Muhammad Omar
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Sector grows 4.82% in August, faces challenges of access to credit, energy shortage. PHOTO: FILE
ISLAMABAD:
The production in the large-scale manufacturing (LSM) sector picked up some pace as it went up 4.82% year-on-year in August, sparking hopes of a steady growth in one of the most critical industrial areas but still remains lower than the desired rate.
The statistics were released by the Pakistan Bureau of Statistics (PBS) on Monday. In July, the sector grew 4.7%.
LSM grows 2.9% with hopes of better performance ahead
The LSM industry, which contributes slightly over half of the total industrial output, faces the challenges of lack of credit due to massive federal government borrowing, energy shortages and a slump in demand in international markets. Its share in the national output is over one-tenth, making it one of the most important sectors of the economy.
The petrochemical industries struggled in August and their growth remained almost flat. The data of 11 products collected by the Oil Companies Advisory Committee showed a growth of 0.07% in August over the same month of previous year.
The PBS calculates the pace of growth after assessing the latest production data of 112 goods received from various sources including the Oil Companies Advisory Committee, Ministry of Industries and Production and provincial bureaus of statistics.
Industrial sector misses target by a mile, grows 3.62%
The Ministry of Industries and Production reported an average growth of 2.7% in the production of 36 items while the provincial statistics bureaus, which recorded data of 65 items, showed an expansion of 2.1%.
For the current fiscal year, the government has set a 5.5% economic growth target, which according to international financial institutions will be missed by a wide margin.
Speaking to a US think tank in Washington last week, Prime Minister Nawaz Sharif also appeared cautious, saying the gross domestic product was expected to grow 5% in the current fiscal year.
Small-scale growth for large-scale manufacturing sector
Industry experts, however, argue that even the 5% expansion will depend on the performance of LSM and services sectors.
In the previous fiscal year, the government had provisionally reported 2.4% growth in the LSM sector, which according to the revised data rose to 3.3%, pushing overall economic growth slightly up.
The growth in the textile sector, which contributes about 21% to the LSM output, stood extremely low at 0.25%, highlighting scores of challenges that the sector faces. The textile industry is struggling due to a slump in global commodity prices and growing cost of doing business, which has left it uncompetitive against regional peers.
Large-scale manufacturing registers dismal growth
The government has slapped over Rs870 billion in additional taxes in the past three years besides increasing prices of electricity and gas, which have hurt the sector’s standing in the international market.
The sub-sector of food, beverages and tobacco, which contributes over 12% to the LSM industry, grew only 0.8%.
The automobile sector posted a relatively healthy growth as its production rose 2.2%. The growth in fertiliser manufacturing stood below 1%.
Despite enjoying state protection from competition, the pharmaceutical industry posted a growth of less than 0.6%.
The growth in production of leather products, which are an important source of foreign currency earnings, stood at only 0.4%.
There was a negative growth in output of iron and steel products, paper and board, engineering and wood products.
Average growth
The average LSM expansion in July and August was 4.1%, according to the PBS, suggesting it will again be difficult to achieve the 6% annual target. In the winter season, the industries will struggle to get uninterrupted energy supplies, which will have adverse implications for their production processes.
