Per capita income grows just 4.3% this year

With methodological discrepancies in this year’s estimated total national income, wiping at least Rs 600 billion off the economy, the per capita income has grown by an unimpressive 4.3% to $1,380.
To arrive at this figure, the Pakistan Bureau of Statistics (PBS) estimated a 2% growth in the country’s population which reached 183 million this year. It then divided the total national income with the population and got a per capita income of $1,380, which is $57 or 4.3% higher than last year’s.
However, the total national income has raised questions due to double-counting, inflated figures and excluded income from some of the economy’s sub-sectors. This comes amidst claims from government officials that they have calculated the size of the economy according to the latest international concepts.
According to the PBS’s estimates, the economy’s overall size has decreased to Rs 22.9 trillion despite new goods and services due to the economy’s rebasing from 1999-2000 to 2005-2006. Economic growth for the current year is estimated at 3.6%.
Though the PBS has applied the latest concepts for calculating the value of goods and services, it has not delivered because of capacity constraints, and delegating work to those unlearned in national accounts, commented a PBS official.
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 will clarify any distortions on Wednesday,” they said.
Distortions: The officials said that the PBS had added production-related taxes such as 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 indirect taxes budget estimates for computing the national income, but actual revenue collection is expected to be at least Rs 300 billion short of the target. It has added Rs 1.54 trillion in direct taxes, but when revising these estimates, the economy’s size will fall further. It is also said to have counted customs duties twice for indirect taxes.PBS has excluded tariff differential subsidies while calculating the value addition in electricity generation and distribution. Previously, they were part of the power sector’s value addition, as the government, not the consumers were paying the generation cost.
This has caused a negative real growth of 3.2%, but the electricity generation and distribution sector grew 9.9% in nominal terms, PBS documents indicated.
According to sources, this was for showing a comparatively higher growth this year. Had the government added power subsidies to the cost, much higher growth for last year would have resulted, causing a comparatively low growth this year because of a higher base.
Last year, the government gave Rs 536.6 billion in subsidies including roughly Rs 500 billion in power subsidies. For this year, the PBS has used budget estimates of Rs 185 billion for power subsides. Officials added that when these distortions are addressed next year, the country will face credibility issues while seeking financial support from international financial institutions.