Editorial
Recent data released by the Pakistan Bureau of Statistics (PBS) on the Quantum Index of Manufacturing (QIM) for the first quarter of 2024-25 paints a bleak picture for the country’s industrial sector. The QIM, which tracks the output of 22 industries, shows a 0.8% decline compared to the same quarter of the previous year, with twelve industries experiencing a downturn. Despite an optimistic start in July 2024, where the index saw a 2.5% increase, the trend quickly reversed, with a slight dip of 0.2% in August followed by a sharper 2% fall in September.
The disappointing performance contrasts sharply with the Planning Commission’s expectations, which had forecasted a 3.5% growth in large-scale manufacturing for 2024-25, bolstered by hopes of improved inputs, energy supplies, and easing economic conditions. However, the sector’s lackluster output underscores the persistent challenges, including a steady decline in the sector’s long-term growth rate. From 2015-16 to 2023-24, the average annual growth rate was a mere 1.3%, marking a significant slowdown in what has historically been a key driver of economic expansion.
In terms of individual industries, textiles provided some bright spots, particularly the garments sector, which saw a remarkable 17.6% growth, driven by strong export demand. Similarly, the automobile industry grew by 26.4%, benefiting from relaxed import restrictions and lower interest rates. However, the tobacco industry’s growth, which spiked by 40%, likely reflects better tax tracking rather than a genuine increase in output.
On the negative side, industries related to construction—cement, iron and steel, and fabricated metal products—experienced severe declines, partly due to a sharp fall in government development spending. Additionally, sectors like machinery, electrical equipment, and electronics, reflecting private investment, also saw a downturn, indicating a lack of industrial confidence.
The ongoing slump in manufacturing poses significant risks to Pakistan’s GDP growth, which is unlikely to meet the official target of 3.6%. It also threatens to undercut national tax revenues, which rely heavily on large-scale manufacturing, potentially exacerbating fiscal challenges in the coming year.
