Report by Engineering Post
Historically, the Large-Scale Manufacturing (LSM) sector has shown considerable volatility over the past decade, reflecting the national economy’s exposure to both domestic and external shocks.
Based on Quantum Index of Manufacturing (QIM) data for the duration of July-March 2025-26, it was observed by the official sources concerned that after recording a strong growth of 10.6 percent in FY 2022, the sector had contracted sharply by around 7.0 percent in FY 2023 due to import restrictions, exchange rate pressures, elevated energy costs, and tight financial conditions. Although the pace of contraction had moderated i n FY 2024 and FY 2025, industrial activity somehow had remained subdued amid high inflation and weak purchasing power. The strong turnaround to 6.5 percent growth in FY 2026 indicated a broad based revival in the industrial activity in the country.
The rebound in LSM was primarily supported by relative monetary easing as the policy rate declined substantially to 10.5 percent by December 2025, from its peak of 22 percent in FY 2024, educing borrowing costs and improving liquidity conditions for businesses . Although the policy rate was subsequently raised to 11.5 percent at the end of April 2026 in response to emerging geopolitical risks, liquidity during most of FY 2026 remained comparatively supportive. The earlier monetary easing was expected to continue supporting industrial activity in the country. This improvement in financial conditions was also reflected in credit flows to industry, where lending to high-weighted manufacturing sectors had expanded during July-March FY 2026, with either working capital or fixed investment financing showing an upward trend. The increase in working capital financing supported short-term production needs amid improving liquidity , while the rise in fixed investment lending indicated a gradual revival in capacity expansion. Within the manufacturing sector, credit growth was broad-based, with notable contributions from food products, textiles, wearing apparel, non-metallic mineral products and motor vehicles.
In addition, tariff rationalization measures which were introduced under the National Tariff Policy also supported industrial activity by facilitating easier access to imported raw materials, at relatively lower costs, thereby improving competitiveness and production efficiency.
The improved performance has also reflected easing inflationary pressures, a stable exchange rate, better foreign exchange availability, and a gradual recovery in domestic demand, Improved availability of imported inputs and reduced supply-side disruptions had also enabled industries to operate at relatively higher capacity utilization levels compared to the previous years.
On a year-on-year (YoY) basis, LSM had grown by 11.1 percent in March 2026, compared to a contraction of 2.4 percent in the same month last year. Meanwhile, on a month-on-month (MoM) basis, LSM had declined by 5.2 percent in March 2026, compared to 8.8 percent decline in February 2026, as per the information available from the official sources.
