July-November LSM growth posts two percent decline

Large Scale Manufacturing (LSM) growth posted a decline of over 2 percent in first five months of current fiscal year due to high interest rate and slow consumption on domestic front. LSM had posted a modest recovery and registered some 5 percent growth during the last fiscal year. The recovery was attributed to the re-entry of commercial banks in consumer financing and rising global demand.
In the first month of current fiscal year, growth was also satisfactory. However, since August 2010 LSM growth is showing a downward trend and after registering a 1.5 percent decline in first quarter of current fiscal year, it has further reduced to over 2 percent in July-November of fiscal year 2010-11.
The Quantum Index Numbers (QIN) of Large Scale Manufacturing Industries has been computed in the FBS on the basis of latest production data of 100 items received from various sources ie Oil Companies Advisory Committee (OCAC), Ministry of Industries & Production and Provincial Bureaus of Statistics.
The OCAC supplied the data of 11 items, the Ministry of Industries & Production supplied the data of 35 items and Provincial Bureaus of Statistics provided data for 54 items. Latest statistics of the Federal Bureau of Statistics (FBS) revealed that Quantum Index Number of LSM industries showed 2.30 percent decline in first five months (July-Nov) of current fiscal year.
Quantum Index Number of LSM industries stood at 187.80 points in July-November of fiscal year 2010-11 as compared to 192.21 points in corresponding period of last fiscal year 2009-10. During first five months, the OCAC and the Ministry of Industries Index posted a declining trend, while provincial BOS index surged by 2.88 percent to 212.60 points from 206.66 points.
Major share in present negative growth has been contributed by the OCAC, as during the July-November 2010 the OCAC index declined by 10.62 percent to 135.35 points from 151.44 points, while the Ministry of Industries Index dipped by 4.75 percent to 179.79 points from 188.76 points. The index during November 2010 has witnessed a sharp decline of some 5 percent to 182.68 points against 191.68 points in November 2009.
"High interest rate, rising cost of business, poor law and order situation, political situation and some negative economic indicators are responsible for negative LSM growth in the initial months of current fiscal year," economists said. They said if the current trend continues, it would also hurt the annual GDP growth target set by the government, therefore policy makers should take a serious notice of decline in LSM growth and make some efforts for healthy growth.
"We were expecting healthy growth during the current fiscal year as there was some indication of recovery in consumption on domestic as well as global front but domestic challenges have further disappointed the LSM growth," they added. They said investors and industrialists seem reluctant to expand their business in the current economic situation and waiting for some improvement.