Why industrial output drops

A fall in industrial production last year following the combined energy and foreign exchange crunch---a direct result of the Ukraine war and that too at the beginning of a possible rebound of global economy---was not quite unexpected. If energy is a vital input for factories and industries, inflow of foreign exchange from either proceeds from sales and exports or remittance sent by the diaspora and workers keeps the economic health of a country robust. Costly fossil fuels drained out more greenback than was expected and at the same time its chain effect triggered a global inflation. Countries like Bangladesh with little share of domestic energy output in their overall requirement for this basic input suffered the most as a result.

A report published in the FE on Tuesday last contends that the major production sectors nosedived to the lowest ever level at the end of the last fiscal. There is nothing to be surprised at this disturbing development in the country's manufacturing sector. However, the year-to year data prepared by the Bangladesh Bureau of Statistics (BBS) for 22 large-scale industries in the country may have given a clue to the drastic drop in the export proceeds of the sector. The government agency has started preparing the industrial output index following the system prescribed by the International Monetary Fund ---one of the conditions for receiving its loan. A year back, there was no such compulsion and the BBS was accused of presenting exaggerated data for understandable reasons. A former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) claims that the answer to the Bangladesh Bank's enquiry about the non-repatriation of US$3.0 billion lies in the inflated figures of export as shown before the application of the IMF method. Well, this may be the case but again, the devious scheme of laundering the sale proceeds abroad cannot be ruled out.

Such mismatches notwithstanding, the fact remains that the country is experiencing an economic slump. Some of the troubles are its own making and the rest is beyond its control. Huge capacity charges paid to rental power plants, mismanagement in the banking and financial sector responsible for default loan amounting almost to the country's budget size and siphoning off money go to its credit. But external economic recession also plays its part to cause decline in demand for exportable goods.

Had fiscal management and energy procurement policy been sound, much of the economic travail could be avoided. What is particularly unacceptable is the country's outrageous inflation now defying any logical explanation contrary to the easing of the global inflation. The production sector appears to get caught in the cobweb of higher profit than reasonable in the domestic market. Admittedly, dollar crisis has adversely affected manufacturing of those industries heavily reliant on import of capital machinery and raw materials. But manipulation of market seems to be the biggest player in the clandestine game of pushing up inflation artificially. Concentration of wealth under an oligarchic arrangement ultimately has its backlash. The economic disparities are eating into the very vital of market economy where consumerism is its life blood. Now the general people have to make do with the barest minimum leaving a whole range of commodities out of the list. No wonder, production falls and economy slumps.