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Budget in reference to growth of GDP
Published Time: June 15, 2019, 12:01 am
Updated Time: June 14, 2019 at 10:51 pm

M S Siddiqui writes for DOT

Gross Domestic Product (GDP) is the final value of the goods and services produced within the
geographic boundaries of a country during a specified period of time, normally a year. GDP
growth rate is an important indicator of the economic performance of a country.
This measures the monetary or market value of all the goods and services produced within the
borders of the country. Bangladesh’s per capita income rises to $1909, which was $1,751 in the
last fiscal year. That means per capita income increased by 158 dollars in a year. Bangladesh
GDP Per Capita data is updated yearly, available from Jun 1960 to Jun 2019, with an average
number of 281.272 USD.
The four elements that laid the foundation of the present Bangladesh economy were: (i)
emergence of the ready-made garments industry; (ii) international labour exports to the Middle
East; (iii) surge in agricultural growth; and (iv) emergence of non-government organisations
(NGOs).
It has economic challenges include a non-diversified economy; very low per capita income and
presence on women in jobs; poor business climate; weak output due to lack of infrastructure; a
narrow tax base (fiscal revenues under 10% of GDP); and natural disasters resulting in
structural damages and loss of harvests (COFACE).
The statistical department will adopt a new base year for calculating the Gross Domestic
Product (GDP) effective from July 2020 and it is expected to raise the size of the economy by at
least 10 per cent. Under the rebasing procedure, the fiscal year 2015-16 (FY ’16) will be the
new base year replacing the existing FY ’06.
Industry represented 27.75% of GDP in 2017 and employed 21.39% of the total workforce in
2018. The Bangladeshi focuses on textiles, which represented USD 31 billion in 2018. A risk
factor for the clothing industry is the gap between local supply and demand of cotton.
Secondary industries include paper, leather, fertilisers, metals, and pharmaceuticals. Services
accounted for 53.48% of GDP and employed 40.98% of the total workforce in 2018.
The 7th Five years plan had a target to break out of the sphere of 6% growth and raise the
average annual growth rate to 7.4%. This growth will be inclusive, pro-poor, and
environmentally sustainable. By the end of the 7 th FYP, extreme poverty will be around 8.9%.
All the additional labour force will be employed, including much of the under-employed.
The government has unveiled the proposed national budget for FY19-20 beginning on July 1,
with an outlay of Tk 5.23 trillion (523,190 crore), giving maximum focus on infrastructure
development. The figure is 12.62 percent higher than the current FY’s original budget and 18.22
percent bigger than the revised budget.
The budget proposal is much more ambitious about growth of GDP. The achievement of
Bangladesh economy is projected in growth of GDP which is one of the fasted growing in the
world. Government has projected the Gross Domestic Product (GDP) growth rate at 8.2 per
cent in the proposed national budget for 2019-20 fiscal. The rate of inflation projected at 5.5 per
cent for financial year 2019-2020.The goal of the government is to achieve double digit growth
rate by fiscal 2023-24. The budget has largely focused on infrastructure, along with a major
push to scale up social safety net and other nationally important projects.
CPD raised doubt about growth rate of GDP dune to inconsistent evidence between GDP
estimates and proxy indicators suggests that there is a need to test the robustness of growth
estimates so as to have credible policy guidance,
The budget deficit will be kept at 5 percent of the gross domestic product. The government has
already approved the Tk 2.03 trillion Annual Development Programme, which is 17.18 percent
higher than the revised ADP of the outgoing fiscal year.
The budget proposal for FY20-19 may be evaluate in reference to GDP. The GDP growth rate
shows consistent improvement over the years which already exceeded the target for 7FYP
(7.6%). The GDP growth has already acceded the target compared to 8% target in 7FYP
(8.13% in FY19, provisional). Alongside other goal will be to enhance all business sectors
including agriculture, industry, commerce, exports, real estate and services sectors and shall
reduce poverty, generate employment, and attract foreign investment.
The component of GDP is not very comfortable. Services sector contributes to the highest share
in GDP (more than 50%) – dominated by wholesale and retail (13.15% in FY18). Manufacturing
has continuously increased and this is also dominated by large and medium scale industries
(13.35% in FY10 and 15.63% in FY18). This is not a healthy symptom for economy missing the
data of SME industries as this may be insignificant.
The target for public investment (% of GDP) has been met in relation to the 7FY. It was7.6% of
GDP in 7FY but the investment was 8.17 percent. But public expenditure-GDP ratio also
declined since FY13, and reached 13.5% in FY18. The total investment scenario is still lagging
behind due to low contribution of private investment.Private investment (% of GDP) was Target
25.1% in 7FYP (2019), but performance in FY 2019 is 23.4%. Gross national savings (% of
GDP) targeted 30.7 while achievement is 28.41%. Between FY09 and FY18, the development
expenditure increased faster than non-development expenditure and public expenditure also
increased faster than revenue collection
The investment (as % of GDP) sluggishly improved mostly due to public investment. • Private
investment (as % of GDP) remains the “Achilles Heel” in macro-economy. In FY20 the
projected private investment (as % of GDP) is even lower than the FY19 budget (25.15%).
Revenue-GDP ratio decelerated since FY12 to be 9.6% in FY18. Aspiration for Revenue (as %
of GDP) and NBR revenue (as % of GDP) of FY20 is lower than that of previous year FY19.
Similar trend is observed for expenditure (as % of GDP). The revenue (% of GDP) is relatively
stabled over the last 10 years without major improvement; however the gap between the
performance and the target of 7FYP increased over time. Revenue and expenditure targets for
FY20 are falling short of 7FYP target by approx. 18% and approx. 14% respectively. For
domestic financing, there is almost similar level of projected reliance on banking and foreign
financing is expected to increase.
ADP of Tk. 2,02,721crore has been proposed for FY20 for 7% of GDP in FY20 (5.3% in FY18
Actual and 6.6% in FY19 RAFY19. It is 17.2% higher than ADP and 21.4% higher than RADP
for FY19. The rate of implementation of original ADP in FY18 was 70% (lowest since FY07).
Bangladesh policy makers usually focus of growth of GDP but not discuss of distribution of
growth and the budget is not focus of growing inequality created due to un-proportionate
distribution of budget expenditure and regressive taxation policy bias toward well-to-do section
of the society.