Submitted By:Wafa Tariq | Submitted to Sir Khalid Khawar [Pick the date]

ACKNOWLEDGMENT
Apart from our efforts, the success of any project depends largely on the encouragement and guidelines of many others. We take this opportunity to

ECONOMIC GROWTH OF successful completion of this project. PAKISTAN

express my gratitude to the people who have been instrumental in the

First of all we would like to thank Almighty ALLAH, without whom anything is possible. We would like to thank our Economics Teacher ,Sir Khalid Khawar, Lecturer of Bahria University for providing us the opportunity to have this valuable experience. Last but not the least, our special thanks to our parents and families who have been constant sources of motivation and support all through. THANK YOU. This definitely wouldnt have been possible without your help.

TABLE OF CONTENTS
ACKNOWLEDGMENT......................................................................2 ECONOMIC GROWTH......................................................................4 GDP GROWTH......................................................................................4 ECONOMIC GROWTH TRENDS SINCE PARTITION......................5 DECADE OF 50s...........................................................................5 DECADE OF 60s...........................................................................7 THE DECADE OF 70s:..................................................................9 DECADE OF 80s:........................................................................11 DECADE OF 90s:........................................................................13 2000-2010.....................................................................................15 SUMMARY OF PAKISTAN GDP GROWTH RATE SINCE PARTITION................................................................................17 SOURCES OF ECONOMIC GROWTH...........................................18 ACHEIVMENTS OF PAKISTAN ECONOMY..................................19 FAILURES OF PAKISTAN ECONOMY..........................................20 RECOMMENDATIONS...................................................................21 CONCLUSION.................................................................................22 REFERENCES................................................................................23
REFERENCES

ECONOMIC GROWTH
Despite frequent changes in the basic economic policies and the poor economic base at the time of independence, Pakistan's growth record has been quite respectable; on average the growth rate of GDP has exceeded four percent and per capita income has increased from Rs. 316 to Rs. 1,039 (at 1959-60 prices) and from $ 116 to $ 470 over the period. With the exception of Sri Lanka, per capita income of Pakistan is the highest in South Asia.

GDP GROWTH
Economy is measured through GDP and Economic growth is the increase in value of the goods and services produced by an economy. It is conventionally measured as the percent rate of increase in real gross domestic product, or GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment," which is caused by growth in aggregate demand or observed output.

ECONOMIC GROWTH TRENDS SINCE PARTITION DECADE OF 50s

During the period 1949-50 to 1959-60, the economy grew at a moderate rate of 3.14 percent per annum.The growth performance was obviously influenced primarily by the agricultural sector, which grew by a modest 1.76 percent per annum. Owing to the low level of manufacturing activity in Pakistan at the time of partition, the growth rate in manufacturing averaged over 10 percent annually in the first half. The expansion in large-scale manufacturing did not make an appreciable contribution to the overall performance of the economy due to its small share in the gross domestic product, the creation of a more diversified economic structure than was inherited at independence was a major achievement of these early years. Though the share of agricultural sector dropped from 52.58 percent in 194950 to 45.61 percent in 1959-60, the economy continued to be dominated by the agricultural sector, with an average share in GDP of around 47.70 percent. There w a s a considerable expansion in the manufacturing sector: its share in GDP increased from 6.39 percent in 1949-50 to 9.91 percent in 1959-60. While the services sector contributed significantly to national output (average share of 41.07 percent), there was little variation in its share over time.

GROWTH RATE IN GDP AND ITS COMPONENT DURING 19501960

SECTOR YEARS 1950-51 1951-52 1952-53 1953-54 1954-55 1955-56 1956-57 1957-58 1958-59 Agriculture 2.55 -8.25 0.16 14.93 -2.78 2.32 2.02 2.07 3.76 Manufacturing 8.39 7.74 9.96 12.98 12.35 10.05 5.43 3.74 4.18 Services 4.60 4.14 2.25 4.00 5.00 2.94 3.09 2.33 7.05 GDP FC 3.82 -1.73 1.86 10.03 1.66 3.49 2.91 2.63 5.49

DECADE OF 60s

The countrys economic performance in terms of broad macroeconomic aggregates in the Sixties is summarized in Table. The growth rate of the economy more than doubled from 3.11 per cent per annum in the Fifties to 6.60 per cent in the Sixties. The agricultural sector recorded a healthy growth rate of 6.04 percent in 1961-62. Growth in the agricultural sector peaked at 11.66 percent in 1967-68, before decelerating sharply to 4.15 percent in 1968-69, and then rebounding to 9.12 percent in 1969-70.The average annual rate of growth in the agriculture sector climbed from 3.88 percent in the first half to 6.36 percent in the second half. Industrial output grew at an average annual rate of 8.11 percent, down from 11.72 percent in the first half. Several factors contributed to the impressive performance of the industrial sector in the Sixties.

GROWTH RATE OF ECONOMIC GDP DURING 1960-1970

Per capita Income 2.0 1 2.6 5 3.8 5 3.7 6 6.2 2 3.8 4 0.8 3 4.0 8 3.1 3 6.2 0

Years

Commodity Producing

Agriculture

Manufacturing

Services

GDP(FC )

1960-61

3.75

-0.39

12.85

5.98

4.67

1961-62

6.86

6.04

13.28

3.89

5.61

1962-63

6.91

4.91

11.18

7.05

6.97

1963-64

6.86

3.83

11.34

6.34

6.65

1964-65

6.83

4.99

9.93

13.22

9.46

1965-66

3.01

0.86

8.58

11.67

6.70

1966-67

5.17

6.00

5.65

1.95

3.74

1967-68

9.57

11.66

6.37

3.48

6.90

1968-69

6.58

4.15

8.62

5.56

6.15

1969-70

10.3

9.12

11.32

6.72

9.10

GRAPHIC REPRESENTATION OF ECONOMIC GROWTH DURING 1960-

THE DECADE OF 70s

The overall performance of the economy during the Seventies was rather subdued as compared with the Sixties: on average GDP grew at a rate of 4.66 percent per annum as against 6.60 percent in the previous decade. With the relatively sluggish growth rates in the commodity producing sectors (agricultural and manufacturing sectors grew at average annual rates of 2.32 percent and 5.50 percent respectively), growth in the GDP was fuelled primarily by the services sector, which grew at a healthy rate of 5.94 percent per annum. It is noteworthy that there was a sharp difference in the economic performance in the first and second halves of the Seventies, and an upturn in economic activity occurred in 1977-78 led by an impressive recovery especially in the manufacturing sector. Thanks largely to the high growth rate of agriculture and large-scale manufacturing, the commodity producing sector exhibited a growth rate of 7.24 percent per annum in the second half, as against 4.62 percent per annum in the first half.

GROWTH RATE OF ECONOMIC GDP DURING 1970-1980

Year Commodit y producing 1970-71 1971-72 1972-73 1973-74 1974-75 1975-76 1976-77 1977-78 1978-79 1979-80 0.16 1.19 4.62 5.45 -0.74 4.74 2.90 5.76 5.03 7.84 -2.79 2.77 1.70 3.85 -2.52 4.47 2.98 3.50 3.41 5.89 6.44 1.26 8.73 6.35 0.54 1.39 1.82 10.21 8.01 10.25 2.31 3.33 9.52 9.05 8.29 1.79 2.71 10.31 6.18 5.87 1.05 2.08 6.70 7.01 3.26 3.37 2.81 7.84 5.57 6.91 -2.29 -0.12 3.09 3.80 0.50 2.19 2.06 9.60 3.25 3.31 Agriculture Manufacturin Service g s GDP(F C) Per capita income

DECADE OF 80s
Economic growth averaged 6.12 per cent per annum during the Eighties, matching the high growth performance of the Sixties. The commodity producing sectors grew at an average annual rate of 7.33 percent, whereas the services sector exhibited an average growth of 6.60 percent. The manufacturing sector showed a healthy performance during most of the decade with an average annual rate of growth of 8.21 percent. Growth in GDP averaged 5.60 percent in the second half, down from 6.65 percent in the first half. It declined to 25.83 percent in 1989-90, averaging at 27.62 percent during the decade. The manufacturing sector accounted for an increasing share in GDP: its share stood at 17.59 percent in 1989-90, up from 15.11 percent in 1980-81. There was a slight shift in the

relative importance of commodity producing sectors and the services sector: whereas the share of commodity producing sectors declined from 53 percent in 1980-81 to 50.85 percent in 1989-90, the share of the services sector edged up from 46.57 percent to 48.62 percent during the same period.

ECONOMIC GROWTH RATE DURING EIGHTYs YEAR 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 Commodity 6.12 7.27 4.64 0.38 9.48 6.94 5.76 6.12 5.77 4.69 Agricultur e 3.93 4.72 4.40 -4.82 10.92 5.95 3.25 2.73 6.87 3.03 Manufacturin g 10.63 13.75 7.03 7.89 8.09 7.55 7.53 9.98 3.96 5.72 Service s 6.31 7.90 9.24 7.90 7.92 5.77 5.86 6.77 3.81 4.48 (FC) 6.21 7.56 6.79 3.97 8.71 6.6 5.81 6.44 4.81 4.59 Capita 1.48 3.78 6.42 0.06 3.79 3.32 0.94 0.44 0.93 1.81

DECADE OF 90s:
The Nineties were marked by a slowing down of the rate of economic growth along with rising incidence of poverty. GDP growth rate during this period averaged 4.41 percent compared to 6.12 percent per annum during the previous decade. The slowdown in the overall growth was notwithstanding an acceleration in agricultural growth to 4.54 percent per annum (compared to 4.10 percent per annum during the Eighties), and mainly reflected a sharp reduction in the rate of growth in the manufacturing sector to 3.88 percent per annum from 8.21 percent annual rate in the previous decade. The average annual GDP growth fell from 5.07 percent in the first half to 3.76 percent in the second half. The aggregate share of the commodity-producing sectors in the GDP fell slightly from 51.55 percent in 1990-91 to 50.94 percent in 1999-2000. On the other hand, the share of the services sector edged up from 48.45 percent to 49.06 percent during the same period.

GDP IN 90s
Years Commodit y Producing 1990-91 5.91 4.96 6.25 5.2 1 1991-92 8.61 9.50 8.05 6.7 6 1992-93 0.09 -5.29 5.35 4.6 3 1993-94 4.87 5.23 5.48 4.2 0 1994-95 5.66 6.57 3.60 4.8 0 1995-96 8.45 11.72 4.80 4.9 9 1996-97 0.37 0.12 1.29 3.6 1 1997-98 2.39 4.52 -1.61 1.6 4 1998-99 3.42 1.95 4.07 4.9 9 1999-2000 3.67 6.09 1.53 4.1 5 3.91 1.22 4.18 1.90 2.03 -0.57 1.93 -0.93 6.76 3.09 5.24 3.16 4.54 1.49 2.27 -0.53 7.71 3.92 5.57 4.49 Agriculture Manufacturing Services GDP(FC) Per capita income

2000-2010
GDP growth, spurred by gains in the industrial and service sectors, remained in the 6-8% range in 2004-06 due to economic reforms in the year 2000.

Pakistan economic growth faced a serious setback in 2009 because of the depressed consumer credit market, slow progress of public sector programmers, inflation, and reduction in subsidies, security threat, and instability in the state and energy crisis. Additionally, no attention was given to the agriculture sector. The exports declined by six percent and imports by 10 percent. The only thing that became a silver lining was the increment in remittances by 22%. Apart from ignorance, agriculture sector has shown credible results because of good weather. Major crops, wheat, rice and maize recorded impressive growth i.e 7.7% against the target of 4.5%. Live stock and poultry also add to GDP as there was no viral disease this year.

GDP FROM 2000 to 2007

Country Subject Description 2000 2001 2002 2003 2004 2005 2006 2007 Gross domestic product, Pakistan constant prices, annual 3.0 2.5 4.1 5.7 7.1 7.0 6.4 6.3 percent change

SUMMARY OF PAKISTAN GDP

GROWTH RATE SINCE PARTITION

SOURCES OF ECONOMIC GROWTH

Physical capital: Physical capital formation is considered to be one of the most important determinants of economic growth. A number of empirical studies have reported a positive effect of fixed investment in the process of economic growth. Human Resources: In the economic growth literature, growth in the labor force is taken to be the quantitative measure (as opposed to qualitative measure) of human capital formation. The theoretical literature on economic growth predicts a positive relationship between the growth rate of the labor force and economic growth. Government consumption: Studies on economic growth have increasingly focused on the role of government in the p r o c e s s of economic d e v e l o p m e n t a n d g r o w t h . Rains ( 1989) a r g u e t h a t government can either foster or hinder the process of economic growth depending upon the nature of its activities. Inflation Inflation can influence the rate of economic growth through different channels. The Tobin-Mundell effect predicts a positive relationship between inflation and economic growth. According to the Tobin-Mundell hypothesis, higher inflation would prompt economic agents to shift assets away from real money balances toward real capital, and this portfolio adjustment would have a favorable impact on economic growth.

ACHEIVMENTS OF PAKISTAN ECONOMY

Empowerment of people through devolution at grass roots level. Empowerment of minorities through joint electorate as well as reserved seats. Empowerment of younger generation by reducing voter age from 21 to 18 years. Empowerment of economy through wide ranging economic reforms.

Economic recovery, institutional reforms and good governance were our declared priorities. For economic recovery, the Government pursued a two-pronged strategy of ensuring macro-economic stability and introducing structural reforms for self-sustainable growth. As a result, the economy had expanded at an average rate of 7% per annum during the last four years. Its growth touched a record level of 9% in 2004-05. Growth of large scale manufacturing which was 3.6% during 199900, registered an average increase of 11.31 % per annum during the period from 2000-07. Growth of this sector was highest in 200405 i.e. 19.9%. Exchange rate remained stable despite widening of trade and current account deficits, clearly indicating strong inflows of external resources. Foreign Exchange reserves have crossed US$ 16 billion mark and the increased reserves can now finance more than 31 weeks of imports against only 10 weeks in 1998-99. Per capita income had increased from $ 526 (1999-00) to $925 (2006-07).

FAILURES OF PAKISTAN ECONOMY

Pakistans economy is in a downward spiral. Inflation is at 25percent (food inflation 50%), foreign reserves are falling, and the government is in danger of defaulting on its foreign debt. A spike in global food prices has hit Pakistanis especially hard, and the global financial crisis only threatens to exacerbate Pakistans economic woes. Pakistan is watching foreign investors flee. Weak governance has contributed to growing militancy in Pakistan, economic troubles, and regional instability. As in the past, the possibility remains that Pakistans military could conduct a coup if it perceives the government as inept. Or Pakistanis may rise up in protest due to the governments inability to deal with economic issues.

Some of the reasons are: Suicide attacks, Soaring oil prices, Food crisis oil prices,low agriculture yield, energy crisis.etc

Another weakening sign relates to the exchange rate management. Since the last quarter of 2004, the nominal exchange rate has remained fixed at around Rs59.5/$, causing over 6-percent appreciation in the real effective exchange rate (REER) since late 2004. Not allowing the exchange rate t o adjust upward may keep imports cheaper and contain inflationary pressures in the short term, but such a policy could very quickly worsen external balances. And an appreciating REER will undermine Pakistans export competitiveness, hurting export performance and discouraging export diversification.

RECOMMENDATIONS
Increase Pakistans Domestic Savings Rate: Pakistan cannot maintain a strong economic growth rate without considerable improvement in domestic savings since these savings will lead to increased investments in the economy. Savings can be encouraged by implementing program loans and by adopting institutional reforms. Invest in Human Resource Capital: Mr. Burki pointed out that Pakistan has one of the youngest populations in the world. There needs to be focused investment in education, particularly at the primary and secondary school level and in technical schools. Decentralize Economic Decision-making in Pakistan: For instance, Punjab is a wellmanaged province and could easily achieve an economic growth rate of 10% if it is allowed to manage its own resources. Given that Punjab accounts for 60% of Pakistans economy, high growth rates in Punjab would have a positive impact on the entire economy. Serve As a Regional Transit Route: Pakistan should be opened up as a transit route for the region thereby creating tremendous opportunity for FDI. Address Shortages in Relevant Economic Sectors: Mr. Burki suggested that the government should address shortages that occur in certain economic sectors when any given economy begins to grow. Examples of such sectors are natural gas, cement, etc.

CONCLUSION
Economy of Pakistan is going through political and economical turmoil at present. Karachi Stock Exchange in 2009 experienced a great blow with five percent off in a single day. Political upheaval also forces economy of Pakistan to depend on International Monetary Fund (IMF). Pakistan economic environment is affected by intensification of war on terror and deepening of the global financial crisis which penetrated into domestic economy through the route of substantial decline in Pakistans exports and a visible slowdown in foreign direct inflows. The intensity of the global financial crisis has further added to Pakistan predicament. Despite support from the IMF and other bilateral and multilateral donors, Pakistan external account remains exposed to a host of uncertainties. Pakistan economic conditions are also marked by contribution of various sectors to GDP by different sectors of national economy. In fiscal 2008 agricultural sector contributed 20.4 percent, while 26.6 percent came from industrial sector. Service sector offered 53 percent to GDP in 2008. Pakistan should aim to reduce poverty, which is main concern for economic department of government. Focus is also given on betterment of infrastructure as well. Plans have been made to make more roads, dams and power generating plants so that people get more job openings and thereby help development.

REFERENCES
http://www.economywatch.com/economic-conditions/pakistan.html http://www.managementconsultants.pk/files/Research_Papers/Pakistan%20Economy %20-%20Challenges,%20Key%20Issues%20and%20Recommendations.pdf http://www.sbp.org.pk/publications/pak-india-trade/Chap_7.pdf http://www.cssforum.com.pk/css-compulsory-subjects/essay/29767-socio-economicproblems-pakistan.html http://www.scribd.com/doc/19255599/Current-Economic-Situation-of-Pakistan http://ishrathusain.iba.edu.pk/speeches/economicManagementPolicies/pak_eco_ach_a pr_15.pdf http://www.facebook.com/notes/pervez-musharraf/achievments-of-former-president-ofpakistan-pervez-musharraf-his-government-oct/456136789338 http://www.indexmundi.com/pakistan/economy_profile.html http://www.iie.com/publications/papers/paper.cfm?ResearchID=333