ISLAMABAD: Large-scale manufacturing (LSM) in Pakistan grew by a modest 4.1% during the first quarter (July-September) of FY2025-26, down from an initial 4.5% pace in the first two months, according to data released by the Pakistan Bureau of Statistics (PBS). Despite crossing the 4% mark, the LSM index stood at just 114.7 in September, still below the three-year-high of 132.5.
An internal assessment by the Ministry of Industries has revealed that several key sectors face severe cost disadvantages ranging from 22% to 67% due to skewed economic policies, high energy prices, taxation, and regulatory burdens. The ceramic tiles and glass sectors suffer the highest handicap of over two-thirds, followed by steel (one-third) and paper & board (one-fourth). These distortions have caused the manufacturing sector’s contribution to GDP to shrink from 26% to 18% over the past three decades.
The ministry has urged immediate policy corrections, including abolition of the super tax, gradual reduction of corporate tax from 29% to 26%, a 5% cut in interest rates, and market-driven exchange rate adjustments. It warned that without addressing structural high costs, tariff liberalization alone will deplete foreign exchange reserves and fail to boost competitiveness.
Growth was mainly driven by food, tobacco, textile, and paper sectors, while overall industrial activity remains constrained by political uncertainty and anti-export biases.