Here we go again, another repeat of knee-jerk policymaking in arbitrarily spiking fuel prices by almost 20% in a single stroke without reflecting on its long-term implications: another wave of inflation, further constrained disposable income, pressure on the PKR possibly leading to further devaluations, escalation in the ongoing industrial erosion, retarded growth, lost competitiveness, diminished investment, unemployment, and last but not least, increased poverty in a highly polarised environment that becomes more dangerous by the day as the government continues to expand its footprint, squandering resources while taxing the daylights out of its citizens. Also, the timing could not have been worse: the middle of Ramadan with Eid approaching, a period when most Islamic governments are busy ensuring price controls, while we, through a soulless act, have handed over a perfect excuse to hoarders and profiteers. Whatever happened to any out-of-the-box or innovative solutions like rethinking regional connectivity on trade, including Iran, doing away with expandable imports and spending, reducing the size of the government, drawing up a mitigating matrix that balances resources by spreading them prudently over essential priorities, or simply pacing the increase gradually to minimise pain? But then again, all of this requires hard work and skilled management, something that we have seen little of lately. Instead, we see a straightforward pattern of brutal execution of foreign dictates. When the economic history of this period is written, all these actors will be remembered as the destroyers of national manufacturing and investment in a way that will leave recovery elusive for a long time.

Ironically, in many ways this callousness and lack of empathy does not come as a surprise, where draconian measures without consulting the real stakeholders seem to have become the norm. Look around us and, in today’s modern era of management, almost all successful economies have charted their way out in a very different manner that banks on motivating stakeholders and riding national GDP growth on the back of their entrepreneurial potential. Release these private-sector juices to flow freely and the momentum simply takes everyone along, including the state. On the contrary, to our bad luck, here time and again the myopic babus and hand-picked imported managers have combined to leave us each time in a bigger economic quagmire than before, killing the hen that lays the golden egg. What we require is not to reinvent the wheel but simply to follow what other successful developing economies have done, where almost in all cases the mantra has been two-pronged: one, update and recalibrate statistical weights in ways that capture the structural transformation of the average household in what it earns, spends and how it lives. For instance, closely monitor the share of food in the CPI basket alongside live tracking of services and consumption patterns to ensure policymaking remains aligned with steadily shifting trends in these primary functional domains; sadly, something we have consistently failed to do. The idea is no longer merely to record numbers but to use this data to calibrate policymaking around people’s constantly changing needs and dynamics.

Meaning, let us say for example that if the government concentrates on food inflation and strives to reduce its weightage in the CPI basket, the remaining equation will automatically adjust towards higher growth. Engel’s Law explains that as disposable incomes and savings rise nationally, households devote a smaller share of their budgets to food and a larger share to housing, transport, healthcare, education, communication and discretionary services, allowing the ship gradually to turn in a direction where the wind can fill its sails. Millions of individual decisions move beyond calorie security to broader economic capability and the effect compounds along the way. If managed right, the magnitude of this multiplier effect can be immense. Second, the transition to a modern economy and sustainable growth cannot happen without securing the production side. Improvements in methodology, including smarter and greater use of regional GST data on levies and zero-rating to remain competitive, enhanced coverage of the unincorporated sector, and increasingly refined estimates of private investment appetite and constraints, can provide the government with a clear view of where economic activity should occur and whether it is evolving in a desirable direction. It is by holistically harnessing this underlying potential that countries succeed, not through mindless taxation or excessive and unnecessary oversight.

Today, for countries that have raised per capita incomes to $5,000 or beyond, a common factor is that private final consumption expenditure accounts for more than half of GDP, underscoring the central role of household demand in economic growth. The economy’s centre of gravity therefore increasingly lies not in subsistence production but in expanding the productive manufacturing base sustainably as a key supply-chain source. Every country that has achieved such an ecosystem has seen rising incomes across all segments follow. More importantly, correctly assessing and prioritising sectoral composition has emerged as a leading factor in recent economic success stories, directly reflecting the competence of economic management. While services such as trade, transport, finance, real estate and professional activities have become important growth drivers, industrial expansion remains at the core of every growth story of the past five decades. Pakistan cannot be an exception. Unless we quickly arrest the exodus of domestic manufacturing, catching up may soon become impossible, as some African countries and Afghanistan in our immediate neighbourhood are discovering the hard way. Once the underlying economic structure and the social contract with the people begin to break, they take with them the will and soul of a country to excel or remain a desirable entity — something we are already witnessing from our westerly neighbour. While all the signs are clear for us to see, the question remains: will we ever learn?

Dr Kamal MonnooThe writer is an entrepreneur and economic analyst. Email: kamal.monnoo@gmail.com

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