GROWTH, SAVINGS AND INVESTMENT

Several policy-induced macroeconomic challenges have severely restricted the maintenance of upward mobility of rate of growth in the recent fiscal years and the continuation of progress in different social sectors. The challenges have partly been the result of lack of farsightedness and creativity in policy making, resulting in fiscal and monetary mismanagement. 2.1 The Scenario of Growth The government has already reviewed many macroeconomic targets in FY 2014-18 that are set in the Medium Term
Macroeconomic Framework (MTMF) due to failure to achieve the earmarked targets in many sectors of the economy in FY 2012-13. As a result, a great mismatch exists between the projection of growth by MTMF which has been revised five times in the regime of current government and actual rate of growth which mainly occurred due to myopic policies taken by the government and some of which were suggested by IMF

Under the five year MTMF FY 2014-18, the annual GDP growth was projected at 7.6 percent in FY 2013-14. But the projection has been revised and set at 7.2 percent in the current fiscal year instead of the 7.6 percent projected by MTMF.

Considering the movement of important variables in the economy, the Unnayan Onneshan projects that the real growth in the GDP might be 5.65 percent in FY 2013-14. On the other hand, in MTMF FY14-18, the rate of growth in GDP has been projected at 7.2 and 8.0 percent for FY 2013-14 and FY 2014-15 respectively whereas the IMF has projected that the real GDP growth might be 6.1 and 6.7 in 2014 and 2015 respectively.

It is to be noted here that MTMF and IMF have made projections about real growth, CPI inflation, and current balance of account as percentage of GDP. In those documents, the decreasing rate of CPI inflation and current balance of account produces increasing trend of the real growth. It is assumed that due to the policy suggestions of IMF, the above variables are supposed to decline and the real growth to increase. The increased rate of growth, however, has not been materialised particularly due to shortfall in investment demand.

The major reasons of failing to achieve the targeted level of growth of the current fiscal year are the increased gap between savings-investment, mismatch between investment demand and growth of credit to the private sector, poor rate of ADP implementation, failure to achieve the targeted level of revenue, reduction in public spending in physical infrastructure and social sectors. These have been accompanied with political contestations.