforms and reduced taxes. India, Sri Lanka, and Bangladesh have a higher consumption of seafood. Pakistan can also gain more revenue by focusing on the fishing sector.
Many other sectors need attention and can be brought to the national fold to increase production and support the economy. By neglecting these sectors, the government has failed to bring any reforms to address the economic crisis worsened by a pandemic and we should not have high hopes either.
The federal budget has raised fear of a ‘mini-budget’ among the business community and the lack of incentives might worsen the situation. The health and education sector has also been neglected by Punjab and Sindh budget and the people are disappointed. Looking at the statistics, the economic worries of the country could worsen even further along with the lives of the people.