Policy framework and structural change

The macroeconomic policy framework of successive regimes is composed of fiscal prudence and tight monetary policy to achieve low inflation rate. These so-called good macroeconomic fundamentals have hindered the desired structural change in the economy. These macroeconomic fundamentals have a great impact on the followings. Tight fiscal and monetary policies give rise to an over-valued rupee vis-a-vis the US dollar. This over-valuation affects the competitiveness of exports. Since our export basket tilts in favour of textiles, their competitiveness is dented. That is the reason exporters are talking up the cost pressure. These tight policies have an impact on the composition of the fiscal budget. Debt servicing has gobbled up a large chunk of federal expenditure and successive governments could not reduce the running expenditure owing to their inertial nature. Then development expenditure became the sacrificial goat.