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Budget: Industrial sector projected to grow?

ISLAMABAD: Industrial sector was projected to grow by 5.9% based on large scale manufacturing (LSM) envisaged growth of 7.4%.

According to the Annual Plan, Small and household Manufacturing grow by (8.3%), slaughtering (3%), mining & quarrying (3%), construction (4%) and electricity & gas distribution (3.5%).
During 2022-23, the flood-induced supply shock severely affected industry and services sectors besides damaging critical transportation infrastructure.
Industrial sector also faced pressures as import restrictions made it difficult to import essential raw materials, intermediate goods and machinery.
As a result, many factories either closed temporarily or operated below capacity. Moreover, increase in energy prices, higher cost of imported input due to currency depreciation, increased cost of working capital due to substantial increase in interest rates and political/policy uncertainties adversely affected the industrial sector.
Energy prices were increased due to reversal of unsustainable subsidies as part of the stabilization programme.
Annual report said that LSM which accounts for about 50% of industrial sector acted as a drag on the overall growth of industrial sector with a contraction of 8% during July-March 2022-23 as compared to the growth of 10.6% during the corresponding period of last year. In March 2023, LSM output plunged by 25% (YoY).
Only four manufacturing groups (wearing apparel, leather products, furniture and football) registered positive growth while contraction of the remaining groups including food, beverages, fertilizers, pharmaceuticals, textile and automobiles, etc. contributed to the decline in LSM index.
The production of textiles, which are normally 25% of industrial output and about 60% of export goods, plunged by 16% as prices for imported cotton to replace domestic supply were driven up by the foreign exchange crisis.
Mining and quarrying sub sector also witnessed a contraction of 4.4% as against the target of 3% due to decline in natural gas, crude oil, other minerals and exploration services.
Value added in small & household manufacturing, slaughtering and electricity generation & gas distribution grew by 9%, 6.3% and 6%, respectively.
On the other hand, construction sector registered a decline of 5.5% which may be attributed to decrease in expenditures by public enterprises and increase in prices of construction material.
The contraction in mining, LSM and construction led to contraction of 2.9% in value added of industrial sector.
The commodity producing sectors during 2022-23 contracted by 0.5%, therefore, the performance of dependent services sector posted a marginal growth of 0.9% with major contributions from education (10.4%), human health & social work activities (8.5%), information & communication (6.9%) and other private services (5%). Wholesale & retail trade with major share in services sector posted a contraction 4.5% due to subdued economic activity and high inflation.
The per capita income increased by 24.1% in nominal terms but contracted marginally by 0.5% in real terms. However, in dollar terms it declined by 11.2% owing to massive depreciation of rupee against dollar.
Investment-to-GDP ratio decreased from 15.7% in 2021-22 to 13.6% in 2022-23 with decrease in both public and private investment-to-GDP ratios. Investment grew by 10.2% in nominal terms, however, decreased by 15.4% in real terms mainly because of high inflation.
Both public and private investment increased in nominal and decreased in real terms.
National savings are estimated to increase to 12.5% of GDP in 2022-23 from 11.1% in 2021-22 mainly because of lower availability of foreign savings due to massive improvement in the current account deficit. Pakistan’s reliance on external borrowing to finance investment has decreased marginally.
The effectiveness of import compression measures is evident from increased level of domestic savings which inched
up to 6.2% of GDP from 4.3% of last year.
Private consumption expanded by 24.8% in nominal terms and 1.6% in real terms during 2022-23. Private consumption occupied the major share in expenditure on GDP and contributed positively to the GDP growth. Moreover, net exports improved as decline in imports outpaced decline in exports.


M M Alam

M. M. Alam is a Pakistan-based working journalist since 1981. Karachi University faculty gold medalist Alam began his career four decades ago by writing for Dawn, Pakistan’s highest circulating English daily. He has worked for region’s leading publications, global aviation periodicals including Rotors (of USA) and vetted New York Times as permanent employee of daily Express Tribune. Alam regularly covers international aviation and defense-related events including Salon Du Bourget (France), Farnborough (United Kingdom), Dubai (UAE). Alam has reported thousands of events and interviewed hundreds of people in Pakistan, UAE, EU, UK and USA. Being Francophone Alam also coordinates with a number of French publications.

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