Consumer goods: The most important reason for LSM growth
For an economy whose revival and long-term growth relies significantly on the performance and structural evolvement of its industry, the drastic retardation in economic activity during the course of these past few years did not bode well for Pakistan. The short term Keynesian policy-making practiced by our ivory tower intellectuals has also not helped much as a singular focus on macro-economic stability abetted by deficit financing for economic growth has led to a lack of attention being paid on micro-economic reforms for our industries. According to the Provisional Quantum Index Numbers (QIN) of Large Scale Manufacturing Industries, released by the PBS, the indices have exhibited an increase of a meagre 1.02 percent during July-April against the same period of last year. However, the overall QIN stands at 110.54 in April 2012; a 1.8 percent decline over April 2011. A dearth of micro-economic foundations means that the cost of doing business is rising consistently, and with fixed investment declining from 11.5 percent of the GDP to 10.9 in 2011-12, major commodity producing sectors including steel, chemicals and petroleum have been exhibiting declining productivity. With a wieghtage of 5.39, the steel and iron production has shown a 1.05 point year-on-year decline as a result of misguided policy interventions by the government. Other sectors such as engineering products, electronics and rubber products have also been exhibiting sluggish trends amidst the rising cost of inputs and the severe energy crisis. Times have been better, however, for the food and beverage sectors with a cumulative increase of 1.16 points year-on-year. The sector can be seen thriving with a 30 percent increase in the production of juices, squashes and syrups over the same period of last year amidst the trend for rising public consumption. The textile sector, with the greatest wieghtage of 20.91 percent, has managed to muster up a very slight increase of 0.65 percent, with the production of cotton yarn and cotton cloth showing a decrease of 0.2 and 0.06 percent, respectively, year on year. This meagre increase in the sector that has a 54 percent share in the countrys foreign earnings reeks of decreased capacity utilisation. Despite growing demand for Pakistani textile products in the international market, these modest growth figures indicate a dearth of proper policymaking that could lead to a better utilisation of the sectors potential. What is greatly needed at this point is the industrys movement towards value addition and increased investment in labour training and fixed assets that utilise cost-efficient fuel sources for energy generation. Overall, it can be safely surmised that any significant growth in the QIN for large scale manufacturing in the past few months has been principally derived from consumer goods such as food and pharmaceuticals. For a sector that comprises roughly 12 percent of our GDP, these figures are just not good enough. In a country where the biggest portion of income is diverted into consumption; which comprises 88 percent of GDP, and where there is a comprehensive absence of a trend for saving, investments are bound to fall. This lack of domestic investment is clearly evident in the lacklustre growth statistics of the economy and teemed with ineffective mobilisation and usage of domestic resources, the future for Large Scale Manufacturing remains unclear.