Emancipating the dairy sector

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LAHORE- It is no secret that inflation has been on the rise in Pakistan for many years. Prices have been galloping upwards with no respite for the common man. Inflation is cannibalising people’s savings as people use up their incomes to meet their day to day expenditures.

This is bringing the economic activity of the country to a screeching halt. However, it seems that tax officials are not quite done yet as they mull over imposing new taxes on some of the high potential growth sectors like dairy and livestock sector.

This step not only will result in a greater slowdown in GDP growth rate which is already below 4pc but will compound the existing socio-economic problems. As prices of daily household items have skyrocketed, the common man has been seriously hit and many have been forced to survive on subsistence level. The situation has taken a turn for the worst, especially in the past couple of years. The situation is depicted by the rise in Consumer Price Index (CPI) over the past year.

CPI measures the change in prices of consumer goods for a household. The nation faces a dismal situation with regard to rising prices of goods and services and the problems citizens face. There is a rise in CPI of over 17pc in less than two years; enough to get the financial experts at IMF toss and turn because they are the ones who are directing the government to curb inflation.

One of the items in the CPI basket that has seen a significant rise is milk and derivative products. The increase has been around 10pc with milk powder at 11.81pc and milk fresh at 9.69pc. Food items are a basic requirement of people and its weight in CPI is over 37pc. In this context, milk and derivative products occupy the largest portion of over 7pc weight. Since milk is a significant nutrient source for the masses in Pakistan, the rise in milk price signify an increase in difficulty for the common man to afford an item of essential need. At the macroeconomic level, this means a further slowdown in economic activity as demand decrease because of rising prices.

However, it has been proposed to impose taxes on the sector and do away with any favorable environment. It goes without considering that any such step will hurt the investor confidence in this vital sector. Moreover, the suffering of the common man will be augmented by levying taxes on an essential item like milk and will inflate the price further.

Tax evasions and the inability of the relevant government departments to collect taxes are the cause of poor tax to GDP ratio. Businesses required a stable working environment. Imposing new taxes will certainly be a recipe for disaster and thwart growth in sectors.

Courtesy:  Nation

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