LAHORE:
Pakistan’s industrial base, the lifeblood of sustainable economic growth, appears to be losing its strength, with large-scale manufacturing (LSM) continuing to show worrying signs of stagnation. Despite glimpses of macroeconomic stability and improving geopolitical relations, the core of Pakistan’s economy remains fragile, weighed down by policy inconsistencies, rising energy costs, and declining productivity across key industrial sectors.
While the government celebrates improved foreign relations and marginal fiscal recovery, the reality on the ground is different. Pakistan’s industrial wheel, particularly its large-scale manufacturing, has slowed to one of its weakest phases in recent years. The sector, which accounts for around 8% of GDP in FY25 and employs millions directly and indirectly, has been contracting intermittently for over two years. According to data from the Pakistan Bureau of Statistics (PBS), LSM output in the last fiscal year fell by 0.74% after a brief rebound earlier, continuing a downward trend that began in the aftermath of global supply shocks and domestic energy crises.
Economists argue that such industrial stagnation poses a long-term threat to the country’s economic health. “No country can grow sustainably without a strong manufacturing base,” said industrial economist Dr Naveed Mirza, adding that nations like South Korea, China, and Germany owe much of their prosperity to consistent manufacturing expansion. “When your industries slow down, exports shrink, jobs vanish, and the economy becomes consumption-driven rather than production-led, which is exactly what’s happening in Pakistan,” he added.
Within Pakistan’s manufacturing ecosystem, the textile sector remains the largest contributor, representing about 18% of total LSM output. However, according to Mian Sohail Nisar, Patron-in-Chief of the Pakistan Industrial and Traders Association Front (PIAF), the textile industry has remained weak for over two years. “The textile index has stayed below the 100 mark for 35 consecutive months,” he said, warning that this prolonged slump reflects a deeper structural issue. He pointed out that textile output today is even lower than what it was ten years ago, a fact that starkly illustrates the story of Pakistan’s industrial decline.
Analysts note that Pakistan’s manufacturing woes are not isolated. Out of 22 major industries tracked by the PBS, nearly ten are producing less today than they did a decade ago. This includes crucial sectors such as automobiles, pharmaceuticals, and engineering goods. Frequent energy shortages, inconsistent government policies, high interest rates, and limited access to raw materials have made it difficult for industries to sustain output, let alone expand.
In contrast, developed economies continue to thrive on manufacturing excellence. For instance, manufacturing contributes roughly 20% to Germany’s GDP, over 25% to South Korea’s, and nearly 30% to China’s. These nations have built their economic resilience through long-term industrial policies, investment in innovation, and efficient energy management. Their success underlines what Pakistan lacks – continuity and commitment in industrial planning.
The PIAF leadership stressed that Pakistan’s economic policy framework needs an urgent shift from short-term fixes to structural reforms. “Our economic foundation has become weak,” Nisar noted. “Occasional spurts of improvement will not lead to sustainable growth. What we need is continuity in policy and long-term commitment.” He further warned that unless Pakistan implements deep reforms in energy pricing, taxation, and industrial policy, large-scale manufacturing will continue to deliver disappointing results year after year.
Industrial experts further believe that the path to recovery lies in incentivising production rather than import substitution. They suggest rationalising power tariffs for industries, introducing export-linked tax benefits, and ensuring policy stability for at least a five-year horizon. Such measures could reignite industrial confidence and attract foreign investors who currently see Pakistan as a high-risk destination.