Economic Issues:

Lecture#15
Economy:

Introduction:

Economy means allocation of scarce resources in the society. Generally an economy is the large set of inter-related production,
consumption, and exchange activities in a society. The production, consumption, and distribution of goods and services are used to fulfill the
needs of those living and operating within the economy, which is also referred to as an economic system. The science which studies the field of
economy and economic systems is known as economics.

Adam Smith, the Scottish economist and philosopher is called as the father of modern economics. Economics have further two sub-categories;
Macroeconomics and Microeconomics.

Macroeconomics: It is concerned with how the overall economy works. It studies such things as employment, gross

domestic product(GDP), and inflation and government’s economic policy and debates.

Microeconomics: It is concerned with how supply and demand interact in individual

markets for goods and services.

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Gross Domestic Product(GDP): It is composed of goods and services produced for sale in the market and also includes some
nonmarket production, such as defense or education services provided by the government. GDP measures the monetary value of
final goods and services those are produced in a country in a given period of time ( a quarter or a year). It counts all of the
output generated within the borders of a country. E.g. current GDP of Pakistan is 347 billion USD

Gross National Product(GNP): It is an estimate of the total value of all the final products and services produced in a given
period by the means of production owned by a country's residents. GNP is commonly calculated by taking the sum of personal
consumptions, expenditures, private domestic investment, government expenditure, net exports, and any income earned by
residents from overseas investments, minus income earned within the domestic economy by foreign residents.

Per -Capita Income: Basically, it is a measurement of the amount of money earned per person in a nation or geographic
region. Per -capita income for a nation is calculated by dividing the country's national income by its population. Per -capita
income of Pakistan is 1562 USD.
Economy of Pakistan:

Introduction:

In 1947, Pakistan had 30 million people with a per-capita income of US$100. Agriculture accounted for almost
50% of the economic output with hardly any manufacturing unit, as all industries were located in India. Despite that, Pakistan
was unable to feed 30 million people and was dependent on food related imports from the Western countries particularly USA.
Today with more than 200 million people, the per-capita income has risen 13 times and stood at US$1,562 in 2021. Pakistan is
the third largest exporter of rice in the world and producing enough food /grains to feed its people. Pakistan is also one of the
five major textile-producing countries in the world. The structure of the economy has also transformed during this period.
Pakistan was one of the top 10 fastest growing developing countries between 1960 and 1990 recording an annual average
growth rate of 6 %. But in the later decades growth rate of Pakistan declined and never achieved the required percentage for
the sustainable economic development. Before going into details of the current economic situation of Pakistan we will
overview the global economy.
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Unprecedented global crisis caused by the outbreak COVID-19 pandemic in early 2020 had led to equally unprecedented worldwide measures
to protect lives and likelihoods. E.g. 6.31 million people were died due to Covid-19 and the global economy lost nearly $4.5 trillion in output
over the pervious two years due to the COVID-19 pandemic, and cause an estimated 34.3 million people felt below the extreme poverty line
in 2020. Governments and Central banks engaged in accommodative fiscal and monetary policy measures to protect the population from an
economic crisis. The imposed mobility and other necessary restrictive measures impacted social and economic prosperity.

In 2021 vaccination programs, although unevenly spread among world regions, allowed to gradually relax economic restrictions. In the
meantime, economic policies continued to support the strong economic revival across the globe that resulted in economic growth exceeding
potential output growth in 2021. In early 2022, the Russian-Ukraine conflict increased global commodity prices, increased inflation and
domestic inflation rates. Threats from high inflation, rising interest rates, demand- supply constraints, and increasing uncertainties affected the
global economic situation.

As Pakistan successfully subsided the first wave of COVID-19 during the summer of 2020 through effective containment measures. However,
smart lockdowns and improved containment strategies aided in managing the reported cases and the resumption of economic activities.
Major Sectors of economy:

Economy depends/consists of the different sectors and the contribution of one sector in the economies worldwide differs. Generally the
main sectors of economy are following.
I. Agriculture.
II. Services.
III. Industry and Energy.
IV. Mining and Minerals.
V. Foreign remittances.
VI. Foreign trade.
VII. Taxation.
VIII. IT and Transportation sector.
IX. Real Estate.
X. Tourism.
Agriculture Sector:

Agriculture land of Pakistan is nearly 22.1 million hectors and counted 53.2 % of GDP in (1949-50) and
engaged 65% of the total workforce and now it constitutes of 21.4 % of the GDP and 45% of the total
workforce. Force behind agricultural up gradation and transformation was basically Ayub Khan’s Green
Revolution.

Agriculture sector consists of two types of the crops; Major crops: which are following : Wheat, Rice, Sugar
cane, and Cotton. These crops are also known as cash crops due to net huge export. While Minor crops are
vegetables, fruits, pulses, fodder, and oilseeds etc. As per economic survey of Pakistan 20221-2022, the
agriculture sector recorded a remarkable growth of 4.40 % and surpassed the target of 3.5 % and last year’s
growth of 3.48 %. This growth is mainly driven by high yields, attractive output prices and supportive
government policies, better availability of certified seeds, pesticides, and agriculture credit.
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Livestock:

Livestock having a share of 61.89 % in agriculture and 14.04 % in GDP, recorded a growth of 3.26 % in
2021-22 compared to 2.38 % during the same period last year.

Fisheries:

The fishing sector having a share of 1.39 % in agriculture value addition and 0.32 percent in GDP grew at
0.35 percent compared to a growth of 0.73 percent in the same period last year.

Forestry:

The forestry sector having a share of 2.14 % in agriculture value addition and 0.49 percent in GDP posted
a positive growth of 6.13 percent against the negative growth of 0.45 percent last year.
Issues in Agriculture:

I. Agricultural Pricing Policy

II. Rural Finance and Agriculture Credit

III. Agriculture Income tax

IV. Water Crisis

V. Mechanization

VI. Seeds

VII. Fertilizer

VIII. Residential Schemes

IX. Floods/Soil erosion

Industrial Sector:

Introduction: Industrial sector is also called as manufacturing sector comprises which is further categorized
into two sub-sectors. Large Scale Manufacturing and Small Scale Manufacturing. At the time of independence,
Pakistan inherited only 34 industrial units out of 921 industrial units in the subcontinent. They were cotton
textile, cigarettes, sugar, rice husking, cotton ginning and flour milling industries; and together they contributed
only 7% of GDP and employed a little over 26,000 employees. The manufacturing sector is now over 13,000
production units. Steel, cement, automobiles, sugar, fertilizer, cloth, vegetable ghee, industrial chemicals,
refined petroleum, and a variety of other products that did not exist at the time of Independence are now
manufactured for the domestic market and, in many cases, for world markets too. Now it is composed of Textile
Industry, Automotive Industry, Chemical Industry, Mining Industry, Leather Industry, defense industry and
Pharmaceutical Industry.
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Performance: In Pakistan, manufacturing sector contributes 19.2 % to Gross Domestic Product (GDP) and the sector
employs 25 % of the country's labor force (73780211). Pakistan is the 8th largest exporter of textile commodities in Asia.
Pakistan is the 4th largest producer of cotton with the third largest spinning capacity in Asia after China and India and
contributes 5% to the global spinning capacity. At present, there are 1,221 ginning units, 442 spinning units, 124 large
spinning units and 425 small units which produce textile. The automotive industry in Pakistan is the one of the fastest-growing
industries of the country, accounting for 4% of Pakistan's GDP and employing a workforce of over 1.8 million people. Mining
is an important industry in Pakistan. Pakistan has deposits of several minerals including coal, copper, gold, chromite, mineral
salt, bauxite and several other minerals. There are also a variety of precious and semi-precious minerals that are also mined.
Pakistan have been considered to be the hub of producing high quality Leather and Leather Products, and there are more than
800 Tanneries in the country actively engaged in producing best quality finished leather of Cow, Buffalo, Sheep and Goat skin.
Issues in the Industrial sector:
I. Energy crisis.
II. Lack of modern technology.
III. Ineffective labor laws.
IV. lack of financial resources.
V. Water crisis.
VI. Unfair privatization policies.
VII. Trade Deficit.
VIII. Poor commercialization policies.
IX. Government insincerity.
X. Corruption.
XI. Less availability of the industrial loans.
XII. Political instability.
XIII. fluctuations in the International Market.
Services Sector:

There are three major economic sectors; primary, secondary, and tertiary. The service sector according to the official data
comprises trade, financing, insurance, real estate and business services, community, social and personal services, transport,
storage and communication, and hotels and restaurants. Services sector accounts for 54 % of GDP in 2021 and little over 1/3
of total employment.

Primary: The primary sector is composed of industries engaged in the business of gathering raw materials. It includes mining
companies, lumber companies, and oil drilling companies and along with the agricultural and fishing industries.

Secondary: The secondary sector includes all businesses involved in producing and selling goods such as auto manufacturers,
furniture stores, and clothing retailers.

Tertiary: The tertiary sector is the service sector. It includes industries such as the financial services industry, internet
technology (IT), and the healthcare and entertainment industries.
Issues in the Economy of Pakistan:
Consult with the given notes on the topic “Challenges to Pakistan’s Economy”.
Solutions:
Consult with the given notes on the topic “Solutions to Improve Economy”.