Alarming results: Large-scale manufacturing registers dismal growth

Clocks in at 2.5% compared to 4.6% in the same period last year.

KARACHI:

Large Scale Manufacturing (LSM) – which constitutes 80% of Pakistan’s manufacturing sector  –registered a meagre growth of 2.5% in the first nine months (Jul-Mar) of fiscal year 2015 compared to 4.6% in the same period last fiscal year, the Economic Survey of Pakistan 2014-15 revealed.

“Ideally, LSM growth should have increased this year and supported the overall gross Domestic Product (GDP). But this two percentage points decline in LSM growth is not a positive sign for exports as well as the economy of the country,” Emerging Economics Research Managing Director Muzammil Aslam said.



The bright spots of the economy in the outgoing fiscal year were the jump in foreign reserves and decline in inflation. However, if you see other important indicators like exports and creating new employment opportunities, the government has failed to do anything substantial this year, Aslam added.

Karachi Chamber of Commerce and Industry (KCCI) President Iftikhar Ahmed Vohra commented that low growth in LSM sector is the direct result of low growth in private sector credit, electricity and gas shortages in the country.

“Pakistan needs to increase its exports considerably to overcome its economic challenges. And, this is not possible unless our manufacturing sector starts growing strongly,” Vohra added. Commenting on the reasons behind the low growth in LSM, the economic survey said that it was hampered by a broad range of issues that include weak export of cotton yarn, gas shortages in a number of industries and sector specific factors.

LSM growth in the month of December 2014, January and February 2015 remained even below 2%.

When it comes to sub-sectors, textiles, food, beverages and tobacco, fertilisers showed dismal performance. On the other hand, automobiles, iron and steel products sectors saw a visible jump in output.

The textile sector, which has an overall weight of 20% in the LSM sector, showed a marginal 0.50% growth compared to 1.45% in the first nine months of fiscal year 2015. Food, beverages and tobacco showed a negative growth of 1.03% compared to 8.23% in the period under review. Fertilisers also dropped to just 0.95% from 22%.

On the other hand, automobiles growth jumped to 17% from 0.35% and iron and steel products also showed a growth of 36% from 3.4%.  Manufacturing sector accounts 13.3% of Gross Domestic Product (GDP) and 14.2% of the total employed labor force of Pakistan.



Large Scale Manufacturing (LSM) at 10.6% of GDP dominates the overall sector, accounting 80% of the sectoral share followed by Small Scale Manufacturing, which accounts for 1.7% of total GDP. The third component of the sector is slaughtering and account 0.9% of overall GDP.

Published in The Express Tribune, June 5^th,  2015.

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