Engineering Post Report
Quite significantly and obviously, the industrial sector plays an important role in the economic development of a country. It contributes almost 20 per cent of Gross Domestic Product (GDP) and employs 24 per cent of total employed labour force.
The industrial sector was envisaged to grow by 2.3 per cent on the back of the manufacturing sector (2.5 per cent), utilities (1.5 per cent) and construction (1.5 per cent). However, the industrial sector faced a major brunt of the COVID-19 related shutdown and depicted overall contraction of 2.6 per cent as compared to the previous year when ir was contracted by 2.3 per cent , according to the revise estimates.
Manufacturing sectoring sector acted as a drag on the overall growth of the industrial; sector with decline in Large Scale Manufacturing (LSM). Despite improved energy supply and better security situation, a constant increase in cost of working capital due to twofold increase in the interest rate (13.25 per cent) since May 2018, increased the cost of production.
The contraction, according to the information gathered from the official sources concerned, can also be attributed to subdued demand owing to double digit inflation during the year and completion of first phase of the great game changer China-Pakistan Economic Corridor (CPEC) which resulted in slowing down of infrastructure related investment in the country.
On supply side, rupee devaluation, important duties and taxes levied in the federal budget 2019-20 had increased the cost of imported inputs, especially I automobile, electronics and pharmaceutical sectors. The pandemic of COVID-19 also had intensified economic miseries of the industrial sector in the country in particular.
According to the available figures, Large Scale Manufacturing (LSM) had posted negative growth during the current year. The period average growth since July 19-20 had remained negative, while Year on Year (YoY) growth was also predominantly negative with the only positive spike during the month of December 2019. The LSM sector is estimated to have contracted by as much as 7.8 per cent as against contraction of only 2.7 per cent.
The annualized estimates worked out primarily on the basis of first quarter data from July 2019 to March 2020, which showed a decline of -5.40 per cent. Major decline has been observed in textile ( 2.6 per cent), food, beverage and tobacco (2.3 per cent), coke and petroleum products (17. 5 per cent), pharmaceuticals (5. 4 per cent), chemicals (2.3 per cent), automobiles ( 36.5 per cent), iron and steel products (22.1 per cent) , engineering products ( 7.1 per cent) and wood products ( 5 per cent), rubber products (4.3 per cent), paper and board (4.3 per cent and non-metallic mineral product (1.8 per cent).
The mining and quarrying sector had witnessed a contraction of 8.8 per cent as against contraction of 3.2 per cent the previous year and target for the year at 2 per cent growth. The contraction had mainly occurred due to negative growth in output reported in I natural gas (-6.4 per cent), crude oil (-10.6 per cent) and coal (-6.3 per cent).
Small and household manufacturing was estimated to bear the brunt of lockdown and subsequent shrinking in growth to 1.5 per cent. Value addition in electricity and gas generation ad distribution posted 17. 7 per cent growth . Construction section witnessed growth of 8.1 per cent compared to contraction of 16.8 per cent during the last year and the target growth of 1.5 per cent primarily because of the rise in investment in the construction sector.
