A report on

“An analysis on Budgetary Policy of Industrial Sector in Bangladesh"

Course title: Treasury Management & Central Banking

Course code: FIN: 424

Submitted to:

Sutapa Chowdhury
Assistant Professor,
Finance and Banking,
Comilla University.

Submitted by: (Group – 04)

ID Name
11817004 Sumaiya Akter (Leader)
11817010 Shamima Akter
11817016 Amrin Binte Halim
11817018 Sanjida Akter
11817023 Fariha Zaman
11817036 Jarin Tasnim
11817063 Afrin Sultana
Submission date: 07-08-2022
Letter of Transmittal

7th August 2022,

Sutapa Chowdhury
Assistant professor,
Department of Finance & Banking,
Faculty of Business Studies,
Comilla University.
Subject: Submission of report on “An analysis on Budgetary Policy of Industrial Sector in
Bangladesh”
Sir,
It has been a great experience working on this assignment. As you have assigned, we have
studied the “An analysis on Budgetary Policy of Industrial Sector in Bangladesh" We have
prepared the report as per your guideline. Here we are submitting the assignment with great
pleasure and gratefulness. We have tried our level best to make the assignment a perfect one.
We hope you will appreciate all our efforts and take any unintentional mistakes with kind
consideration.

Sincerely yours,

-------------------
Sumaiya Akter,
On behalf of the group no: 04,
Department of Finance and Banking,
Comilla University.
Acknowledgement

Report is a part of BBA program. This report is based on practical knowledge. We have realized
that practical knowledge is very much essential for professional life and it is very different from
academic knowledge.
In preparing this report first of all we express our deep gratitude to Sutapa Chowdhury, Assistant
professor, Department of Finance and Banking, Comilla University, who guided us properly by
giving direction at different times to prepare this report. Her guided supervision resulted in
successful completion and timely submission of the report.
At last, I am grateful to almighty Allah who has blessed me and given me strength to prepare this
report successfully and smoothly.

Objective of the study

The main objective of analysing on budgetary policy of industrial sector in Bangladesh is to
achieve the information about the industry sector. In a nutshell, budget analysis involves closely
reviewing the details of a financial budget of the industry sector. The purpose of budget analysis
is to understand and improve the way money is spent and managed. The objective is also to
know the problems and prospects of the industry sector of Bangladesh. This type of scrutiny
ensures that if the country is utilizing its all available finances in the most efficient way to meet
overall goals.

Source of Data and Methodology

In order to preparing this comprehensive and formal report, we have gone through a marvellous
experience while gathering and combining all data from Secondary Data source.
To analyse 10 years data of Industrial sector in Bangladesh, we needed to arrange all the data
that covers sources of financing and measures performance, contribution in economy, which is
for more specific and defined information, we have followed the sources of websites, reference
books and presented in graph and chart to clarify each and everything easily.
Limitations
We, the group of empower, has it’s enough to create a fine finished assignment of us. But doing
so each of us faced various difficulties, and those are
 Lack of time
 Lack of technological know-how
 Lack of proper guiding information

Executive Summary
Our assignment is completely focused on, “The Budgetary Policy of Industrial Sector in
Bangladesh “. We are aware that an executive summary is the short version of what we got in the
overall analysis.
In this analysis we tried our best to cover the entire core things related to industrial sector of
Bangladesh. At first a very short discussion of budgetary policy and changes of budget allocation
from the previous budget within a table of information. Then we added a detailed introduction of
industrial sector on Bangladesh perspective. Along with it we include some factors which
abbreviate sources and the disbursement of finance in various industries within information
adjusted graph of last 10 years budget of Bangladesh. We tried to highlight the core analysis
which is the contribution of GDP in industrial sector and the systematic performance comparison
of industries on the basis of last 10 years data, which also presented in graph and line charts to
define the contribution in GDP and the comparison of performance genuinely.
We know that Bangladesh is mostly dependent on agriculture sectors, because of some barriers
that we identified in our analysis and every problem wants a solution, that’s why we discussed
how to overcome these barriers and how industrial sector will be able to contribute in GDP of
Bangladesh more than before.
So at the end of this segment we just want to say that, this report gives you much more
information about the industrial sector of Bangladesh at a glance.
 Table of Contents

No. Topic Page

No.

01 Introduction 06

02 Introduction to Industrial Sector of Bangladesh 07-08

03 Sources and Disbursement of budget financing in 08 -09

Industrial sector

04 Industrial Sector contribution to the overall GDP 10-11

05 Systematic comparison among industries relating 12-13

to their performance

06 Barriers to the development of Bangladesh's 14

Industrial Sector

07 Prospects of Industry sector in Bangladesh 15

08 Findings and Analysis 15-16

09 Conclusion 16

10 Recommendations and Reference 16-17

 Introduction

Budgetary policy is regarded as a key macroeconomic policy instrument because the level of
revenues and expenses can have a powerful effect on total expenditure, national production. A
budgetary matter or policy is concerned with the amount of money that is available to a country
or organisation, and how it is to be spent in a fiscal year.
Bangladesh is embarking on its 50th year of sustaining as a sovereign nation this year. The budget
for the fiscal year 2021-22 has certainly generated significant discourse already. In 2021-22
fiscal year, the total expenditure for the budget is Taka 603681 Crore ($64 billion), a 6.28%
increase from the previous fiscal year. This consists of Taka 378357 Crore ($40 billion) allocated
for operating and other expenditure, while Taka 225324 Crore ($24 billion) has been allocated
for the Annual Development programme. On the total budget, in the revenue side, Taka 389000
Crore has been set as the NBR sources and Non-NBR sources. The overall budget deficit for FY
2021-22 will be Taka 214681 Crore, which is 6.2 percent of the gross domestic product.
A cross comparison of the budget with the previous fiscal year, FY 2020-21 reveals the changes
in major sectors, The amount allocated as a percentage of total budget to different major sectors
as follows:
Sector FY 2021-22 FY 2020-21 Change
Agriculture 5.30% 5.30% 0.00%
Defence 6.20% 6.10% 0.10%
Education and technology 15.70% 15.10% 0.60%
Health 5.40% 5.10% 0.30%
Industry & Economic .70% .70% 0.00%
services
Power and Energy 4.50% 4.70% -0.20%
Public Administration 18.70% 19.90% -1.20%
Social security and Welfare 5.70% 5.60% 0.10%
Transport & 11.90% 11.40% 0.50%
Communication

From the whole budgetary policy, we choose the industrial sector of Bangladesh to analyse the
overall budgetary policy of the industrial sector on the basis of last 10 years.
 Introduction to the Industrial Sector of Bangladesh

An industry is a branch of an economy that produces a closely- related set of raw materials,
goods or services. Industry sector means those firms that produce similar products or provide
similar services using somewhat similar business process. Among the fifteen sectors of GDP, the
broad industry sector includes four sectors namely construction mining and quarrying,
manufacturing, electricity gas, water supply and construction. The contribution of the
manufacturing sector is the highest in GDP.
There are four types of industry in Bangladesh namely Primary, Secondary, Tertiary and
Quaternary.
 Primary:
This sector of a nation's economy includes agriculture, forestry, fishing, mining,
quarrying and the extraction of minerals. It may be divided into two categories, genetic
industry and extractive industry.

 Secondary :
This sector also called manufacturing industry, (1) takes the raw materials, supplies by
primary industries, process them into consumer goods. (2) Build capital goods used to
manufacture consumer and non consumer goods. For example: large-scale industries,
small-scale industries and cottage industries.

 Tertiary :
This broad sector also called the service industry includes industries that, while
producing to tangible goods, provide services or generate wealth. This industry includes
banking, finance, insurance, investment, retail, wholesale, real estate services etc.

 Quaternary :
An extension of tertiary industry that is often recognised as its own sector, quaternary
industry concerned information-based services, like information technology, research and
development, communication etc.
The Bangladesh economy is dominated by the services sectors. It accounted for 56.3% of GDP
in FY 2015, followed by industry 28.1% of GDP. There are some key factors of industrial sector
in Bangladesh, such as-

 Objectives:
State Minister for industries Kamal Ahmed Majumdar said the main objective of National
industrial policy 2021 is to provide necessary legal and infrastructural facilities for
protection of domestic industry. Preservation of product quality and intellectual property
management.

 Potential sectors:
All the 32 sectors have the potential to become the next billion dollar investment
opportunities in Bangladesh. The sectors include, apparel, agriculture, ICT, light
engineering, pharmaceuticals, infrastructure, frozen foods, energy, handicrafts, ceramics,
tourism and healthcare.

 Fastest growing industry :

E-commerce is the fastest growing industry in Bangladesh; it is making progress at a
rapid pace. On average, about 50 new companies, start their e-commerce business each
day. Out of the statistics, only 1-3 percentage of start up can be sustained.

 Problems in Industrial Sector:

If one seeks to identify the impediment to achieving the goal of industrialisation the
following could be considered as the major bottlenecks: lack of adequate capital,
inadequate knowledge, adverse tax system, lack of technological knowledge, weak
investment base, political instability and improper law and order etc.

Sources of budget financing in Bangladesh

 Tax Revenue
 NBR Tax Revenue
 Non-NBR Tax Revenue
 Non-Tax Revenue
  Foreign Grants
These are the sources of budget of Bangladesh.

Disbursement of budget financing in industry

The financial sector of Bangladesh is the second largest in the Indian subcontinent. Bangladesh
is one of the fastest growing economies in the world and South Asia. It has an impressive track
record of growth and development. It has been among the fastest growing economies in the
world over the past decade, supported by a demographic dividend, strong ready-made garment
(RMG) exports, remittances, and stable macroeconomic conditions. The country made a strong
economic recovery from the COVID-19 pandemic. To accelerate this sector government support
every year by providing incentives. Here are shown in below the graph chart which presents the
comparative scenario of disbursement of budget financing in industry:

Disbursement of budget financing in industry

4500
4000
3500
3000
2500
disbursement of budget financ-
2000 ing in industry
1500
1000
500
0
12 13 14 15 16 17 18 19 20 21
-20 -20 -20 -20 -20 -20 -20 -20 -20 -20
11 12 13 14 15 16 17 18 19 20
20 20 20 20 20 20 20 20 20 20
From this chart it finds that the budget amount is 1503 crore in 2011-2012 which gradually
increase in year 2013-2014.But this budgeted amount also decrease in 2014-2015 is 1854 crore.
We see that our industrial growth occur in 2017-2018 for that reasons government contribute less
compared to other year. In next year global problem Covid 19 pandemic occur which collapse
our industry and to recover this situation, government declare many incentives and increase this
sector budget amount is 4033 crore. This amount is the large budget in industry sector last 10
years.

Industrial Sector Contribution To The Overall GDP:

The industrial sector is one of the main sectors that contribute to the Bangladesh GDP. The
industrial sector is made up of manufacturing, mining and quarrying, and electricity, water
supply, and gas sectors. The reasons for the rise of the Growth Rate of the Industrial Sector in
Bangladesh are that the consumption of the industrial goods has increased a great deal in the
country, which in its turn has boosted the industrial sector. The reasons for the rise of the Growth
Rate of the Industrial Sector in Bangladesh are that the consumption of the industrial goods has
increased a great deal in the country, which in its turn has boosted the industrial sector.

Growth Rate
14

12 11.63

10 10.29

8 7.65
7.11 7.28
6.55
6 6.06

4 3.61

0
2014 2015 2016 2017 2018 2019 2020 2021

Growth Rate
Bangladesh has experienced high and steady growth for more than a decade. The government is
providing efforts to make the country’s environment more business-friendly. We have already
achieved remarkable success in the industrialisation sector. Even though the economy faced
tremendous challenges because of pandemic situation of Coronavirus, the industry sector,
constituting more than one-third of gross value-added (GVA) in the economy, grew by 10.29
percent in FY21, almost triple from 3.61percent in FY20. Growth in the industry sector was
highly underpinned by the external demand which was mostly reflected in export proceeds that
increased by 13.7 percent in Fy2020.Manufacturing production has been hit particularly hard by
the pandemic, characterized by supply disruptions, drops in demand and overall recession.

Shares of Industry Sectors

Share of Industry sectors

Share of Industry sectors

29.65% 29.54%
28.54%
27.75%
27.35%
26.83%
26.31% 26.31%
25.31%
24.96% 25.05%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

From the above graph we can see that contribution of industrial sector was higher in 2019 and
lower in 2010.That's mean the development in industrial sector is raising day by day. The
contribution of share in industrial sector in 2010 was 24.96% and in 2019 29.65%.

However, the industrialisation process in Bangladesh has been built on a very weak ground. In
the 1970s, the country followed an import-substituting industrialisation strategy. Specifically,
Bangladesh followed a public sector-led industrial development plan during 1971-1975. This
was largely attributed to the existence of a number of industrial units abandoned by non-
Bangladeshis after independence. Small and cottage industries and foreign enterprises were kept
outside the public sector. According to the bureau, the growth of new employment opportunities
in the industrial sector has been slow so far.

Systemic comparison among industries relating to their performance:

If we want to compare the industry performance with each other the first thing we capture is
Covid 19. As because of Covid 19 the industry performance during the fiscal year 2020-2021
was adversely affected. To clear this topic I want to present some information related to the most
significant industry in Bangladesh which is garments sector. We hope by this way, a preliminary
idea is generated which help to compare the industry performance. So let’s come to the topic -

In this study, the principal purpose has been made to investigate the impacts of COVID-19
outbreak on the garment sector of Bangladesh including Bangladesh economy using the modern
econometric techniques. For this study, the time series variables GDP, total export values (TEX),
sales revenue of the garment sector (REVGS), employment in the garment sector (EMP),
remittance inflows (REM) and unemployment rate (UNR) of Bangladesh are used in order to
find the impacts of COVID-19 outbreak. In this paper, the impacts of COVID-19 outbreak are
predicted using the Holt-Winters’ seasonal additive method for all variables individually for the
years 2020 and 2021 and then for each and every variable the future values are forecasted. From
the predicted results it is found that the loss of GDP, TEX, REVGS, and REM are $31,677.475
million, $6771.5296 million, $6854.089 million and $3941.4486 million in the year 2020 and in
the year 2021 it will be $13,544.415 million, $3044.7328 million, $2026.187 million, and
$934.513 million respectively for the country wide lockdown due to COVID-19 outbreak. In
terms of percentage, the loss of these variables is 13.973%, 13.9726%, 21.789% and 21.650% in
the year 2020 and 6.945%, 7.303%, 6.395% and 5.826% in the year 2021 respectively.

During the period of COVID-19 more than 348 garment factories have shut-down and 0.4
million garment workers lost their jobs. It is found that unemployment rate is upswing by
58.234% in the year 2020 and then will fall back by 18.72% in the year 2021, but from 2022
again increases returning to moderate levels with an increasing rate of 2.47% and will be
continued for a long period of time due to COVID-19 outbreak. The long-lasting increases in
unemployment rate will cause adverse effects on socio-economic conditions including the
livelihood of the marginal people. Unexpected outcomes such as reported women are being
raped and suicide may adversely affect the mental health status of the garment female workers
for future. Thus from the predicted values, the following policies should be implemented to
tackle the problem of sales revenue, to improve the employment condition in garment sector and
also to improve unemployment conditions in Bangladesh. Entrepreneurs should be encouraged
and different stimulus packages should be allocated and emphasize should be given for proper
management of these packages so that there will be no scope of wastage money, as a result
money can be used for right purposes.

Now here we present the industry performance comparison of several industries regarding the
Bangladesh perspective-

Sector Name 1 year (%) 3 year (%) 5 year (%) 10 year (%)
Communication Services -33.50 +9.49 +22.70 +25.91
Information Technology -13.46 +62.93 +136.54 +423.54
Consumer Discretionary -21.17 +19.31 +59.99 +244.88
Energy +51.98 +20.32 +15.28 +10.14
Industries -12.73 +15.39 +30.68 +153.43
Financials -10.37 +14.58 +29.15 +181.37
Materials -8.21 +27.31 +34.65 +117.56
Consumer Staples +3.25 +24.01 +33.63 +112.90
Health Care -0.17 +44.19 +64.62 +251.74
Real Estate -8.27 +16.07 +32.50 0
Utilities- +7.62 +18.60 +34.89 +91.07
 Performance Comparison of several industry
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Barriers to the Development of Bangladesh’s Industrial Sector

Bangladesh has an impressive track record of growth and development. It has been among the
fastest growing economies in the world over the past decade, supported by a demographic
dividend, strong ready-made garment (RMG) exports, remittances, and stable macroeconomic
conditions. The country made a strong economic recovery from the COVID-19 pandemic.
Bangladesh tells the world a remarkable story of poverty reduction and development. From being
one of the poorest nations at birth in 1971, Bangladesh reached lower-middle income status in
2015. It is on track to graduate from the UN’s Least Developed Countries (LDC) list in 2026.
Poverty declined from 43.5 percent in 1991 to 14.3 percent in 2016, based on the international
poverty line of $1.90 a day (using 2011 Purchasing Power Parity exchange rate). Moreover,
human development outcomes improved along many dimensions. But development of
Bangladesh’s Industrial sector has many barriers and they are described below precisely:

 Lack of Adequate Capital: Bangladesh being a poor country, people’s saving is

insufficient. As saving is poor, investment is also low. Again people’s per capita income
is not adequate. So their consumption is also low. Consequently local market oriented
industries are also very thin here.
  Weak Investment Base: Due to long colonial rule, economic discrimination and post-
liberation nationalization of industrialization, the growth of entrepreneurship has been
slow in Bangladesh. Besides, due to bureaucratic red-tapes and lack of investment
climate, capital investment has not been developed here.

 Insufficient Infrastructure: Infrastructural facilities in our country are insufficient.

Power supply, telecommunication, transport, gas, water supply etc. – all facilities are not
adequate which have hindered process of industrialization in Bangladesh.

 Technological Know-how: Lack of proper technological know-how is also another

reason of our industrial backwardness. Government have to work on giving training the
people to make efficient them. Today’s world is the era of technology. Without
technically efficient, our industry sector will not develop.

 Lack of Adequate Resources: Lack of adequate raw materials and natural resources are
also unfavourable for our industrialization. In our country, most of the company import
raw materials to run their production. For this reason some times they are not interested
for industrialization.

 Shortage of Energy: Acute shortage of energy and unreliable supply of power and other
utilities such as gas and water.

Prospects of industry sector in Bangladesh

 Increase portion of budget

 Improved technology
 Infrastructural development
 Proper allocation of resources
 Utilization of labour forces

The industrial sector in Bangladesh makes a huge contribution to the country’s economic growth.
Industrialization and specialization in manufacturing is the obvious way in which Bangladesh
can raise it’s per capital income and social structure. The rate of GDP growth accelerated in
Bangladesh since the beginning of the 1990s. The product account of the GDP in Bangladesh is
usually classified into three broad categories: agriculture, industries and services. The
contribution of Industry Sector to GDP is progressively increasing in Bangladesh. If we develop
an industrial culture, where efficiency and innovation are rewarded, where markets function
effectively but do not substitute for a sense of strategic vision to underwrite the goals of
industrialization and if foreign direct investment encouraged in all industries in Bangladesh the
industry sector will grow faster. The leading industrial sector in Bangladesh is Textile industry.
The future looks bright for Bangladesh's RMG sector after a period of profound uncertainty due
to the global pandemic. The latest apparel export figures show that, despite the coronavirus
pandemic and global lockdowns in key markets, Bangladesh set a new record for apparel exports
in the 2021 calendar year. E-commerce is also the fastest growing industry in Bangladesh. It is
making progress at a rapid pace. Bangladesh would be the 27th largest economy in the world (it
ranked 31st in 2016) and the country has more potential to become the 23rd largest economy in
the world by 2050 if the industry sector grows as fast as it is growing.

Finding and Analysis

In this report ,we analysis the industry sector from the budget 2020-2021.Here we compare
the industry performance with the situation of COVID-19.As because of COVID-19 the
industry performance during the fiscal year 2020-2021 was adversely affected. We also
presents the comparative scenario of disbursement of budget financing in industry between
fiscal year 2011-12 to 2020-2021.We can also see that though the situation of Coronavirus,
the industry sector, constituting more than one-third of gross value-added (GVA) in the
economy, grew by 10.29 percent in fiscal year 2021, almost triple from 3.61percent in fiscal
year 2020. As we are not efficient in industry sector we should maintain several technic to
develop our industry sector. We need to develop an industrial culture, where efficiency and
innovation are rewarded, where markets function effectively but do not substitute for a sense
of strategic vision to underwrite the goals of industrialization. Foreign direct investment
should be encouraged in all industries in Bangladesh. Some points that should be maintained:
 Improve capacity utilization.
 Encourage alternative technologies.
 Focus on the power sector.
 Incentivize production.
 Localize defence production.

Conclusion
Industrialization is the transformation of a society from agrarian to a manufacturing or industrial
economy. Industrialization contributes to negative externalities such as environmental pollution.
Separation of capital and labour creates a disparity in incomes between labourers and those who
control capital resources. This is the period of social and economic change that transforms a
human group from an agrarian society into an industrial one based on the manufacturing of
goods and services. It is a process that happens in countries when they start to use machines to
do work that was once done by people. Technological innovation and progress, modernisation
and structural transformation of the economy and diversification of the economic base,
accelerated economic growth and employment creation, increase in incomes and standard of
living of the people are the universally recognised dynamic benefits arising from industrial
development. Industrialisation introduces a form of philosophical change where people obtain a
different attitude towards their perception of nature, and a sociological process of inclusive
rationalisation. The industrial sector in Bangladesh makes a huge contributor to the country's
economic growth. Industrialisation and specialisation in manufacturing is the obvious way in
which Bangladesh can raise its per capita income and social structure.

Recommendations
Industrialisation is a process that is an essential pre requisite for rapid and sustained economic
development and social progress. Throughout the overall assumption of this, we find so many
flows on our sector. Some recommendations to improve the condition are given below:

 An ideal industrial environment should be maintained to raise productivity

 Establish investment friendly environment
 political Stability should be ensured
 Set Up technical Institute
 Industrial policy should be implement
 Human resources should be skilled.
 Technologically advanced industry should be set.
 Manage industry applying scientific method.

Reference

 www.investopedia.com
 www.Wikipedia
 www.adb.org
 www.dailysun.com