Mainstream media reports that growth in large scale manufacturing was at a 4-year high in the fiscal year ended June 2017. But if revised numbers from Economic Surveys are anything to go by, the LSM growth in FY17 was the highest since FY07.
The growth seems fairly broad-based as most of the important sub-sectors in the LSM index performed very well, with many of those witnessing multi-year high in production quantities. As a result, the LSM index grew by 5.6 percent, much higher than National Economic Council's forecast of 4.93 percent at the time of release of the last Economic Survey, and much closer to BR Research's lower forecast range of 5.7 percent (See BR Research column “L-S-M!" published on August 2, 2017).
Onto the bigger picture! Since the start of this week, a presentation made to the Prime Minister by Pakistan Business Council has been circulating around.
That presentation brings home the point that manufacturing sector is being penalized by high taxation, which is why the sector's share in national economic output has been slipping for many years. LSM's share in GDP was 10.7 percent in FY17, lowest since FY03 when the number stood at 10.63 percent.
There is no doubt ‘may you become a manufacturer' is becoming a curse in this country; not only because of taxation issues, but also because of power and gas shortage, falling labour productivity, law & order, the general dis-ease of doing business and what not.
PBC's presentation also inquired whether Pakistan is “becoming a nation of traders". BR Research was not a part of that presentation made to the PM, but that question seemed to be a rhetorical one with an underlying affirmative answer, because the mainstream view among stakeholders and observers is indeed that Pakistan is becoming a country of traders.
However, as the graphs here show, the situation seems to be otherwise. The share of ‘wholesale and retail' sector in Pakistan's GDP has been tapering off since about the same time when the share of manufacturing started falling. Likewise, Pakistan's trade – both import and export – as percentage of the country's GDP has been slipping since mid-2000s, more noticeably in the last seven years.
The question to reflect on is not the one raised in this column's heading; but whether does this country even have a priority at all. Clearly, manufacturing is not a priority; but neither is trading; and surely agriculture is a step child.
This requires a separate discussion, but hopefully some of the underlying questions will be answered when the Pakistan Bureau of Statistics releases its results of the Census of Manufacturing Industries by the end of calendar of 2017. That is if ongoing political wrangling doesn't come to harm PBS's performance. Touchwood!