LSM expands 7.3% in July-August

Despite double-digit growth in Aug, LSM index remains far below pre-Covid levels

ISLAMABAD:

The output of large-scale manufacturing (LSM) industries increased 7.3% in the first two months of current fiscal year, but the LSM index remained below pre-Covid levels after briefly surpassing it seven months ago.

During July-August of fiscal year 2021-22, 12 out of 15 major industries recorded a growth in their output while the production of remaining three sectors contracted, according to figures released by the Pakistan Bureau of Statistics (PBS) on Friday.

Since large industries contribute heavily to revenue collection and job creation, an uptick in the sector turns the sentiment of government and businesses positive.

In August alone, the LSM sector expanded 12.7% over the same month a year ago but the increase was largely because of a low base effect.

However, despite the double-digit growth in August, the overall index stood at 140.8, far lower than the pre-Covid level of 160.4.

For the current fiscal year, the government has set the gross domestic product (GDP) growth target at 4.8%. However, a recent report of the International Monetary Fund (IMF) projected that Pakistan’s economic growth would stand at 4%, which was a decent rate but nearly half of what was required to create jobs for all the new entrants into the market.

Another report of the World Bank showed that only agriculture growth would surpass last year’s level in the current fiscal year and it also projected a slowdown in industrial and services sectors.

Prime Minister Imran Khan won the July 2018 elections on the promise of creating 10 million jobs and constructing five million homes at affordable prices for the general public.

Due to an average growth of less than 3% during his first three years in power, the prime minister has so far been unable to fulfill his promise, which needs an average growth of 7% per year.

Data collected by the Oil Companies Advisory Committee (OCAC) showed that 11 types of industries registered 0.2% growth on average in the first two months of current fiscal year.

The Ministry of Industries, which monitors 15 industries, reported a 4.3% increase in output. Similarly, the provincial bureaus reported over 2.8% growth in 11 industries.

On a month-on-month basis, the LSM sector grew 2% in August over July.

Sectors that posted growth in the first two months of FY22 included textile, which grew 1.4%. The textile sector enjoys the maximum weight of over 20% in the LSM index and any movement in the segment significantly impacts the overall LSM sector growth.

The output of food and beverages increased 6.7%, coke and petroleum products 2.4%, pharmaceuticals nearly 19% and chemicals 6.4%.

The non-metallic mineral products sector expanded 3.7% during the first two months of current fiscal year. Production of the automobile sector increased 55.3% in the July-August period. Similarly, the iron and steel sector saw a growth of 14.3%.

Manufacturing of leather products increased 20.2%, paper and board 10.4%, engineering products 6% and wood products 15.8%.

There was a dip of 0.9% in the output of fertiliser plants as the government struggled to provide gas to urea producers to enable them to function at full capacity.

The Economic Coordination Committee (ECC) of the cabinet this week allocated more gas to two fertiliser plants aimed at producing 175,000 tons of urea for winter crops.

In case of shortage, the government will be forced to import at least 100,000 tons of urea, which may cost it heavily after India also placed bids for import of 1.1 million tons of urea.

Production of electronic products dipped 1.2% while the output of rubber products decreased nearly 31%.

Published in The Express Tribune, October 16^th, 2021.

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