State Bank trimmed the GDP target for the current fiscal year from 7.0% to 6.0-6.6%. This came on the heels of an anticipated decline in two major crops, namely cotton and sugar, coupled with a deceleration in large scale manufacturing

Cotton production is projected at around 12.8-13mn bales against the full year target of 15mn bales. According to the estimates, a 15% decline in cotton production contributes to a 0.5% decrease in growth rate of the economy. Against the domestic demand of 3.8mn tons, sugar production is anticipated to be around 2.8-3.0mn tons. Moreover, large scale manufacturing (LSM) depicted a growth of 8.7% in the first quarter versus the full year target of 13% and a growth of 24.9%in the corresponding period last year.

The Index of Industrial Production indicates a slowdown in growth prospects, mainly attributed by LSM, as it registered a single digit growth of 6.1% in 1Q-FY06 versus 19.0% growth in the same period last year.

Adequate fertilizer and water availability, timely announcement of support prices, and ample agricultural credit are likely to feed into an encouraging production of minor crops.

Despite industrial growth remaining a little subdued, LSM is foreseen to improve on the back of a buoyant construction sector, improved electricity and gas distribution and rapidly expanding private sector credit, which stood at PKR 231.735bn as on 17-Dec-05 against the full year target of PKR 330bn