The country has missed its large-scale manufacturing (LSM) growth target of 12.5 percent by 4 percent in the wake of high interest rates and increased cost of doing business in the country, reliable sources said.
The LSM is the second largest sector of the economy accounting for over 20 percent of Growth Domestic Production (GDP) has shown poor performance during fiscal 2006-07.
Experts believe that despite government's best effort, its growth target could not be achieved and final growth figures will be around 9 percent.
Sources said that final figures of LSM growth will be around 8.5-9 percent in last fiscal 2006-07 against the target of 12.5 percent, depicting a decline of 3.5-4 percent during 2006-07.
Official statistics show that 8.5 percent growth was achieved during July-April of fiscal 2006-07, which is around 1.4 percent less than last fiscal year's achievement of 9.9 percent.
Although the government claimed in the Economic Survey that overall manufacturing continued to show a robust growth in 2006-07, it did not concede that the country was failing to achieve its annual growth target, sources said.
Satistics show that the LSM growth has been declining for the last three years due to high interest rates, besides increasing cost of production. Around 97 percent decline witnessed in the LSM growth during the fiscal 2005-06, as it stood at 9.9 percent in 2005-06 as compared to 18.7 percent in the fiscal 2004-05.
"Several factors have contributed to missed growth target of LSM, including difficulties in the textile sector, reduced production of cotton crop. Besides, lower than expected scale of operations of oil refineries are the main reasons behind the decline in the LSM growth," the analyst said
Textile and cooking oil sectors are the major parts of LSM and both have showed poor performance during the last fiscal year, the decline in raw cotton production and high cost of production has badly hit textile industry, he added.
Since high raise in the international palm oil prices put negative impact on the ghee sector, vegetable ghee and cooking oil also showed a lackluster performance.
In addition, high imports of used cars and increase in car-financing rates in the fiscal year also dampened the performance of the domestic auto sector, therefore, the auto sector performance has been far less impressive during 2006-07 as compared to previous five years due to the fall in domestic demand for cars, the statistics said.
The main contributors to the LSM over thr last year are in the textile group: cotton cloth by 7.0 percent, cotton yarn by 11.9 percent, in the food, beverages and tobacco groups cooking oil 6.8 percent, sugar 19.6 percent and cigarettes by 4.14 percent during July-April of last fiscal year. Similarly, the cement sector grew by 21.11 percent and in the automobile group jeeps & cars by 3.0 percent, LCVs 17.04 percent, motorcycles by 12.30 percent and tractors 11.40 percent during July-April 2006-07.
On the other hand, some sectors such as petroleum and fertiliser showed negative growth. In the case of fertilisers, nitrogenous and phosphatic fertilisers growth declined by 0.08 percent and 3.10 percent respectively. Petroleum products declined by 5.59 percent.
Traditionally, the large scale manufacturing (LSM) data of 100 items is compiled and made available for public by the Federal Bureau of Statistics on a monthly basis The SBP in its third quarterly report indicated that LSM target would not be achieved.
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