THE slump in large-scale manufacturing amidst the adjustments the economy is forced to make in order to stay afloat comes as no surprise. With economic growth rates having nearly bottomed in recent years, big industry output has grown negatively since July 2022, barring a few months of a slight uptick in LSM output. Although economic activity has gained some traction as underlined by high-frequency indicators, including the sale of automobiles, POL products and cement, as well as import volumes and credit to the private sector, the real sector remains under stress. Multiple factors — the high cost of credit, heavy taxation, a steep surge in domestic power and gas prices, dollar liquidity crunch leading to unspoken curbs on imports, declining cotton production, etc — are dragging down LSM growth. Further, the use of fertilisers is decreasing and people are spending less on food and beverages. Likewise, the construction industry slowdown has had a harsh impact on iron and steel output. That said, certain sectors like textiles and cement have shown a slight uptick due to a modest rise in exports, and automobiles sales are recovering on a low base effect.

Overall, big industry recorded a negative growth of 1.78pc during the first seven months of the current fiscal year from a year ago. In FY24, LSM had contracted 0.03pc compared to a 0.92pc growth in the preceding year. No doubt there is reason to be worried about the country’s declining LSM output. However, we cannot expect big industry to grow when the entire economy is in slow mode, despite the reduced volatility that has created a semblance of stability and slight recovery, supported by IMF funding, over the last one and a half years. Inflation is down but significant risks remain; the current account is in surplus because of a record increase in remittances, but pressures on the external account are re-emerging due to rising imports and weakening foreign private and official capital flows. The recent recovery notwithstanding, Pakistan’s economy lacks the strength to walk let alone run. Any push to accelerate industrial growth at the moment would land us into deeper trouble. The only way forward is to shed our old habits of achieving growth through imported consumption, while sticking to a slow-growth mode until the pro-growth reforms agenda is implemented to remove structural issues that are pulling down the industry.

Published in Dawn, March 20th, 2025