Positive LSM trend a ray of hope for economic revival: FPCCI 

Mian Anjum says decline in interest rates and reduction in duties on raw materials expected to spur economic activities during current fiscal year

KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has said that the positive growth in large-scale manufacturing (LSM) will help achieve the annual economic growth target, besides creating jobs if the trend continues in coming months. 

FPCCI President Mian Anjum Nisar, while addressing a delegation of various industrial sectors, said that the LSM output had grown 7.65 per cent in September, besides reporting a growth of 4.8 per cent in the first quarter of current fiscal year. He added that the positive growth rate of the industry had given a ray of hope for the revival of economic activities in the country, also stressing that the data of October 2020 might be critical to sustain the momentum of industrial production during the second wave of pandemic in the country. 

He said that in the year 2019-20, the LSM output had fallen by 10.17 per cent which was alarming. 

“The industrial production after suffering months of damage inflicted by the COVID-19 pandemic mainly in the construction, sugar, automobile, and pharmaceutical sectors is now clearly reflecting a revival in economic activities in the country,” Nisar said.

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“For the current fiscal year, the government has set the economic growth target at 2.1 per cent, which will be better in the current economic situation but is not enough to create jobs for a growing population,” he commented. 

Mian Anjum Nisar said that remarkable decline in interest rates and reduction in duties on raw materials were expected to further spur economic activities in the current fiscal year, as manufacturing activity showed that more than half of the sub-sectors in the LSM rose in September. The FPCCI president said that the growth had now broken a cycle of constant contraction in the past over one year. 

He further said that large businesses had been bearing the brunt of very high interest rates, issues related to the Federal Board of Revenue (FBR) and high energy prices.  

According to the data, large-scale manufacturing grew 4.8 per cent in the first quarter of the current fiscal year on the back of increased output in food, textile and mineral sectors. The LSM recorded 7.7 per cent year-on-year growth in September, which kept hopes alive for recovery after the large industrial sector contracted more than 10 per cent in the previous fiscal year.  

Data shows that out of 15 major industries, nine saw a surge in production while the output of five industries showed a contraction in the first quarter compared to the same period of the previous fiscal year. 

FPCCI president said that the industrial sector had a major contribution to the tax collection and the sector’s share in revenues is almost three times higher than its contribution to the overall economic output.  

According to the data, 11 types of industries registered an average growth of 0.2 per cent in the first quarter of the current fiscal year.  

The manufacturing of chemical products increased by almost 10 per cent, paper and board almost 10 per cent and rubber products nearly 8 per cent. The pharmaceutical sector registered a growth rate of over 13 per cent in the July-Sept period. The coke and petroleum sector output increased by 2.7 per cent. 

Industries that registered a dip in manufacturing included the automobile sector which saw a contraction of 5.4 per cent in the first quarter, iron and steel production fell 8 per cent, electronics 20 per cent, leather products 45 per cent, engineering products 37 per cent and wood products 70 per cent in the first quarter.  

Sectors that posted growth on a quarterly basis included textile that grew by over two per cent and non-metallic mineral products increased 22 per cent during the July-Sept period. The output of power looms had declined by 50 per cent in the first quarter while the fertilizer industry showed two per cent growth whereas the food, beverages and tobacco industries recorded 13 per cent growth in the first quarter. 

FPCCI chief Mian Anjum Nisar called for out-of-the-box solutions for economic growth, as COVID-19 has adversely impacted the world’s economy as well as Pakistan’s trade and industrial sectors.  

He said the government had already missed its annual export target for the first two years. For the current fiscal year, the export target was reset at $27.7 billion, requiring at least 6 per cent growth. 

He said that the government has to formulate long-term and consistent policies for the revival of industry and considerable improvement in exports. “Pakistan’s exports have remained stagnant during the past 40 years, and unless attention was paid to all factors that hamper industrial and exports growth, the country might not be able to achieve desired results,” Nisar added. 

Some of the impediments to industrial growth include cost of production, poor governance, obsolete technology, lower productivity, lack of competitiveness, supply constraints, and energy issues, he said. 


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