By Muskan Naveed ISLAMABAD, Oct. 29 (INP-WealthPK): Pakistan’s large-scale manufacturing (LSM) grew at a 16-year-high level of 14.85% during the fiscal year 2021. The government’s favorable policies led to boost in aggregate demand as well as enabled a fostering environment for LSM to re-bounce from the fall during the pandemic. Moreover, the Covid-19 pandemic caused an increase in export demand for LSM output – further fueling the sector’s output. Importance of LSM The large-scale manufacturing comprises of firms having 10 or more employees. The manufacturing sector is undoubtedly an important tool for economic growth. It promotes economic growth through production, exports and employment. The sector has substantial contribution to Pakistan’s Gross Domestic Product (GDP) and employs disproportionately large number of employees – indicating the importance of the sector. The manufacturing sector contributes 12.79% to Pakistan’s Gross Domestic Product (GDP) while employing 16.1% of the labor force. The sector can be further broken down into large-scale manufacturing, small-scale manufacturing (SSM) and slaughtering. The LSM has the largest share in the manufacturing sector at 76% while SSM and slaughtering’s shares stand at 16% and 7% respectively. Growth in LSM The Quantum Index of Manufacturing (QIM) is used as a measure of the large-scale manufacturing. The yearly data shows an increasing QIM which was squandered by the pandemic; however, a historic revival was seen subsequently. Figure 1: Data source, Pakistan Bureau of Statistics The LSM suffered greatly because of the Covid-19 pandemic as lockdowns were imposed throughout the country and supply chains were disrupted. However, a strong re-bounce was seen following the policies adopted by the government in order to stimulate the economy. Through the government’s efforts, the QIM reached a high of 175 during January 2021. While the LSM production began to decline after the high in January, it now has a more sustained growth of 2% - which is comparatively better than the performance of the previous year. The output has increased by 12.74% in August 2021 when compared with August 2020. Out of the total fifteen sectors in LSM, twelve showed a positive change while three – fertilizers, electronic and rubber products – declined. The best performing sectors automobiles, pharmaceuticals and food, beverages & tobacco. The three sectors recorded a year-on-year cumulative growth impact of 2.60%, 1.48% and 1.09% respectively – the highest. The secret recipe Pakistan’s Covid-19 response has been lauded by countries throughout the world. Because of the quick policy actions of the government, the LSM and the economy – in general – was able to begin its recovery quickly. Moreover, the government imposed smart lockdowns to ensure minimal supply chain disruption which was able to facilitate the production of LSM. The masses saw sustained periods of hoarding and limited supplies during the lockdowns which led to increased demand. On top of this, the government also resorted to heavy monetary stimulus in order to further boost the aggregate demand. The accommodating monetary policy and the increase in domestic demand ultimately resulted in the year-on-year growth of LSM hiking to 18.5% in June. The government’s willingness for businesses to return to being operational also promoted a positive investor sentiment. The Pakistan Stock Exchange was ranked as the best performing in Asia during the peak of the pandemic in 2020 because of the government’s effort in a time when stock markets were on the verge of collapse.