Mansoor Sadiq

Leading industrialists hail the Budget 2023-24 but criticize the federal government’s failure to reduce the production cost of major and large-scale manufacturing industries. Talking to WealthPK, Mian Zahid Hussein, Chairman of National Business Group Pakistan, said the industrial sector faces multiple challenges due to import restrictions and rising production costs. However, the government offered no incentives in the 2023-24 Budget, making the industry feel neglected. He feared that this could affect the export performance of the sector in the next fiscal year. Mian Zahid said the incentives and facilities announced for agriculture, SMEs, IT, solar and many other sectors was a positive undertaking and urged the government to broaden the tax net instead of burdening the tax depositors with new and added taxes.

Talking to WealthPK, Faad Waheed, Vice President of the Islamabad Chamber of Commerce and Industries, appreciated the government for abolishing the duty on solar panels and not imposing any new tax on the industrial sector. “The government’s decision to establish the Export Council and give the status of SME to the IT sector is a good decision but the SMEs need bank loans on easy instalments, as they along with IT have vast prospects to earn valuable foreign exchange for the country,” he said. Highlighting the challenges facing the large-scale manufacturing industries in Pakistan, Faad Waheed said except the garments and sports industry, all industrial and manufacturing sectors had contracted with lower production.

“The output of all leading sectors, including textiles, food, petroleum products, chemicals, automobile, pharmaceuticals, cement, fertilizers, iron and steel, furniture, leather products, electrical equipment, and non-metallic mineral products, has witnessed a decline in the last fiscal year. The government needs to take substantial measures to boost the confidence of investors and industrialists. “The LSM sector is a key driver of economy, accounting for around a quarter of gross domestic product (GDP). The decline in the sector is a worrying sign for the economy, which is already facing many challenges, including high inflation, a widening current account deficit, and a depreciating rupee,” said the ICCI vice president.

Faad said high energy costs, rupee depreciation, and costly bank financing have contributed to the negative growth of the industrial sector. Owing to the uncertain economic situation and raised cost of production, a large number of industrial units have been forced to scale back their operations or reduce operating hours, while many others have shut down their plants,” he added. As per statistics of the Pakistan Bureau of Statistics, , the LSM growth dropped by -25 percent in March 2023 and -21.07 percent in April. From July to April of the outgoing fiscal year, the industrial output shrank by 9.4, slightly better than -9.78 percent in the same period of the previous year.

The manufacturing sector witnessed a robust growth of 11.7 percent in the Fiscal Year 2021-22 in comparison with the previous year. This growth was attributed to increasing global demand and favourable government policies that not only stimulated the local manufacturing sector but also contributed significantly to the overall GDP growth in the country.

Credit : Independent News Pakistan-WealthPk