EDITORIAL: Data released by the Pakistan Bureau of Statistics reveals that the Quantum Index of Large Scale Manufacturing Industries for June rose from 153.1 in May to 165.6 in June though it still has some distance to go to achieve the high of 198 in March when the Khan administration was in place followed by the dip to 152.8 in April due, no doubt, to growing political turmoil in the country.
It is, however, important to note that the highest growth July-June 2021-22 was achieved by the sugar industry (39.11 percent), which includes an impressive list of Who’s Who in Pakistani politics, with a weightage of 3.5 percent. This does not imply that sugar output met domestic demand as the country had imported 190.9 million dollars worth of sugar July-March 2021-22, as per the Economic Survey, reflecting an increase in the quantity imported by 11.2 percent in comparison to the corresponding period of the year before.
Fertilizers with a weightage of 4.4 grew by 2.6 percent in 2021-22 with a cumulative growth year-on-year of 0.2, an item which was imported to the tune of 675.2 million dollars July-March, reflecting a rise of 53.4 percent when compared to the comparable period of the year before even though actual quantity imported declined by 2 percent.
Cement, an input required by the construction industry which received monetary and fiscal incentives from the previous administration, including a tax amnesty scheme, with a weightage of 5.3 witnessed negative 3.59 percent growth year-on-year in July-June 2021-22 though iron and steel, with a weightage of 5.4 percent, rose by 21.41 percent, perhaps reflecting the stage of construction achieved.
The single highest weightage of any LSMI is textiles, at 20.9 percent, which grew by a meagre 0.6 percent cumulatively July-June 2021-22 — perhaps more a reflection of the recession in our major international buyers due to the ongoing Russia-Ukraine war as well as in the domestic market due to inflation in double digits and the eroding rupee value.
Automobiles with a weightage of 4.6 rose July-June 2021 by 49 percent and by almost half last fiscal year at 24.6 percent. The rationale may well be that at the tail end of 2020-21 sales rose considerably as the lockdown due to the pandemic eased; however, demand was mostly met with inventories requiring a boost in production. By December 2021, the International Monetary Fund (IMF) began to reassert the need for implementing contractionary monetary and fiscal policies with negative implications on the manufacturing sector in general and the LSMI in particular that perhaps account for the decline in growth in the automobile sector.
The sectors that showed a decline in growth during July-June 2021-22 compared to the comparable period of the year before with a total weightage of 8.1 include: (i) non-metallic products (weightage 5.4) registered a cumulative year-on-year negative growth of 0.4; (ii) electronics (weightage 2) negative 0.2; (iii) engineering products (weightage 0.4) with negative 0.01; and (iv) rubber products (weightage 0.3) with a cumulative year-on-year growth impact of negative 0.1.
The LSMI rose by 7.7 percent during last fiscal year compared to the year before; however, it is evident that in 2020-21 Pakistan, like other countries in the world, was struggling with output constraints due to the pandemic. Hence the base was low in 2020-21 and again as an outcome of the pandemic the then government, with concurrence from the IMF, abandoned the contractionary policies agreed in the ongoing IMF programme and began an expansionary phase; however, at present with the expected Fund programme revival due to the successful completion of the seventh/eighth reviews the policies are contractionary again and as a consequence one would expect LSMI growth to pay a major price in months to come.
Copyright Business Recorder, 2022