THE most recent data on large-scale manufacturing shows that the growth spurt of the last couple of years may be on the cusp of a plateau. After registering some increases, growth in the period July to January 2017 was 3.48pc, below its target of 5.9pc. More interestingly, sharp falls in the growth rate of automobiles and fertiliser dragged the overall rate down. The only bright spot in the data came from food, particularly soft drinks and sugar, and iron and steel products. This was most likely the outcome of the accelerating pace of construction involving projects related to the China-Pakistan Economic Corridor.

One aspect the figure draws our attention to is the absence of any linkages between the CPEC-related projects that are gathering steam across the country and the rest of the economy. Much is riding on the assumption that investment related to CPEC will spur growth inside the country. It is important because we are now relying on this investment to create jobs, spur exports and generate revenues. If the investment fails to establish substantial backward and forward linkages, there is a risk that we will be left with little more than the bill that comes with this enterprise. Thus far, when perusing the data on large-scale manufacturing, we see an impact in the construction sector and nowhere else, which is troubling because this trend could be the earliest sign that hopes of a wider economic revival owing to CPEC could be misplaced.

The absence of growth in textiles is crucial here. This is the sector that generates the most jobs and export proceeds. Its growth has been the most anaemic thus far, less than 1pc last year and falling to 0.29pc in the same period this year. If any revival in the overall growth rate leaves out textiles, we can be quite certain that it will be unsustainable because the rising bill from the import of industrial raw materials will swamp the economy in the absence of proceeds from exports. The government needs to revisit its CPEC story while focusing due attention on the impact on domestic industry. This impact should be evaluated from two perspectives. First, there are the backward and forward linkages necessary to ensure that CPEC does not end up creating an island of growth in the midst of a largely stagnant economy. Second, the competitive pressures unleashed by CPEC investment could act as a spur to innovation, or lead to the wholesale destruction of domestic industry as raw materials and energy are swivelled as ‘incentives’ to relocate to Pakistan. The fact that the government enjoys pointing out an increase in the growth rate since it assumed power while large-scale manufacturing continues to register mixed trends is one reason to believe that the anxiety around these questions might be well grounded after all.

Published in Dawn, March 19th, 2017