Large Scale Manufacturing (LSM) growth has plunged by 1.5 percent during the first quarter of current fiscal year due to lower domestic demand and high cost of doing business. Economists say a number of factors including greater energy crisis, rise in input cost and slow domestic and external demands are major causes of the decline in LSM production.
Although, there is some improvement on external side, however, despite all guarantees foreign buyers are hesitating to place orders due to uncertain political situation and deteriorating law and order in the country, they said.
"The export-oriented units are also facing huge difficulties for marketing due to poor law and order situation and country's image, as the importers have several concerns including the Pakistan's exporters' and producers' ability to meet the delivery deadline," they added. They said the government should launch a campaign in collaboration with export bodies to boost country's export.
LSM industries with 0.97 percent growth stood at 195.61 points in July-August 2010-2011 as compared to 193.73 points in corresponding period of last fiscal year. However, latest statistics of Federal Bureau of Statistics (FBS) revealed that Quantum Index Number of LSM industries showed 1.47 percent decline in first quarter (July-September) of current fiscal year.
Quantum Index Number of LSM industries stood at 187.48 points in July-September 2010-2011 as compared to 190.28 points in corresponding period of last fiscal year. During the period, OCAC and Ministry of Industries Index posted a massive decline, while provincial BOS Index surged by 5.77 percent to 219.16 points from earlier 207.21 points.
In present negative growth OCAC has a major share, as during the first quarter of fiscal year 2011, OCAC Index declined by 17.03 percent to 127.02 points from 153.09 points in the corresponding period while, Ministry of Industries Index dipped by 4.58 percent to 176.50 points. The index during September 2010 declined by 2.58 percent to 178.62 points as against 183.36 points in September 2009.
According to economists, interruptions in energy supplies and upward adjustment in the prices of electricity, gas and diesel lowered the productivity and raised the cost of production in domestic industry. They pointed out that rupee depreciation with a greater volatility also increased the cost of imported inputs.
Decline in consumer demand in the domestic market is attributed to the high interest rates on consumer financing (due to the tight monetary policy adopted by the SBP) and commercial banks' reluctance to provide consumer financing for due to rising NPLs, they added. They said if the current trend continued than it would also hurt the annual GDP growth rate, therefore, policy makers should take a serious notice of the decline in LSM growth and make efforts for a healthy growth.
It may be mentioned here that official provisional statistics of Quantum Index Numbers of Large Scale Manufacturing Industries of FBS depict no growth in the production of major industries of the country. QIM shows the industrial productivity of the 100 items received from different sources ie Oil Companies Advisory Committee (OCAC), Ministry of Industries and Production and Provincial Bureaus of Statistics. OCAC supplied the data of 11 items, Ministry of Industries and Production supplied the data of 35 items and Provincial Bureaus of Statistics provided data of 54 items.