ISLAMABAD: During July-March 2021, Large Scale Manufacturing (LSM) sector posted nine percent growth against 5.1 percent decline in the same period last year, the Pakistan Economic Survey 2020-21 released Thursday said.
The survey said that the LSM expansion is broad-based, reflecting production increase in major manufacturing sectors.
This is the highest period-wise growth since FY2007 supported by promising performance of textile, food beverages and tobacco, and automobile.
The prime minister’s construction package has also supported well all other allied industries such as increased cement dispatches, and iron and steel production.
The survey said that on year-on-year (YoY) basis, the LSM is exhibiting positive trajectory since July FY2021, which indicates that the government's proactive role has not even catered to the pandemic adversities rather made the LSM to outperform its pre-COVID level.
Out of 15 industrial sectors, nine showed positive growth, while six sectors showed a declining trend.
The LSM has increased by 22.4 percent in March FY2021 against 21.7 percent decline in the same month last year, which was the time when the pandemic had started hitting business activities.
It is encouraging to note that YoY performance of the LSM is improving as compared to previous years as well.
The Month-on-month (MoM) performance has also been satisfactory as LSM showed 2.9 percent average growth during current fiscal year.
Briefly, the manufacturing sector has been a major contributor in sustaining growth rate during FY2021.
The textile sector has the highest weight of 20.91 in Quantum Index of Manufacturing (QIM) posted a growth rate of 5.90 percent during July-March FY2021 against 2.58 percent decline in the same period last year.
Major jump originated from woolen segment production that may be associated with the projections of early onset of winter season by international agencies.
The survey said that the pandemic also helped increase exports of garments manufacturers as there is a flurry of export orders from European and American markets for Pakistan's garment sector due to the severe impact of the Covid-19 on our regional countries.
Cotton yarn production and cotton cloth have also contributed well as they grew by 3.1 and three percent, respectively.
The government has facilitated the sector i.e., tax refunds and duty drawbacks, which is bearing fruits and this sector has started picking up the pace.
Food, beverages and tobacco with the second highest weight of 12.37 in QIM posted a 11.73 percent increase as compared to 1.69 percent decline last year.
Sugar, cigarette, and wheat milling came up with significant growth, which boosted the overall sector.
The sugar production increased due to early crushing of sugarcane owing to the domestic shortage and subsequent need for imports.
Domestic cigarette producers were provided conducive environment via keeping the last year’s FED intact and continued fight against smuggled alternatives, which increased the cigarette production.
Further, the government has increased the wheat support price and subsidised the inputs, which pushed up wheat production and wheat milling units.
However, cooking oil and vegetable ghee production remained subdued due to the price hike of a key input, palm oil.
Coke and petroleum industry production expanded by 12.71 percent against 17.54 percent decline in the last year.
Production of petrol, furnace oil and diesel grew significantly as demand spurred from resumption in transportation activities accompanied by robust sales of automobiles.
Comparatively lower prices of retail fuels, during the period, pushed up the petroleum sales by 14 percent hence, encouraged the petroleum production.
In the wake of gas shortages, furnace oil use for electricity generation has increased the fuel’s demand.
Besides, the FBR crackdown against smuggled petroleum products led to increase in demand for domestic products.
All these factors provided cushion to the dwindling petroleum industry.
Automobile sector witnessed a growth of 23.38 percent against 37.66 decline last year.
Reduced interest rates, stable exchange rate and huge investments by the new and existing players are having positive impact on this segment as well as enhancing competition.
Car production and sale increased by 20.1 and 31.5 percent, respectively.
Trucks and buses production and sale declined by 7.5 and 1.5 percent, respectively.
Total tractors production and sale remained promising and recorded 57.5 and 57.1 percent growth, respectively.
Automobile sector is still working below its potential thus, offering a lucrative opportunity for the manufacturing sector.
Iron and steel production inched up by 1.66 percent during July-March FY2021 as compared to 7.96 percent dip in the same period last year.
Billets/ingots, mainly used in construction industry, grew by 37.2 percent as compared to 14.6 percent decline last year.
The government has announced multiple incentives for the construction sector, which have already started bearing fruits.
However, H/C.R.Sheets/Strips/Coils/plates having the highest weight in iron and steel products declined by 22.5 percent.
Lower demand of these flat steel products is mainly driven by a drop in electronics production.
Fertilisers production grew by 5.69 percent as compared to 5.81 percent growth during last year.
This performance is mainly attributed to the nitrogen fertilisers, which increased by 4.13 percent.
The government’s fertiliser subsidies incentivised manufacturers to expand capacity and upgrade plants by offering gas at lower rates.
That attracted investments in this sector and enhanced local urea production capacity.
Improved farm economics, lower input costs and better support prices offered by the government had supported this industry.
The electronics exhibited lackluster performance and plunged to 20.77 percent against 15.58 percent slump in corresponding period.
Electric motors, bearing the highest weight in this segment, have so far been responsible for overall electronics dip.
During the period under review, electric motors dived by 31.8 percent and dragged down the whole electronics industry.
Electric fans, TV sets and deep freezes also witnessed decline as pandemic has affected the spending patterns and majority is focusing on essentials.
The pharmaceuticals industry witnessed a growth of 12.57 percent during July-March FY2021 against 5.29 percent decline of last year.
Panic buying of medicines and escalated prices contributed to this encouraging situation.
Chemicals grew by 11.65 percent as compared to 11.35 percent increase last year.
Non-metallic mineral products surged by 24.31 percent as compared to 1.87 percent increase last year.
This was mainly driven by 17 percent jump in cement production.
Total cement dispatches during July-March FY2021 increased to 43.32 million tonnes (mt) from 37.03 mt last year.
Engineering products plunged to 25.53 percent as compared to 7.28 percent decline last year.
This drag mainly came from sewing machines and bicycles production, which declined by 43 and 59 percent, respectively.
Leather products decreased by 38.26 percent during July-March FY2021 as compared to 6.50 percent increase last year.
The USA and the EU are among top importers of Pakistani leather as a result complete/partial lockdown situation in these countries, leather demand slowed down.
Paper and board production decreased by 0.60 percent as compared to 4.30 percent increase last year.
Rubber products declined by 12.92 percent during July-March FY2021 as compared to 6.83 percent growth in the same period last year.
Wood products declined by 45.77 percent as compared to 20.67 percent decline last year.
A major plywood unit is closed from many months causing disruption in supply.
Copyright Business Recorder, 2021