Domestic demand, household spending forbidden topics in Pakistan?
Business
US prime example, China too focusing on domestic consumption amid economic slowdown
LAHORE (Raja Arsalan Khan) – Indonesia saw its exports contracting by 2.75 per cent in the second quarter on a yearly basis, in stark contrast to last quarter's growth of more than 10pc, says Reuters in a latest report. However, it isn’t the real story as the Southeast Asian nation had a 5.17pc growth during the same period, which was strongest in the last three quarters.
Read more: Indonesia sees 5.17pc quarterly growth, eyes huge FDI in solar systems production
Wait! How is it even possible? Did you say that the exports declined? Well yeah! Exports were down in the April-June quarter. And to add more to the puzzle, the 5.17pc quarterly growth rate was higher than 4.93pc witnessed in the preceding Jan-March quarter.
So what about boosting exports to grow economy mantra repeated in Pakistan? How did Indonesia achieve these figures?
It certainly negates the bookish intellect as represented by foreign educated and globally-certified economic experts [spending a part of their career with international financial institutions or think tanks or NGOs].
They tell us that a depreciating rupee is the solution which will boost exports but it hasn’t been the case in Pakistan with the country witnessing a constant decline in exports despite the historic slide in the rupee exchange rate.
Anyway, no more suspense. We return to today’s subject – Indonesia – to find out what happened there.
The unexpected surge in GDP was a product domestic spending. Yes! We are talking about domestic spending – both household and government.
Meanwhile, it isn’t just Indonesia. Recently, China's top leaders pledged to step up policy support for the economy amid a tortuous post-Covid recovery, focusing on boosting domestic demand, signalling more stimulus steps.
Read more: China to focus on boosting domestic demand amid tortuous recovery
"Currently, China's economy is facing new difficulties and challenges, which mainly arise from insufficient domestic demand, difficulties in the operation of some enterprises, risks and hidden dangers in key areas, as well as a grim and complex external environment," Xinhua quoted the Politburo as saying, after a meeting chaired by President Xi Jinping.
One last example of the United States – the largest world economy which historically relies upon domestic demand. The developments in recent years are enough to prove the point.
So one thing is clear. Only exports don’t fuel economic growth – a statement that doesn’t mean to downgrade the importance of exports industry. What it actually means that nations can expand their economy even when the global demand has reduced [the reason behind this decline in Indonesia’s exports] by focusing on domestic consumption.
And how do we trigger domestic demand? By increasing the purchasing power of consumers in the country, unlike Pakistan where people are ruined by food inflation, let alone the overall trend. The overwhelming majority doesn’t have enough to feed themselves or their families and cannot go for consumer goods as the ruling class and intelligentsia are not even thinking about to look into the issue of shrinking purchasing power.
In fact, they issue sermons – barring Finance Minister Ishaq Dar, a staunch advocate of a strong rupee but is powerless due to the past and present deal reached by the IMF – to glamorize a weak rupee. It is only makes the imports expensive when Pakistan will have to import even to expand the industrial base, if all other issues are resolved.
With zero wage growth and the continued reduction in purchasing power in recent years, it is impossible to even imagine any increase in household spending to boost domestic demand in the country.
The ordinary Pakistanis need to ask the decision makers and their advisers as well as the opinion makers why things like bolstering domestic demand and household spending are among the forbidden topics.
Perhaps it is because of the fact that any discussion or policy shift would require stop burdening the masses with indirect taxes and higher prices of utilities besides increase their income so as to boost their purchasing power while taxing the elite. Certainly, it is a difficult venture.
