Large industries: LSM grows 2.9% with hopes of better performance ahead

Govt sees improved gas, electricity supplies aiding growth in coming months.

LSM registered a growth of 2.93% from July through April, the Pakistan Bureau of Statistics (PBS) said on Friday. PHOTO: REUTERS

ISLAMABAD:


The large-scale manufacturing (LSM) sector picked up pace slightly and grew 2.9% in the first 10 months of the outgoing fiscal year with the government hoping that the sector will perform better in coming months due to improved energy supplies.


LSM, which contributes more than one-tenth to the national output and employs about 14% of the workforce, registered a growth of 2.93% from July through April, the Pakistan Bureau of Statistics (PBS) said on Friday.

The reading was marginally higher than the output in the first nine months.


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On a yearly basis, LSM grew 5% in April over the same month of previous year. However, in comparison to the previous month, LSM growth fell 8.8% in April over March, according to the PBS.

Hoping for the best

The government expects the sector to rebound in coming months on the back of a smooth supply of gas in the summer season. It has also pinned hopes on implementation of power projects of 10,400 megawatts that will help overcome energy shortages in the long run.

However, the expectations seem to be short-lived, as the government has announced outages for eight hours a day for the industries to meet energy requirements of domestic consumers during Ramazan.

Demand from the domestic and commercial sectors suddenly peaked to 21,000MW on Friday, up from 16,000MW a day earlier, said the Ministry of Water and Power.

For the current fiscal year, the government had projected that the LSM sector would grow 7%, but later revised downwards the forecast to 2.4%.


For the new fiscal year, it expects 6% growth in LSM, suggesting adjustment to expectations due to energy shortages.

In the Economic Survey of Pakistan for 2014-15, the government has listed numerous reasons for the slowdown in output of the LSM sector. Among these were weak exports of cotton yarn, gas shortages in a number of industries and sector-specific issues like closure of a large chipboard plant and substitution of domestic oil production with imports.

However, it did not list shortage of capital and heavy taxes, which the industrialists describe as the biggest reasons after energy shortage that are hampering growth in large industries.

As of June 5, the banking sector’s single largest borrower was the federal government that got net loans of Rs876.8 billion for financing the budget deficit, according to the State Bank of Pakistan. In the comparative period of last year, the government’s budgetary borrowings were just Rs250.6 billion.

On the other hand, from July to June 5 of this fiscal year, the private sector credit stood at Rs130.1 billion compared to Rs302.9 billion in the same period of last year, according to the central bank.

Similarly, the government imposed Rs360 billion in additional taxes, mostly indirect in nature, in the outgoing fiscal year. For the next fiscal year too, it has announced Rs238 billion in new tax measures.

A glance at other sectors

According to the PBS data, the textile sector, which has 20.9% weight in the LSM basket, grew just half a percentage point in the first 10 months. Its exports have plunged as in July-May of the outgoing fiscal year exports fetched $12.4 billion, down $214 million or 1.7% over the same period of previous year.

The iron and steel sector of LSM saw a healthy growth of 36% during the July-April period, followed by 19.8% growth in the automobile sector. The non-metallic mineral product manufacturing grew 2.4% and the chemical sector expanded 7.6%. There was 6.7% growth in electronics and 7.2% in leather products.

The food, beverages and tobacco group, which has a 12.4% weight, decelerated 1.6%. There was negative 12.7% growth in engineering product manufacturing while paper and board industry contracted 5.9%.

Published in The Express Tribune, June 20th, 2015.

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