Pakistan’s industrial sector staged a broad-based recovery in FY2026, with manufacturing growth surging to 6.6 per cent, up sharply from 2.0 per cent last year, driven by stronger large-scale production.
The government said it was made possible due to improved macroeconomic stability and easing financial conditions.The combined manufacturing and mining sectors, which account for 13.5 per cent of GDP, showed renewed momentum as inflation eased, interest rates declined for most of the year, and exchange rate stability improved business confidence across key industries, according to data released in the Economic Survey 2025-26 on Thursday.
Large-scale manufacturing (LSM), the backbone of the industrial economy with an 8.2 per cent GDP share, rebounded strongly with 6.1 per cent growth after contracting 0.7 per cent in the previous year. The recovery marked a sharp turnaround from recent volatility, when the sector had swung from a 10.6 per cent expansion in FY2022 to a steep 7.0 per cent contraction in FY2023 amid import curbs, high energy costs and tight financial conditions.
Small-scale manufacturing maintained steady momentum, expanding 8.5 per cent, while slaughtering activity rose 6.2 per cent, collectively strengthening the overall industrial output.
The improvement was largely attributed to easing monetary pressure, with the policy rate falling to 10.5 per cent by December 2025 from a peak of 22 per cent in FY2024, before edging up to 11.5 per cent in April 2026 amid geopolitical risks. The earlier easing phase helped boost liquidity and credit flows to industry, particularly in high-weight manufacturing sectors.
Mining and quarrying also posted modest growth of 0.4 per cent, signalling a gradual recovery in extraction activity as industrial demand strengthened and broader economic conditions stabilized.
Manufacturing remains the dominant force within industry, contributing 67.4 per cent of the manufacturing sector, followed by small-scale manufacturing at 2.5 per cent of GDP and slaughtering at 1.4 per cent, underscoring its central role in Pakistan’s industrial base.
Source: The News Pakistan
