ISLAMABAD, May 31: Despite energy shortfall, the manufacturing sector performed well in the outgoing fiscal year mainly driven by domestic demand backed by high consumption trends, the Economic Survey 2011-12 said on Thursday.

The manufacturing sector posted a growth of 3.56 per cent during the first nine months (July-March) of 2011-12 compared to 2.96 per cent in the same period last year.

However, the Large Scale Manufacturing (LSM) managed to expand by a modest 1.05 per cent during the period under review over 1.51 per cent growth posted in the same period last year.

The growth in LSM was mainly derived from consumer goods such as food and pharmaceuticals which showed the strongest contribution, in addition, intermediate goods such as building materials, fertilisers and petroleum products posted a modest contribution in overall LSM performance.

The pharmaceutical sector posted 10.89 per cent growth in the nine months, paper and board 8.38 per cent, wood product 7.39 per cent, food beverages and tobacco 6.53 per cent, non-metallic mineral products 2.87 per cent, leather product 1.76 per cent, however and performance of textile sector improved marginally by 0.77 per cent.

The sectors showing a decline in production during July-March 2011-12 were iron and steel products 28.47 per cent, rubber products 24.63 per cent, engineering products 10.19 per cent, electronics 7.88 per cent, coke and petroleum products 5.68 per cent, chemicals 4.70 per cent, automobiles 0.84 per cent and fertilisers 0.42 per cent.

The survey has added that the agro-based industries witnessed a recovery phase from the impact of the floods of 2010 but was again hit by another spell of heavy rains in Sindh during August 2011.

Floods damaged industrial supply networks and contained rural demand, this was coupled with severe power and natural gas shortages leading to a number of key industries like textile, fertiliser, steel, glass etc., not operating at expected levels.

However, the survey said that LSM production began to revive in December, 2011 as the impact of flood began to subside.

“A remarkable growth of 6.0 per cent was witnessed in February 2012, mainly attributed to specific policies on large scale industry,” the survey said.

“Effective fiscal policy helped in revitalising the growth to some extent due to reduction in duties on beverages, automobiles, cement and air conditioners.”

The survey added that this step was necessitated in view of the costly input prices and the need to absorb the volatility in production of these industries.

The country also witnessed growth in agro-based industries backed by increase in cotton production in Punjab and sugarcane production during the current fiscal year.

However, in March 2012, the year-on-year performance of the LSM sector turned negative by registering a decline of 3.7 per cent owing to prolonged power and gas shortages.