Recognising Pakistan’s industrial slowdown, the government launched a coordinated push toward export-led growth. The National Industrial Policy 2025–30 marks a departure from protectionism, setting targets of $60 billion in exports, six per cent GDP growth, and 8pc annual manufacturing expansion by 2030, while compressing customs duties into four slabs and removing additional charges.
Regulatory simplification has reduced compliance burdens, and a dedicated revival mechanism supports distressed but viable units. On energy, industrial tariffs have been cut through cumulative relief, negotiations with power producers eased future liabilities, and new electricity packages for incremental consumption — along with lower wheeling charges and cheaper export financing — aim to restore competitiveness in energy-intensive sectors.
Broader governance reforms across federal institutions are also underway, with upcoming legislation to simplify the business environment. Export-oriented sectors, especially textiles, remain central, supported by revised policies and financing schemes to raise shipments. These measures collectively seek to stabilise the industry while shifting toward a more competitive, export-driven structure.
But correcting Pakistan’s industrial fundamentals has never been a quick fix; rather, it has been a long, demanding journey. Today, that journey feels even more stretched. The shifting geopolitical winds in the Middle East, the ongoing struggle to strike the right balance in our energy mix, and the visible impact of climate change on agriculture and agro-based industries have all added layers of complexity.
A realistic strategy for sustainable industrial recovery and expansion must focus on restoring policy credibility and reducing structural costs
Moreover, artificial intelligence is steadily entering industrial processes, changing how industries operate and compete. This means the challenge is no longer just about fixing old problems — it’s also about keeping up with new realities. What was already difficult has now become more complex, requiring clear thinking, adaptability, and the courage to move forward with purpose.
Just consider the numbers. While official figures show modest rebounds in some segments — such as electricity, gas, and water supply — the overall picture of large-scale manufacturing (LSM) is more mixed. In FY25, overall LSM output contracted by 0.74pc, missing its 3.5pc annual target. FY26 has shown a fragile cumulative rebound of 5.75pc in July–January, but the path remains uneven: monthly growth swung from 8.99pc (July) to 0.54pc (August) and then to 10.37pc (November) — underscoring uneven demand rather than a durable recovery.
Nearly 10 of 22 major industries now produce less than they did a decade ago, including textiles that account for roughly 18pc of LSM output but have posted an index below 100 for 35 consecutive months. Gains in segments like automobiles (up approximately 75pc in 5MFY26 on a low base) reflect currency-driven import substitution, not genuine export competitiveness.
Industrial growth is not simply about output statistics; it is about competitiveness in global markets and the creation of sustainable jobs on a large scale. Pakistan’s industrial base has been heavily reliant on low-value, traditional sectors — especially textiles — which alone account for more than 55pc of total exports. While textiles are important, focusing predominantly on them without parallel development in higher-value industries limits the economy’s potential to climb the global value chain.
The fragility of this model is evident: even as textile exports showed some recovery in FY25, exports of basic yarn fell 28.76pc, while raw cotton imports jumped 182.53pc — a clear sign of upstream supply chain weaknesses. The overall trade deficit reached $27.81bn in the first nine months of FY26 (July–March), a 22.65pc increase, driven by a 6.64pc rise in imports ($50.54bn) alongside an 8pc decline in exports ($22.73bn). Heavy import dependence on energy and intermediate goods continues to weigh down the trade balance.
Real structural transformation of industries requires addressing deep-seated impediments that have plagued industry for decades: persistent energy shortages, policy and governance unpredictability, the high cost of capital, and underdeveloped supply chain infrastructure.
Despite installed power capacity of 46,605 MW, actual availability hovers at 70–80pc, with peak shortages exceeding 7,000 MW and rural outages lasting 10–18 hours. Industrial energy consumption fell 21pc year-on-year in FY24 as firms shifted to off-grid power; by July 2025, Pakistan had imported 17 GW of solar PV capacity in a single year.
Moreover, gas-sector circular debt reached Rs3.2 trillion by March 2025. Without reliable electricity and predictable policy frameworks, investors hesitate to commit capital to long-term ventures. These challenges cannot be resolved by a single reform package. They require sustained, multisectoral efforts over the years.
Export competitiveness — a key pillar of sustainable industrial growth — remains fragile. Pakistan’s trade balance continues to be weighed down by heavy import dependence on energy and intermediate goods, while export diversification has been slow. A stronger export performance would not only improve foreign exchange reserves but also reinforce industrial output through scale and integration into global value chains.
Yet fundamentals remain daunting: Pakistan’s investment-to-GDP ratio stood at 13.8pc in FY25, compared to roughly 30pc in regional peers like India, Vietnam, and Bangladesh. The World Bank ranks Pakistan 108th out of 190 in ease of doing business, while the 2025 Index of Economic Freedom places it 150th out of 184 — a “repressed” economy.
A more market-aligned exchange rate can improve competitiveness and correct external imbalances, while sustained reforms in energy pricing, logistics, and skills development can lower the cost of doing business.
At the same time, industrial policy needs to become more targeted and performance-driven.
Published in Dawn, The Business and Finance Weekly, April 13th, 2026