Economic growth

2. Economic Development of Pakistan
Economic Growth
“An increase in production of goods and services over a specific period of time”
Annual increase in economy’s real income or increase in per capita income. The
term increase in goods and services, increase in real income or increase in per
capital income means that increase in standard of living but it should be
sustainable increase to qualify for economic growth.
 Real vs Nominal
Nominal value is the money value of something whereas real value adjust for the
differences in price level. So the real income indicates earnings that an entity or
an individual makes after considering inflation rates.

3. The Business cycle
Economic Development of Pakistan

4. Economic Development of Pakistan
Economic Development
“A process of lifting a nation’s per capita consumption, production and
income to get benefits of improved material wellbeing”
“Increase the quality of life for a community”
Structural Changes
The term economic development signifies both economic growth as well as
structural changes in the economy.
 Occupational Structure: the percentage share of labor working in primary
sector (farming, fishing, mining etc.) begins to decline whereas percentage
share of population working in secondary sector (manufacturing) increases.

5. Economic Development of Pakistan
Structural Changes
 Sectoral Structure of National Output: There takes place a visible change in
relative contribution of primary, secondary and tertiary sector (services and
commerce portion) in the generation of national output. The % share of
primary sector falls and the share of other sectors gradually goes up.
 Structure of Industrial Production: Industrialization takes place in the
country. The proportion of capital goods in the total industrial output rises
and that of consumer goods declines.
 Structure of Foreign Trade: The share of primary goods in the total exports
decline and that of a manufactured capital goods goes up. Likewise the share
of consumer goods in the total imports falls and those of raw material capital
goods rises.

6. Economic Development of Pakistan
Structural Changes
 Technological Progress: There is a technical development in in agriculture,
transport, industries, communication and other sectors of the economy. The
traditional techniques of production gradually give way to scientific based
automated techniques.
 Social, Institutional Changes: There is a general urbanization and the
adoption of modern methods of producing, consuming, thinking and acting.
There are changes in behavioral, institutional and organizational factors.
Innovation and investment thinking becomes more sharp.

7. Economic Development of Pakistan
Difference Between Economic Growth and Economic
Development
Economic Growth Economic Development
Increase in economic variables over a given
period of time (monetary growth of a
nation)
• Increase in real GDP, Higher national
income/output
• Quantitative
• Short term process
Overall development in the quality of life in
a nation (multi-dimensional approach)
• Economic growth, Increase in living
standard, increase in educational
standard, Improved healthcare, Improved
infrastructure, Diversification of
economy
• Both quantitative and qualitative
• Long term process

8. Economic Development of Pakistan
Disadvantages of Economic Growth
 Environmental Consequences: High rates of economic growth can create negative
externalities such as pollution, climate change and land erosion. Such changes can
damage the wellbeing of people and their quality of life in long run.
 The risk of Inflation: If the economy grows due to excessive demand in economy,
there is a danger of demand-pull inflation. This can lead to prices of goods and
services rising to unstable level with negative consequences on economy.
 Inequalities in Income and Wealth: Although a country might experience
economic growth, not everyone will benefit in the same way. Economic growth can
create greater disparities in the distribution of income and wealth-the rich get
richer and poor get relatively poorer.
 Resource Depletion: Economic growth often involves using up the world’s scarce
resources at rates that are not sustainable. For example, deforestation.