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Characteristics of pakistan economy

Brief detail of pakistan's economy

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Characteristics of pakistan economy

  1. 1. Analysis of Industries of Pakistan ECO411 by IRFAN HAIDER SHAKRI
  2. 2. Basic Characteristics of Pakistan’s Economy 1- General Poverty and Low Living Standard. Poverty cannot be described, it can only be felt. The most of the less developed countries (LDC) are facing the major problem of general as well as absolute poverty and low standard of living. Most of the people in developing nations are ill-fed, ill- housed, ill-clothed and ill-literate. In LDCs almost 1/3 population is much poor. But in Pakistan, 21.0 % population is living below poverty.
  3. 3. 2- Burden of Internal and External Debts: Under developed countries (UDC) are loans and grants receiving nations. Most of the developing countries of the world are depending on foreign economic loans. An amount of foreign loans is increasing as the years pass. Their foreign trade and political structure is also dependent on the guidance of foreigners. The outstanding total public debts are Rs. 12024 billion (58.2% of GDP) and the value of external debts and liabilities is $ 60.3 billion and services charges on all types of debts are Rs. 730.733 billion during 2011-12, in Pakistan.
  4. 4. 3- Low Per Capita Income: Due to low national income and huge population growth rate, per capita income in developing countries is very low. At constant prices (Base Year 1959-60) per capita income of Pakistan was Rs. 985 and according to the Economic Survey of Pakistan 2011-12 per capita income of Pakistan is $ 1372.
  5. 5. 4- Over Dependence on Agriculture: 61% Population of Pakistan is living in more than 50,000 villages. Backward agriculture is the major occupation of the population. Agriculture sector is backward due to old and traditional methods of cultivation, in-efficient farmers, lack of credit facilities; un-organized agriculture market etc. 66.7% population is directly or indirectly depending on agriculture sector in Pakistan. It contributes to GDP 21.0% while in advanced nations it is less than 5 %. It employed 45.0 % of labour force while it is less than 5 % in developed countries.
  6. 6. 5- Backward Industrial Sector: Backward industrial sector is an additional feature of under developed countries. Industrial sector of Pakistani economy is backward since independence. Pakistan got only 34 (3.7 % of total industrial units) industrial units out of 921 units in sub-continent in 1947. Small and backward industrial sector is based on low level of capital formation, technology, training and education and over dependence on agriculture sector. 13.7% labour force is attached with industrial sector in Pakistan. Its share to GDP is 25.4 % and to exports is more than 60 %.
  7. 7. 6- Unemployment : An outstanding problem of developing countries is their high rate of un-employment, under- employment and disguised-unemployment. More than 3.5 million people are unemployed in Pakistan. There is 16 % underemployed and 20% disguised unemployed of total labour force. Unemployment rate is 6.0%; it is mainly due to high population growth rate, which is 2.03%.
  8. 8. 7- Low level of Productivity: The productivity level is very low in under developed countries as compared to developed countries. Low level of productivity is due to economic backwardness of people, lack of skill, illiteracy and ill-training. Value of annual productivity of labour is about $ 100 while it is more than $ 2500 in advanced nations in Pakistan. Minimum wages are Rs.8000/- per month against the average gross salary of $3,950 (Rs.3,79,200) per month in United States.
  9. 9. 8- Deficit Balance of Payment: Third world countries have to import some finished and capital goods to make economic development, on the other hand they have no products to export but raw material. During July-April, its exports were $ 20.474 billion and imports were $ 33.15 billion in case of Pakistan. So, its deficit balance of payment was $ 12.68 billion in 2011-12.
  10. 10. 9- Dualistic Economy: Dualistic economy refers to the existence of advanced & modern sectors with traditional & backward sectors. Pakistani economy is also a dualistic economy as other developing countries on the following grounds: Co-existence of modern and traditional methods of production in urban and rural areas, Co-existence of wealthy, highly educated class with a large number of illiterate poor classes and Co-existence of very high living standard with very low living standard.
  11. 11. 10- Deficiency of Capital: Shortage of capital is another serious problem of poor nations. Lack of capital leads to low per capita income, less saving and short investment. National saving is 10.7% of GDP and total investment is 12.5% of GDP in Pakistan. Rate of capital accumulation is very low as 5%. On the other hand, capital output ratio (COR) is very high which is not desirable for economic development.
  12. 12. 11- In-appropriate Use of Natural Resources: Mostly there is shortage of natural resources in developing nations and this is also a cause of their economic backwardness. Natural resources are available in various poor countries but they remain un-utilized, under-utilized or mis-utilized due to capital shortage, less efficiency of labour, lack of skill and knowledge, backward state of technology, improper government actions and limited home market. Natural resources contribute to the GDP about 1%.
  13. 13. 12- Market Imperfection: Market is imperfect in accordance with market conditions, rules and regulations in the most of developing nations. There exist monopolies, mis- leading information, immobility of factors; hoarding and smuggling etc. that cause the market to remain imperfect.
  14. 14. 13- Limited Foreign Trade : Due to backwardness, developing countries have to export raw material because the quality of their products is not according to international standard ISO etc. Lower developing nations have to import finished and capital goods. Imports of Pakistan are $ 33.15 billion and exports are $ 20.474 billion that cause into unfavourable balance of payment of $ 12.676 billion.
  15. 15. 14- Vicious Circle of Poverty: According to vicious circle of poverty, less developed nations are trapped by their own poverty. Vicious circle of poverty is also applied in case of Pakistani economy. Due to poverty, national income of Pakistan is low which causes low saving and low investment. So, rate of capital formation is very low results in “a country is poor because she is poor”.
  16. 16. 15- Inflation: High rate of inflation causes economic backwardness in poor nations. Due to high level of price, purchasing power, value of money and saving of the consumers tend to decrease. Rate of inflation (CPI) is 10.8% in 2011-12 in Pakistan.