Improvement noted in January: decline in LSM to affect 6 percent growth target: economists

Large Scale Manufacturing (LSM) growth has improved from 5.5 percent year-on-year in December 2017 to 6.63 percent in January 2018, primarily because of increased crushing of sugarcane by sugar mills. The Finance Ministry officials, independent economists, including former finance ministers Dr Hafeez Pasha and Dr Salman Shah, are agreed that the decline in LSM will affect overall GDP growth target of 6 percent for the current fiscal year 2017-18.
Talking to Business Recorder, Dr Pasha said the government may miss GDP growth target of 6 percent for the current fiscal year 2017-18 and growth may remain at 5 percent to 5.5 percent. However, he said this rate will depend heavily on wheat crop production which is seriously threatened by water shortage. If wheat crop remains less than the target, eventually it will have a negative impact on growth of agriculture sector.
He said that there was a continuous decline in LSM growth since July 2017 due to late crushing of sugarcane, stagnation in growth of textile industry as well as fertilizer and petroleum output. He further said that final figure of LSM growth would be less than the target of 6.3 percent for the current fiscal year and may remain close to 6 percent.
The government had set 6.3 percent target of LSM growth for the current fiscal year 2017-18. According to PBS data, LSM growth was 14.10 percent year on year in July 2017, followed by 12.02 percent in August, 9.95 percent in September, 9.64 percent in October, 7.19 percent in November and 5.55 percent in December.
However, sources in Finance Ministry said that the decline in LSM was arrested in January 2018 following sugarcane crushing by the sugar mills began raising the overall LSM growth in January 2018 to 6.63 percent. He was optimistic that there would be no issue in achieving LSM target of 6.3 percent set for the current fiscal year because growth in sugar was on rise due to increase in sugarcane crushing by the sugar mills.
Salman Shah said that LSM growth is linked to consumption of cement, sugar, automobiles and increase in growth of textile sector. He said that consumption and demand of cement, automobile and sugar production has been increasing and if this trend continues, there will be no difficulty for the government to achieve LSM growth target set for the current fiscal year 2017-18. However, he said that decline in textile exports would hurt the LSM growth prospects.