The National Accounts Committee (NAC) is reported to have approved GDP growth of 3.71 percent for the first quarter of FY26 (1QFY26) and revised upward the growth rate for the final quarter of FY25 to 6.17 percent. However, these official figures have been strongly questioned and disputed by independent economists, who argue that the data does not align with on-ground economic conditions.

According to the official breakdown, the reported 3.71 percent growth comprises 2.9 percent growth in agriculture, 9.4 percent growth in industry, and 2.4 percent growth in the services sector. Within agriculture, crop output reportedly declined by 3.7 percent, as major crops and cotton ginning remained in negative territory. Despite this, the sector is still shown to have posted a growth rate of 2.9 percent, attributed entirely to what is described as exceptional performance by the livestock sector. However, ground realities appear to contradict this claim, as prices of beef and mutton continue to rise sharply. This raises a fundamental question about the credibility of the livestock growth estimates and the assumptions underlying them.

The claim of a robust 9.4 percent industrial growth is also at odds with key indicators, particularly the fact that Large-Scale Manufacturing (LSM) recorded growth of only 4.1 percent during the same period. The highest reported growth within the industrial sector is in electricity, gas, and water supply, which expanded by 25.5 percent, following growth of over 100 percent in the previous quarter. Yet electricity consumption in 1QFY26 increased by merely 1 percent. The higher growth in this subsector appears to be driven largely by increased government subsidies aimed at clearing circular debt, rather than any meaningful rise in physical output. The second-largest increase is reported in the construction sector at 21.0 percent, partly supported by a 15 percent rise in cement production. In contrast, the services sector grew by only 2.35 percent, while wholesale and retail trade posted modest growth of 3.1 percent, indicating subdued economic activity.

According to the well-known think tank Economic Policy and Business Development (EPBD), the economic growth figures presented by the government for the first quarter of FY26 are overstated and fail to reflect prevailing market conditions. EPBD argues that the reported 3.71 percent Gross Value Added (GVA) growth for Q1FY26 — with agriculture expanding by 2.89 percent, industry by 9.38 percent, and services by 2.35 percent — is “difficult to reconcile with ground realities.”

In the think tank’s assessment, the most glaring inconsistency lies between domestic output estimates and actual trade performance. Despite the reported growth in agriculture and food-related manufacturing, food group exports declined sharply by 25.8 percent, while food imports surged by 18.8 percent during the quarter under review. As EPBD notes, “If domestic production were genuinely expanding, exports should strengthen rather than collapse.” Instead, it appears that rising imports are being used to artificially support growth figures.

EPBD has also questioned agriculture’s reported 2.89 percent expansion, highlighting that severe flooding during the middle months of 2025 likely resulted in stagnant or even negative agricultural growth. Contrary to official claims, important crops declined by 0.75 percent, driven by a 1.2 percent fall in cotton production and the absence of a wheat crop during Q1. This points clearly to overestimation across multiple agricultural sub-sectors.

Regarding industrial growth of 9.38 percent, EPBD notes that much of this expansion was driven by a more than 25 percent increase in electricity, gas, and water supply. Crucially, this increase was not due to higher output but stemmed from a sharp rise in subsidies, which jumped from Rs 20 billion to Rs 118 billion. Such accounting-driven growth, the think tank argues, distorts the true picture of industrial performance.

Similarly, the reported 21 percent growth in the construction sector does not fully align with related indicators. While cement production increased by 15.32 percent, imports of transport equipment more than doubled, suggesting that construction activity is becoming increasingly import-dependent rather than driven by domestic supply chains. Meanwhile, declining cotton output led to a 12 percent drop in cotton ginning, and cotton exports fell by around 10 percent. EPBD has also pointed to a reversal in the sugar sector, with Pakistan shifting from being an exporter to an importer. Services sector growth of 2.35 percent reflects a quarter-on-quarter slowdown, underlining weak demand conditions across the economy.

According to EPBD, the GDP figures reveal a widening gap between domestic production and trade performance, raising serious concerns about the quality, credibility, and sustainability of the reported economic recovery. The think tank concludes that the government’s claim of recovery is not based on solid fundamentals. Structural weaknesses continue to constrain growth, resulting in a slow and fragile recovery. Instead of massaging numbers, the government must adopt well-considered reforms to address these underlying issues. Rising unemployment and poverty levels underscore the lack of economic dynamism, while over-taxation and excessive regulation are driving both local and foreign firms to relocate operations abroad. This trend is a clear danger signal that policymakers should not ignore. EPBD has rightly urged the government to pursue market-oriented, business-friendly policies and provide a stable, predictable environment for private sector activity. Ultimately, only private sector–led investment, industrial dynamism, and export growth can deliver long-term and sustainable economic expansion.