Daffodil International University
Faculties and Departments => Business Administration => Business & Entrepreneurship => BBA Discussion Forum => Topic started by: Rozina Akter on August 07, 2013, 03:16:15 PM
-
The nation is concerned with political uncertainty prevailing in the country today. Common people are concerned with how to maintain their standard of living with their existing incomes. The Bangladesh Bank is struggling hard to contain inflation. The government is interested in faster economic growth. It knows how it could be achieved. But it is less concerned about the ways and ensuring favourable environment for achieving the targeted growth.
For economic progress, macro-economic stability is of utmost importance and it refers to a situation where, in order to achieve the targeted economic growth, certain parameters like inflation, savings and investment rates, revenue growth, revenue expenditure, foreign trade growth, foreign exchange reserves and credit growth are set. The Ministry of Finance in Bangladesh sets such parameters in the name of medium-term macro-economic framework. The estimated real GDP (gross domestic product) growth was shown at 7.0 per cent in the fiscal year (FY) 2009-10 to 8.0 per cent in the FY 2014-15. The estimated real GDP growth rate was fixed at 7.2 per cent for the FY 2012-13 and 7.6 per cent for the FY 2013-14. Unfortunately, it could not achieve 7.2 per cent GDP growth which even came down to 6.02 per cent in the FY 2012-13. Now, instead of 7.6 per cent GDP growth in the medium-term macro-economic framework, the budget for FY 2013-14 set the target at 7.2 per cent.
The inflation rate targets, over the last four years, could not also be achieved. The average inflation was 8.5 per cent over last four years. The projected inflation in the medium-term macro-economic framework is 6.5 per cent for FY 2013-14. Now both the budget and the Bangladesh Bank (BB) set inflation target at 7.0 per cent. Recently, the BB announced its monetary policy seeking to promote expansionary credit growth in the public sector and contractionary credit growth in the private sector. By doing so, the central bank hopes to contain inflation at 7.0 per cent. But inflation depends on many factors: broad money supply, credit flow, exchange rate ratio, wage hike, prices of imported goods and commodities, production and supply of domestic goods and services. Broad money supply depends on credit flow and lowers the value of domestic currency. It adds to the fuel when the government itself becomes a strong borrower from the domestic banking sector. The government is set for borrowing Taka 260 billion from the banking sector for the FY 2013-14. Price hike may also occur due to high import prices of goods and commodities from India, feared the BB Governor. The falling growth in the agricultural sector for the FY 2011-12 and FY 2012-13 also induced inflation. The supply chain of essentials and other commodities was severely affected in the FY 2012-13 due to different political programmes.
The economic growth was affected by low agricultural production, low rate of investment, depressed foreign trade and political instability. All these factors are prevailing in the ongoing FY 2013-14.
On scrutiny, it is found that the agricultural sector received low allocation in the budget for FY 2013-14. More investment is required for research and development in the agricultural sector. At least 30 per cent of GDP should go to investment. But investment is sluggish particularly in the private sector. Credit flow to the private sector has also decreased. Entrepreneurs are reluctant to undertake investment risks.
Political uncertainty is on the rise. The Awami League-led government is found to be absolutely reluctant to accept the opposition demand for poll-time non-party caretaker government for holding parliamentary election. The opposition, till date, is adamant not to go for polls without the non-party caretaker administration. It points to political clashes and stalemate in the days ahead. Why will investors go for investing their money in such a situation? Added to it is the deteriorating law and order situation. According to a newspaper report, during the last one year and a half, 1,500 trucks and covered vans of the owners of Chittagong alone were hijacked. More than 50 drivers and helpers were killed at the hands of the hijackers. These incidents add up to the prices of the commodities and business investment. In the context of Bangladesh, therefore, the dream of achieving targeted economic growth and containing inflation at an acceptable level depends on the political situation that will develop in the country in the run up to the next general election.