Economy of

Pakistan
Lecture No. 1
Concept of Economic Growth and Development
Measurement of Economic Growth and Economic
Development
• Economy

The state of a country or region in term of the production and

consumption of goods and services and the supply of money.
Economy also refers to the careful management of available
resources.

• Economic Resources

Economic Resources are the factors used in providing goods or

providing services. These can be divided into human resources,
such as labor and management, and non-human resources such as
land, capital goods, financial resources and technology.

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• Economic Development

Economic development is a process of economic transition

involving structural transformation of an economy through
industrialization, raising gross national product and per capital
income.

According to Lewis, economic development means increase in

output per head.

According to Micheal Todaro, economic development must be

conceived of as a multi-dimensional process involving major
changes in social structures, people’s attitudes, national
institutions, acceleration of economic growth and reduction of
inequality.
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Economic development is more important than economic growth
because economic development is more comprehensive process
than economic growth. Economic growth is a quantitative term as
it represents quantitative increase in the production of goods,
services and factors of production, whereas economic
development is a qualitative terms as it indicates continuous
increase in real national income and structural changes in the
economy of a country.

• Economic Growth

According to Micheal Todaro, economic growth is a steady

process by which the productive capacity of an economy
increases overtime to bring rising levels of national output and
income.
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• Objectives of Economic Development

1 Increase of supply of food, clothing, health and education

facilities.

2 Increase in standard of living of the people.

3 Increase in leisure, political freedom and equal opportunities of

life.

4 Increase in capital formation that is new buildings and

industries.

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• Economic Development

• Rise in real national income and per capital income along with
structural changes in economy.
• It includes
1. Changing Occupational structure
Percentage share of labor working in primary sector
Percentage share of labor working in secondary sector

2. Changing Sectorial Structure of National Output

Percentage share of primary sector in national output
Percentage share of secondary and tertiary sectors in national output

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3. Changing Structure of Industrial Production
Proportion of capital goods in the total industrial output

4. Changing Structure of Foreign Trade

Exports: Share of primary goods
Manufacturing capital goods
Imports: Share of consumer goods
Raw materials

5. Technological Progress
In agriculture, transport, industries, communication traditional techniques of
production
Science-based automated techniques

6. Social and Institutional Changes

Thinking, acting producing and consuming
Risk undertaking, innovation and investment
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• Measures of Economic growth

1. Increase in the real gross national product.

2. Increase in the real per capital income.

3. Increase in the general welfare of the masses.

4. Increase in social, economic and human development.

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• Main Measures of Economic Development

1. Increase in real GNP

Before 1970’s measure of economic development was increase in real
national product of a country over a long period of time.
Rapid industrialization at the expense of (a) agriculture, (b) rural
development
It meant growth of material production

2. Increase in real per capital income

It states that economic development is increase in rate of growth of per
capita income over a long period of time.
I did not consider problem of poverty, unemployment and unequal
distribution of wealth.

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3. Rise in material well-being of the people
According to this economic development is a sustained and secular
improvement in the material well-being which is reflected in goods and
services.
It is at the expense of too much hard work, unequal distribution of
wealth and expense of health, safety and comfort.

4. Basic needs approach

It is related to the physical quality of life and focuses on (a) life
expectancy and age, (b)infant mortality and (c) literacy. It also includes
heath, nutrition. Shelter and education.
It does not considers security, justice and human rights

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5. Human development index
The Human Development Index method, which is prepared by United
Nations Development Program is the best method, which should be
adopted by the nations and organizations.
This method includes the opportunities for education, health, income,
employment, environment and economic freedom.

6. Other diverse indicators

(i) If the percentage of primary sector in GDP is the country is less
developed.
(ii) If the per capital consumption of energy is the country is more
developed
(iii) If the percentage of starched in total calories consumed is the
country is less developed.

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(iv) If the degree of urbanization and high school enrollment ratio
is the country is more developed.
(v) If infant mortality and density of population is the country
is less developed.

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