The document provides an overview of Pakistan's economy. It defines key economic terms like GDP, GNP and discusses Pakistan's current GDP growth rate of 5.7% annually. It outlines Pakistan's economic history since independence in 1947 and some of the challenges it has faced. Key challenges to Pakistan's economy mentioned include a growing population, foreign investment issues, and ongoing conflicts. The document also discusses factors needed for economic development and measures of development.

1. ECONOMIC OF PAKISTAN

2. WHAT IS ECONOMICS
 It’s a Social Science which deals with how human being is
performing his daily actions, it is the study of efforts of human being
at individual and collective level, which is robust relationship that
how he/she get attempt for prosperity and how resources should be
utilized for maximum level of utility.”
 In its most simple and concise definition, “Economics is the study of
how society uses its limited resources”.
 Economics is a social science that deals with the production,
distribution, and consumption of goods and services. .

3. ADAM SMITH’S DEFINITION OF ECONOMICS
 Adam Smith was a Scottish philosopher, widely considered as the first modern
economist. Smith defined economics as “an inquiry into the nature and causes of the
wealth of nations.”
Criticism of Smith’s Definition
 The Smithian definition over-emphasized the material aspects of well-being and
ignored the non-material aspects. It was assumed that human beings acted as rational
economic agents who mindlessly strived to maximize their own well-being.
 The Smithian definition prevents the subject from exploring the concept of resource
shortage. The allocation and use of scarce resources are seen as a central topic of
analysis in modern economics.

4. ALFRED MARSHALL’S DEFINITION OF ECONOMICS
 British economist Alfred Marshall defined economics as the study of man in the
ordinary business of life. Marshall argued that the subject was both the study of
wealth and the study of mankind. He believed it was not a natural science such as
physics or chemistry, but rather a social science.
Criticism of Marshall’s Definition:
 The Marshallian definition, like the Smithian definition, ignored the problem of scarce
resources, which possess unlimited potential uses.
 The Marshallian definition does not provide a clear link between the acquisition of
wealth and welfare. Marshall’s critics claimed that it left the subject in a state of long-
lasting confusion. For instance, there are sufficiently of activities that might generate
wealth but that can reduce human welfare.

5. MODERN DEFINITION OF ECONOMICS
 The modern definition, attributed to the 20th-century economist, Paul
Samuelson, builds upon the definitions of the past and defines the subject
as a social science. According to Samuelson, “Economics is the study of
how people and society choose, with or without the use of money, to
employ scarce productive resources which could have alternative uses, to
produce various commodities over time and distribute them for
consumption now and in the future among various persons and groups of
society.”

6. INTRODUCTION OF ECONOMICS
 The economy of Pakistan is the 27th largest economy in the
world in terms of purchasing power, and the 45th largest in
absolute dollar terms.
 Pakistan has a semi-industrialized economy, which mainly
encompasses textiles, chemicals, food processing, agriculture
and other industries.

7. DEFINITION OF ECONOMY
“Economics is the study of how a society uses
scarce resources to produce and distribute goods
and services”.
Economic System:
An economic system is the method used by a
society to produce and distribute goods and
services by utilizing factors of production.

8. ECONOMIC HISTORY
First five decades:
 Pakistan was a very poor and largely agricultural country when it gained
independence in 1947. In the first five decades (1947–1997) Average annual real GDP
growth rates were;
 6.8% in the 1960s,
 4.8% in the 1970s, and
 6.5% in the 1980s.
 Average annual growth fell to 4.6% in the 1990s with significantly lower growth in
the second half of that decade.

9. PROBLEM OF PAKISTAN ECONOMY
The economy has suffered in the past from decades of internal
political disputes, a fast growing population, mixed levels of
foreign investment, and a costly, ongoing conflicts with
neighboring.
We Consume More & Save less
Import More & Export less
High Fiscal Deficit & Inflation

10. PROBLEM OF PAKISTAN ECONOMY
 Share in World trade is Shrinking
 Badly lag in Social Indicators
 Energy & Water Shortage
 Governance & implementation Crisis
 Law & Order Situation

11. IMPORTANCE OF ECONOMIC IN PAKISTAN DEVELOPMENT
Definition of 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, and national institutions, acceleration of economic growth and
reduction of inequality.
According to Kindleberger,
 Economic development means an increase in output of goods and services in the economy.

12.  It 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.

13. 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.

14. MEASUREMENT OF ECONOMIC DEVELOPMENT
Previously four methods including,
 National income method,
 Per capital income method,
 Welfare method and social indicators method were used for the
measurement of economic development of a country but none of them
provided an acceptable answer.
 The Human Development method

15. ACCORDING TO PROF. TODARO,
 The Human Development 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.

16. ECONOMIC FACTOR NEEDED FOR ECONOMIC DEVELOPMENT:
1. Natural Resources:
 Natural resources are one of the three main factors of production the other two
are labor and capital. Natural resources include area of land, forests, rivers,
climate and mines. If a country is rich in better quality of all natural resources, it
will develop economically at a fast speed.
2. Capital Formation:
 It is the process of adding net physical capital stock of an economy. Capital
formation creates productive potential for future production. Capital formation
has three stages namely savings financial institutions and capital market for
mobilization of savings act of investment in machinery and buildings.

17. 3. Specialization Output is greater as a result of specialization:
 Specialization enables an economy to use its scarce resources
more efficiently, thereby producing larger volume of goods and
services. It increases the rate of economic development of a
country.
4. Technology Inventions and innovations reduce
manufacturing and distribution costs:
 Technological progress serves to change cost conditions in the
long run; thus technological changes play an important role in
the economic development.

18. 5. Transport and Communication Efficient:
 Communication facilities increase the production capacity of all
sectors of the economy. It reduces cost of production, increases
mobility of goods within and outside the country.
6. Entrepreneurship:
 If an entrepreneurship is capable, skillful and trained then output
of his organization will be greater. Entrepreneurship results in
the introduction of new types of output, new techniques and new
sources of supply of inputs for business and industry.

19. NON-ECONOMIC FACTORS NEEDED FOR ECONOMIC DEVELOPMENT
1. Social Values and Attitudes:
 It includes culture, religion and life style of a society. Some
societies are orthodox and do not like material approach of life.
2. Religion:
 Religion does not allow them to keep themselves busy day in and
day out for material prosperity. Most societies believe in festivals
and different cultural ceremonies. They do not prefer to save money;
hence savings rate reduces too much. In such societies material
gains are not appreciated.

20. 3. Political Stability:
 Strong and stable Governments can prepare five-year development plans,
they can enforce monetary and fiscal policies and change social attitudes
and institutions, which may be progressive one. The frequent changes in
Govt. setup results in the lack of concrete economic policy decisions.
4. Administrative Efficiency:
 Educated, trained, skillful and hardworking Govt officers can push
development of a country at a very fast speed, whereas untrained
administration of a country retards the economic development.

21. 5. Economic Freedom:
 Private ownership of resources and maximum freedom to deploy these
resources in line with profit signals create strong incentives to work hard. If
everybody is allowed to participate in economic activity, then due to
competition the rate of economic development will increase.
6. Right of Private Property:
 Private Ownership of the means of production results in the increase in
supply of goods and services. In order to own and accumulate profit and
property, people work hard, thus trade and business activity flourishes.

22. WHAT IS GDP , GNPAND CURRENT GDP OF PAKISTAN

23. WHAT IS GROSS DOMESTIC PRODUCT (GDP)
 The gross domestic product (GDP) measures of national income
and output for a given country's economy.
 The gross domestic product (GDP) is equal to the total
expenditures for all final goods and services produced within the
country in a specific period of time.

24. DEFINITION OF GDP
 GDP is “one of the primary indicators used to measure the
health of a country’s economy” (Investopedia, 2009)
 GDP indicates the size of an economy ,It represents all goods
and services produced over a certain period.
 GDP is usually compared to figures from the previous year in an
individual economy.

25. APPROACHES OF CALCULATING GDP:
 1. Production approach
 2. Income approach
 3. Expenditure approach
 GDP = C + I + G + Xn
 Calculating GDP includes adding together private consumption or
consumer spending, government spending, capital spending by
businesses, and net exports—exports minus imports.

26. HERE'S A BRIEF OVERVIEW OF EACH COMPONENT
 Consumption: The value of the consumption of goods and services
acquired and consumed by the country’s households. This accounts for
the largest part of GDP.
 Government Spending: All consumption, investment, and payments made
by the government for current use.
 Capital Spending by Businesses: Spending on purchases of fixed assets
and unsold stock by private businesses.
 Net Exports: Represents the country’s balance of trade (BOT), where a
positive number the GDP as country exports more than it imports, and
vice versa.

27. GDP = TOTAL NATIONAL INCOME + SALES TAXES + DEPRECIATION
+ NET FOREIGN FACTOR INCOME
 Total national income = Sum of rent, salaries profit.
 Sales Taxes = Tax imposed by a government on sales of goods and
services.
 Depreciation = the decrease in the value of an asset.
 Net Foreign Factor Income = Income earn by a foreign factor like the
amount of foreign company or foreign person earn from the country and
it is also the difference between a country citizen and country earn.

28. GDP CAN BE BROKEN UP INTO TWO CATEGORIES
Real and Nominal:
Real GDP:
 A country's real GDP is the economic output after inflation is
factored in, while nominal GDP is the output that does not take
inflation into account.
Nominal GDP:
 Nominal GDP is usually higher than real GDP because inflation is a
positive number. It is used to compare different quarters in a year.

29. CURRENT GDP OF PAKISTAN
 When the GDP rises, it means the economy is growing. On the other
hand, if it drops, the economy shrinks and may be in trouble. But if the
economy grows to the point where inflation builds up, a country may
reach its full production capacity.
 Longer periods of negative GDP, which indicates more spending than
production, can cause big damage to the economy. It leads to jobs loses
businesses closures and idle productive capacity.
 Pakistan, officially the Islamic Republic of Pakistan, is a country in South
Asia. It is the world's sixth-most populous country with a population
exceeding 207.8 million.
 5.7% annual change (2017).

31. GROSS NATIONAL PRODUCT
 Gross national product is another metric used to measure a country's
economic output. Where GDP looks at the value of goods and services
produced within a country's borders, GNP is the market value of goods
and services produced by all citizens of a country—both domestically and
abroad.
 While GDP is an indicator of the local/national economy, GNP represents
how its nationals are contributing to the country's economy. It factors in
citizenship but overlooks location. For that reason, it's important to note
that GNP does not include the output of foreign residents.

32. CHALLENGES OF PAKISTAN ECONOMY
 Why Economy Matters
 Pakistan’s Economy in Historical Perspective
 Recent Development
 Why have we Landed in such a difficult situation
 Economy in the Current and the Next Year
 Why Economy Matters

33. WHY ECONOMY MATTERS
 Economy affects the lives of the people of Pakistan
 Two Pillars of the State
 Strong Economy
 Strong Defense
 A strong economy can ensure strong defense; it will enhance country’s power and hence make
the country’s defense even more stronger
 Economic Backwardness generates violence, social conflicts and political confusion.
 According to historian Paul Kennedy, “a nation’s military strength rests on its economic
strength”
 What is military strength? It is nothing but power. What is power? It is the ability to influence
the behavior of others in accordance with one’s aims and objectives.

34.  Power can lead to prosperity and prosperity may generate more
power
 Former US Secretary of Defense Robert said that “Security
means development and without development there is no
security”.
 No nation can sustain strong defense and nuclear resource
without a strong economy

35.  A strong economy would ensure strong defense and not the
other way round
 One Pillar of the State (Economy) has been damaged to the core
in the last five years. Can the second pillar (defense) remain
strong and for how long?
 It is for this reason that economy needs greater attention.

36. PAKISTAN’ ECONOMY IN HISTORICAL PERSPECTIVES
 Not withstanding numerous challenges that we faced over the last 65 yeas,
Pakistan has done reasonably well on economic front. Pakistan’s economy has
grown at an average rate of 5.0% per annum over the last 65 years.
 The influx of refugees from India created undefeatable problems as the country
had no resources to meet this challenge
 The migration of Hindu and Sikh communities from Pakistan nearly paralyzed
the economic and administrative machinery.
 The head office of only One Pakistani owned bank was located in Pakistani
territory

37.  The Karachi Port was underdeveloped and most of Pakistan’s
trade routed through the Indian ports of Bombay and Calcutta
 India refused to release allotted share of cash balance of
undivided India to the tune of Rs 75 crore (Rs. 750 million) for
running the civil administration.
 After a long battle India released a much smaller amount than
the legitimate share of Pakistan

38.  The share of agriculture in GDP was 60% in 1947. Today, it contributes
22% and 78% contribution comes from industry and services
 Production of wheat was 4.0 million tons in 1947. Today we are
producing over 23-24 million tons - almost 6 times more
 Production of cotton was approximately 1.0 million bales in 1947. Today
we are producing close to 13.0 -14.0 million bundles
 Production of sugarcane was 10 million tons in 1947. Today we are
producing over 55-60 million tons

39.  Pakistan used to produce 35,000 tons of sugar and today we are
producing more than 3.5-4.0 million tons of sugar.
 At the time of independence Pakistan was producing 270,000 tons of
cement. Today we are now producing over 28 million tons of cement.
 Pakistan naturally very weak infrastructure at the time of independence.
 Pakistan inherited 22,000 km road and today we have a road network of
258,350km
 Given its potential, Pakistan could have done better on economic front.