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Industrial production slows

Raises question about record import bills
SOHEL PARVEZ
Industrial production has slowed in Bangladesh, official figures showed although surging imports paint a different picture.
According to the Bangladesh Bureau of Statistics (BBS), the general index of manufacturing stood at 489.73 in April, down 6 per cent from 520.90 in March. The manufacturing production grew 4 per cent year-on-year in April.
April was the third month in a row that registered slower industrial production after the score hit 566.19 in January, the highest in three years.
The downward trend came at a time when imports had ballooned to feed the economy rebounding from the slowdown induced by the coronavirus pandemic. The prices of goods and commodities have surged owing to the pent-up demand as global economies make a turnaround and the Russian-Ukraine war.
Bangladesh’s imports grew 41 per cent in the July-April period of the last fiscal year. It moderated to 36 per cent at the end of the fiscal year as importers brought in $82.49 billion worth of goods, data from the Bangladesh Bank showed.
“Industrial production data does not match the import data,” said Selim Raihan, a professor of economics at the University of Dhaka.
According to the economist, high imports should have translated into high investment and industrial production.
“Our imports have skyrocketed. Then, why has the overall manufacturing production slowed down? It appears that there was over-invoicing of imports which have created undue pressure on the foreign exchange reserves.”
Referring to BBS industrial production data, Prof Raihan said there are symptoms even in the closing months of the last fiscal year that the economy is losing steam.
“It may be that the cost of production increased owing to the Russia-Ukraine war and higher inflation.”
Industry accounted for 37 per cent of Bangladesh’s gross domestic product in the fiscal year of 2021-22, according to the provisional estimates by the BBS.
The national statistical agency collects industrial production data from 965 industries, both public and private, in 22 sectors on a monthly basis to assess the movement of industrial production.
The sectors include food processing, beverages, textile and garments, jute, leather, paper and printing, petroleum, chemical and chemical products, pharmaceuticals, plastic, steel, cement, edible oil and soap and detergent.
Among the sector, the industrial production for 14 sectors declined while it grew for eight sectors.
The production of jute and cotton textiles, pharmaceuticals, tea and fruit processing and preservation increased in April from the previous month.
On the other hand, the manufacturing of apparels, petroleum products, fertiliser, tiles, cement, paper and paper products, and salt fell.
“It appears that the overall consumption has declined as higher inflation takes a toll on the purchasing power of consumers,” said Anwar-ul Alam Chowdhury, president of the Bangladesh Chamber of Industries.
Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue, said: “What we see is that a number of export-oriented sectors are doing good.”
“But it appears the demand for the domestic market-oriented products has declined. It may be that the buying power of people has not increased while the production cost of factories has increased.”
Importers bought a 58.2 per cent year-on-year higher readymade garment related goods in FY22, data from the BB showed.
Import of raw cotton was up 39.3 per cent, yarn 115.3 per cent, textiles and allied articles 51.6 per cent, staple fibre 50.9 per cent, and dyeing and tanning materials 24.9 per cent.
The import of intermediate goods, which included clinker for the cement industry, oil seeds, chemicals and pharmaceuticals products rose 63.6 per cent in the last fiscal year.
Capital goods imports, including those for capital machinery, rose 26.35 per cent in FY22.
Zahid Hussain, a former lead economist of the World Bank’s Dhaka office, says: “It is a valid question whether there is any discrepancy between export, import and industrial production data. This is because it is not explained by the changes in volume and market prices.”
This begets the question about other possibilities, he said.
“There might have been import over-invoicing. But you can’t conclude that because in order to reach such a conclusion, you need detailed information.”