Stagnation shadows large-scale industries

Production in the big industrial sector experienced stagnation, as the index for large-scale industries remained nearly unchanged in April of the previous fiscal year.

The index of industrial production for large-scale manufacturing in April (July-April) grew by merely 0.021 per cent compared to the same month a year earlier, according to the Bangladesh Bureau of Statistics.

During July-March of FY23, the general index of industrial production for large-scale manufacturing recorded a 7.2-percent year-on-year increase.

This decline can primarily be attributed to a slowdown in food production, ready-made garment (RMG) manufacturing, chemicals and chemical products, paper and printing and pharmaceutical sectors.

This reduction in production capacity is believed to have resulted in a regrettable situation where many individuals lost their jobs.

These statistics highlight the challenges confronting the local manufacturing sector and give rise to concerns about the country's overall economic performance in the forthcoming months.

The production of food items decreased by 7.6 per cent, RMG by 18.7 per cent, paper and printing products by 22.7 per cent, chemicals and chemical products by 18 per cent and the pharmaceutical industry by 20 per cent, as shown by BBS statistics.

Conversely, beverage manufacturing expanded by 71 per cent during the review period, while the textile sector witnessed a growth of 44 per cent.

Bankers said that the opening of letters of credit (LCs) has declined due to dollar shortages, which could impact the industrial sector. They also mentioned that there is a weak demand for advances from industry stakeholders.

"Big industries are not taking loans as they did in the past, reflecting a decline in private sector credit," said Mr Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank, a privately-owned bank in Bangladesh.

He said both customers and banks have adopted a cautious "wait and see" approach.

Private sector lending saw a modest increase of only Tk 129 billion during the January-March quarter of the previous fiscal year.

The private sector credit for Q3 reached Tk 13,603 billion. This marked a rise from Tk 13,474 billion recorded at the end of Q2 or the October-December period.

Economists attribute the large industry slowdown to issues such as LC (letters of credit) opening hurdles and the energy crisis.

They also noted that the ready-made garment (RMG) sector, a significant contributor to exports, is facing subdued demand due to global challenges stemming from the war in Ukraine.

"I am aware that RMG demand has been dampened in recent months," said Dr M Masrur Reaz, chairman of the Policy Exchange of Bangladesh.

He said the ongoing energy crisis and import restrictions have considerably impacted the output of several major industrial sectors.

He, however, mentioned that the beverage manufacturing sector has seen growth due to higher temperatures caused by climate changes.

The industrial sector is estimated to contribute 35.55 per cent to the GDP in FY23. Among the components of the industrial sector, the manufacturing sector's contribution to GDP in FY23 is estimated at 23.00 per cent.

The BBS compiles the data from a sample of 23 big manufacturing establishments.

jasimharoon@yahoo.com