LSM grows over 6%, but realistic picture missing

Govt sees dire need for conducting latest census of manufacturing industries

KARACHI: Although Adviser to Prime Minister on Finance Dr Miftah Ismail announced that the Large-scale Manufacturing (LSM) sector grew over 6% in Jul-Feb FY18, the realistic picture was missing as the census of manufacturing industries was conducted way back in fiscal year 2005-06.

“The census of manufacturing industries (CMI) was done in 2005-06 in which the share of LSM was calculated. There is a dire need to expedite the process of conducting the latest CMI survey in order to capture a more realistic picture through adding more industries to the LSM sector,” read the Pakistan Economic Survey 2017-18.

According to the survey, the manufacturing sector continued to gain momentum with 6.24% growth on the back of stellar performance of the LSM sector in the first eight months of the current fiscal year as it touched 6.13% - the highest in the past 11 years.

The industrial sector also maintained its upward growth trajectory at 5.8%, which was the highest in the last 10 years.

The LSM sector has 80% share in manufacturing and 10.8% share in the gross domestic product (GDP) whereas small-scale manufacturing has 13.8% share in manufacturing and 1.9% in GDP. Slaughtering has around 6% share in manufacturing and 0.9% share in GDP.

A major contribution to LSM came from the automobile sector that recorded a growth of 19.58% in Jul-Feb FY18. Among its sub-sectors, tractor production grew 44.68%, trucks 24.41%, jeeps and cars 23.29%, light commercial vehicles 19.73% and motorcycles 14.15%. Buses posted a negative growth of 39.35%.

“The sector will gain more growth due to entry of new variants such as Hyundai, Renault and Nissan coupled with rapidly growing ride-hailing services like Careem and Uber,” the survey said.

The heavyweight textile industry, which had a weight of 21% in the manufacturing sector, displayed a meagre growth of 0.47% in Jul-Feb FY18. Although the industry reported an increase in exports, it mainly came in the wake of recent rupee depreciation. Textile products account for 60% of total Pakistan’s exports.

Food, beverages and tobacco industries posted a growth of 2.33% compared to 7% in the corresponding period of previous year. They had a weight of 12% in the manufacturing sector.

Pharmaceutical industry grew 9.44% compared to 8.87% last year. Fertiliser sector showed a negative growth of 7.36% compared to expansion of 0.21% in the same period of previous year.

Iron and steel products showed a growth of nearly 31% whereas cement production grew 11.95%. Cement dispatches also remained strong at 14.7% expansion during Jul-Mar FY18.

“The outlook for construction remains encouraging in view of expected strong demand in allied industries like steel industries,” said the survey.

“The outlook for manufacturing seems promising on the back of continued growth performance in LSM, expansion in credit to private sector, low interest rate, contained inflation and increase in economic activities due to the China-Pakistan Economic Corridor (CPEC).”

Published in The Express Tribune, April 27^th, 2018.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.