Chapter One

Economy and its Subject name:

characteristics .
Pakistan Economy
What is economy?

• An economy consists of the economic system of a

country or other area, the labor, capital and land-
resources, and the economic agents that socially
participate in the production, exchange, distribution,
and consumption of goods and services of that area.
Cont.

• The economic trend in a country as a whole, is

the major component for its business
environment. An economy whose growth rate is
high provides a promising business prospect and
thus builds business confidence.
 What is economic Development?

• Economic Development involves rise in the level of production in an

economy along with the advancement of technology, improvement
in living standards and so on.
•  In short, it is the progress in the socio-economic structure of the
economy.
Structural changes by economic
development

• Changing occupational structure

• Changing sectoral structure of national output
• Changing structure of industrial production
• Changing structure of foreign trade
• Technological progress
• Social , institutional changes
• Applicable to Developing Economies.
 Elements of Development

• Long term process

• Improvement in life expectancy rate, infant mortality rate,
literacy rate and poverty rates.

• Economic development applies to developing countries to

measure progress.
• Economic development is a continuous process so that it can
be seen in the long run.
 Economic Growth

Economic Growth refers to the rise in the value

of everything produced in the economy. It
implies the yearly increase in the country’s
GDP or GNP, in percentage terms.
It alludes to considerable rise in per-capita
national product, over a period, i.e. the
growth rate of increase in total output, must
be greater than the population growth rate.
Cont.

• Economic Growth is defined as the rise in the money value of goods and
services produced by all the sectors of the economy per head during a
particular period. It is a quantitative measure that shows the increase in the
number of commercial transactions in an economy.
Determinants of Economic growth.
 Elements of economic growth .

• Narrow and Short term process as compared to Economic

Development.
• Increase in the indicators like, GDP, Per capita income.
• Applicable to Developed economies.
• Rise in productivity
• Greater Equality.
Human Development Index

• Human Development Index (HDI) is the appropriate

tool to gauge the development in the economy. Based
on the development, the HDI statistics rank countries.
It considers the overall development in an economy
regarding the standard of living, GDP, living
conditions, technological advancement, improvement
in self-esteem needs, the creation of opportunities,
per capita income, infrastructural and industrial
development and much more.
Main components of Human Development

• Equity

• Sustainability

• Productivity

• Empowerment
Equity

This means all the people should have

equal access to opportunities
available in the country In terms of:
1. Land reforms.
2. Transforming income from rich to
poor.
3. Provision of credit to needy people
4. Active participation of low income
people in in politics.
Sustainability

This means present and future generation must

access to share development opportunities .
 Productivity

Productivity in all the sectors of the economy

can be achieved at a rapid speed by increasing
investment in human capital .
 Empowerment

This means that people should be in

a position to exercise choices of
their own free will , this is only
possible in
• Political Democracy
• Less economic controls and
regulations ,
• Decentralization of power
• Provision of equal opportunities to
women to compete men with
equal footing.
Common characteristics of developing countries .

• Burden of international debt

• Low per capita income
• Unproductive uses of funds
• Inappropriate investment decisions
• Agriculture is the main occupation
• Disguised unemployment
• lack of enterprise
• Backward state of technology
• Glut of unskilled workers
• Government controlled by wealthy persons
An Overview of Pakistan’s Economy.
Cont.

• In 1947, Pakistan had 30 million people with per capita income

of 100$. Agriculture accounted for almost 50% to 70% of
economic output with hardly any manufacturing, as all
industries were located in India.
• Therefore, it was unable to feed 30 million people and was
dependent on imports from the USA.
• From thereon, Pakistan has come a long way. Today with 216.6
million people (2019), our per capita income is $1388 which is
much higher than it was in the beginning.
Current Situation of the Economy

• Pakistan is a developing country with an emerging economy and

has a potential to become world’s 20th largest economy by 2030.
With GDP (PPP) of $1.202 trillion, the economy of Pakistan is
24th largest in the world in terms of purchasing power parity,
and 42nd largest in terms of nominal GDP of $284.2 billion. The
GDP growth rate was recorded as –0.38%▼ in 2019-20.
 Pakistan has a mixed economy with three
main sectors:

• Agriculture
• Industry, and
• Services sector
1.Agriculture
• The agriculture sector contributes 19.3% to GDP. It is the
largest employer absorbing 38.5% of the country’s total labour
force. The agriculture sector recorded a growth of 2.67%▲ in
the financial year 2019-20.
Sub-sectors of Agriculture

• The agriculture sector has four sub-sectors:

• Crops, livestock, fisheries, and forestry. 
• Livestock is the most important sub-sector of the
agriculture sector having share of 60.54% in
agriculture and contributes 11.22% to the country’s
total GDP.
 2. Industry

• The industrial sector contributes 20.47% to GDP. It is the

major source of tax revenues for the government. The
Industrial sector recorded a growth of –2.64%▼ in the
financial year 2019-20. The manufacturing is the most
important sub-sector of the industrial sector containing 64.4%
share in the overall industrial sector.
• Manufacturing provides employment to about 16.1% of the
total labor force and contributes about 13.5% towards the
overall GDP. The manufacturing has three components:
The manufacturing has three components:

• Large-Scale Manufacturing (LSM)

• Small Scale Manufacturing (SSM), and
• Construction
 Cont.

• The Large Scale Manufacturing (LSM) has 78% share in the

manufacturing sub-sector and contributes 9.5% in the total GDP.
The important sub-sectors of the industry sector are: Textile
Industry, Engineering Sector, Automobile Industry, Fertilizer
Industry, Cement Industry, and Small and Medium Enterprises.
• Pakistan is 5th largest producer of cotton in the world, the
raw material for textile industry. And, the textile is tzzhe
most important manufacturing sector of Pakistan and has
the longest production chain. The share of textiles
products in national exports is almost 62%.
 3.Services Sector.

• The services sector contributes 60.23% to GDP. It is the largest

contributor to the Gross Domestic Product (GDP). The Services
sector recorded a growth of –0.59%▼ in the financial year
2019-20. The important sub-sectors of the services sector are:
Transportation, Information and Communication, and
Financial Services.
 Human development in Pakistan
The increase in expenditure on human development has shown marked
improvements on social and living standard indicators of the people .
e.g.
• Literacy rate has increased from 53% in 2006-7 and 55% in 2007-8 .
• Number of rooms availability have been improving consistently .
• % of households using tap water as major source of drinking water has been
improved over the years .
• Health care opportunities condition have been extended
• Life expectancy have been improved
• Reliable creation of job opportunities in public and private fields
• foreign investment has been rapidly increased in Pakistan.
Challenges to Pakistan’s Economy

• We Import More and Export Less.

• We Consume More and Save Less.
• Government Spends More than it Earns as Revenues
• Our Share in the World Trade is Shrinking
• We Face Energy and Water Shortages
• Crisis of Governance and Implementation Weaknesses
• Political Stability, Law and Order/Security
Solutions

1.Change in National Psyche and Mindset.

2. Building up of Human Capital
3. Use of Technology.
4. Young Labour Force.
5. Governance, Devolution and Decentralization
Conclusion

• Pakistan and its people has a lot of potential and we

are blessed with a whole lot of natural resources.
• If the government plans wisely, and the people work
hard, the economy of Pakistan can be taken to a whole
new level.