Energy crisis, slump in global commodity prices behind lack of pace. PHOTO: FILE
The LSM sector grew just 2.2% in September over the same month of the last fiscal year, Pakistan Bureau of Statistics (PBS) reported on Friday. The figures were contrary to the trends of recent months when the large industries showed signs of recovery. In August, LSM grew at 4.8%, renewing hopes in the industrial sector.
Alarming results: Large-scale manufacturing registers dismal growth
Average LSM output growth from July through September period remained at 3.9%, according to the PBS, suggesting that it will again be difficult to achieve the annual target of 6%.
“The slump in prices of crude oil and other commodities is, at the moment, a matter of concern,” said Karachi Chamber of Commerce and Industry (KCCI) former president Iftikhar Vohra. “Companies are witnessing a decline in sales.”
A slowdown in industrial growth will also adversely affect this year’s revenue collection target of Rs3.104 trillion. The Institute for Policy Reforms (IPR) has already projected a shortfall of Rs150 billion due to various reasons.
Large industries: LSM grows 2.9% with hopes of better performance ahead
The sector also faces challenges of lack of credit due to massive federal government borrowings and energy shortages. From July through November 6, the private sector borrowed just Rs13.5 billion.
Suspension of gas supplies is another reason for the slow pace of industrial grwoth.
The PBS computes LSM growth based on the latest production data of 112 items received from various sources, including the Oil Companies Advisory Committee (OCAC), Ministry of Industries and Production and provincial bureau of statistics.
The Ministry of Industries and Production provincial Bureaus of Statistics, which recorded data for 65 industries, reported 0.6% growth, while the OCAC reported just 0.7% growth.
Industrial sector misses target by a mile, grows 3.62%
For the current fiscal year 2015-16, the government has set a 5.5% overall economic growth target, which according to the international financial institutions, will be missed by a wide margin.
Growth in the textile sector that contributes almost 21% in the LSM output remained extremely low, highlighting scores of challenges that the sector faces now. The textile sector is struggling due to a slump in global commodity prices and growing cost of doing business, which has made it uncompetitive against the regional peers.
The growth in sub-sector of food beverages and tobacco, which contributes over 12% in the LSM, remained shy of 1%. The automobile sector posted relatively healthy growth of 1.7%. The growth in fertiliser manufacturing remained below 1%. Despite enjoying state protection from competition, the pharmaceutical sector posted a growth of less than 0.6%.
LSM growth picks up pace, but still less than desired
The output in leather products stood at only 0.4%. There was a negative growth in iron and steel products, paper & board, engineering, electronics and wood products.
Published in The Express Tribune, November 21th, 2015.
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