Assignment for the seminar

Submitted to Mam zakia batool Submitted by Kafayat Ullah Khan (2487)

M.sc economics 4th(semester) Department of economics

NATIONAL UNIVERSITY OF MODERN LANGUAGES ISLAMABAD

Growth and sector wise composition of GDP Growth and Stabilization Gross domestic product (GDP) is the market value of all final goods and services produced within a nation in a given time. Gross Domestic Production (GDP) the rate of change that GDP experience from one year to other. GNP is nation economy is heavily depended on foreign earning. Historically, from 1952 until 2012, Pakistan GDP averaged of Growth Rate 5.0 %, high of 10.2 % in 1954 and a low of -1.8 Percent in 1952. Pakistan is the poorest and least developed countries in Asia. Pakistan has a rising semi-industrialized economy that depends on manufacturing, agriculture and remittances. To make things even worst, political instability, law enforcement and foreign aid.

Years

Commodity Producing Sector

Industrial Sector 830,863 865,196 889,539 926,183 1,076,808 1,207,268 1,256,827 1,367,532 1,387,117 1,385,669 1,470,110 1,480,768 0.7 3.4

Services Sector

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2010-11 R 2011-12 P Percentage change 2010-11 Percentage change 2011-12

1,754,472 1,768,695 1,792,972 1,868,125 2,041,661 2,234,671 2,348,925 2,504,569 2,580,671 2,672,521 2,806,667 2,912,825 1.5 3.3

1,807,546 1,863,396 1,952,146 2,173,947 2,173,947 2,368,559 2,511,551 2,687,140 2,847,044 2,895,045 2,971,081 3,227,914 4.4 4.0

The total production of 2011-12 in total Commodity Producing Sector 2,912,825 and Total Industrial sector 1,480,768 and Total Services Sector 3,227,914 produce. The Commodity producing sector is rising 3.3% greater as compare as last is that 2010-11 is 1.5%, the industrial sector is in 2011-12 3.4% greater than as compare to last year 2010-11 is that 0.7% , and the services sector is rising 4.0%.

The main reasons are that the low foreign investments, High inflation rate, energy shortages and the deteriorating political situation. According to the report, the foreign direct investments are low to almost 50% at the start of 2011 due to the political conditions. A current account deficit of 1.7 % was in the start months of the year 2011.

Agriculture Sector:
The agriculture is back bone of Pakistan economy because the Pakistan Economy is dual economy. The contribution of agriculture products have main role in GDP. Pakistans population about 70% is living in rural areas and nearly 50% of them work in farming, livestock and agrobased industries. Agriculture sector plays a very important role in the development of economic of a country. The Agriculture contribution (% of GDP) in Pakistan was last reported at 21.62 in 2011, according to a World Bank report published in 2012. Contribution of agriculture is based on is that the net out of sector and subtracting intermediate inputs.

The Agriculture sector recorded a growth of 3.1 percent against 2.4 percent last year. In 2008-09 the cropped area rise 24.01 hectors because there is technologic progress and most of land aggregated. Due to the more land cultivated then the availability of water is reduce 131.51 MAF. The water is low as compare to the last year. The sum of good governments supportive policies of resulted in a growth is rise of 3.1 percent against 2.4 percent last year.

Major Crops register a speed up growth of 3.2% compared to a growth is negative of 0.2% last year. The major crops including Cotton, Sugarcane and Rice witnessed growth in production of 18.6 percent, 4.9 percent and 27.7 percent respectively. Although, first round estimate of production wheat showed a growth negative due to late receding of flood waters in lower Sindh which hampered the timely cultivation of the wheat crop. Our major crops is Exports as name is Wheat, Rice, Sugar Cane and Cotton etc. this is the major source of GDP rising or decreasing in the Pakistan. Our minor Crops of agriculture name as, bajra, maize , Balry etc. The livestock totally depend on agriculture sector. The rise in agriculture Livestock has marginally higher growth of 4.0% against the growth of 3.97% last year. Fisheries sector showed a growth of 1.8 percent. Forestry recorded a growth of 0.95 percent as compared to the contraction of 0.40 percent last year.

Manufacturing Sector: Industrial production, in which raw materials are changed into finished goods on a large scale. The manufacturing sector is based on depended on agriculture sector.

Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Industrial sector 830865 942263 989349 1083914 1416986 1659285 1923698 2214610 2658205 2931543 3269796

Manufacturing

522801 608132 642850 725434 902486 1136634 1370793 1567310 1950522 2067494 2369029

The industrial sector and manufacturing is rising but not is speed that show in 1999-00 to 200405 there is many causes of slow growth or revenue of industrial and manufacturing sector. The manufacturing is government takes setups to raise the policy. The manufacturing sector growth is estimated at 3.6% compared to 3.1% previous year. Small scale manufacturing growth of previous year at 7.5%. Large Scale Manufacturing (LSM) has shown a growth of 1.1 percent during July-March 2011-12 against 1.0 percent last year. The Construction Sector has shown 6.5 percent growth as compared to negative growth of 7.1 percent last year. Mining and Quarrying sector recorded a positive growth of 4.4 percent during JulyMarch of the fiscal year 2011- 12 against negative growth of 1.3 percent last year. Electricity and gas distribution witnessed a negative growth of 1.6 percent against 7.3 percent last year.

The major share in industrial sector of growth in 2011-12 is that 15.25 of sugar cane. The share of other industrial item is as follow cotton yarn is 1.13% , cotton cloth is 0.67%, Jute Goods is 5.51%, Vegetable Ghee is 1.53%, cigarettes is (3.76) %, Fertilizers is (0.92) %, cements is 2.86%,Soda Ash is (5.13) %, Caustic Soda is (0.04) %, And Sugar is 15.25% share in Growth

Services Sector: The Services sector has recorded a growth rate of 4.0% throughout 2011-12 beside 4.4 % previous year. It is dominated sub sector is Finance and Insurance at 6.5%, Social and Community Services 6.8% and Wholesale and Retail Trade 3.6%. The flexibility of the Pakistans economy has been tested more than a few times by one crisis after another. The jagged go up in global oil and food prices, the internal security hazards brought on by the campaign against extremism.

years Services

Transport, Storage and Communication 400983 512997 542828 609929 675623 759711 908409 1012210 1155873 1630278 1894188

Wholesale and Retail Trade 621842 691854 720812 785776 896357 1093114 1262001 1441790 1829944 2100661 2391058

Finance and Insurance 132454 116997 142424 144989 165230 236254 364320 447270 556679 625471 667550

Ownership of Dwellings 110425 124359 126454 135139 146264 165441 184812 206170 239010 298789 345759

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

1807546 2035680 2188527 2390988 2668790 3149049 3777607 4335260 5246198 6546587 7557128

Public Community Administr Services ation & Defense 220291 321551 235039 354434 260042 395967 285854 429301 312105 473211 343348 551181 404628 653437 467690 760130 530074 934618 662723 122866 794439 146413

In the history of economy of Pakistan the service sector is boom day by day. The service sector is working in a good manner and contributed major part of GDP. The Service sector progress good in the economy of pakistan as compare to all other sectors. The 2011-12 progress of service sector is as, the total revenue from service sector is 7557128, Transport, Storage and Communication is 1894188, Wholesale and Retail Trade is 2391058, Finance and Insurance is 667550, Ownership of Dwellings is 345759, Public Administration & Defense is 794439 and Community Services is 146413.

GDP Growth , Unemployment, poverty, inequlity The GDP growth rate of a country Thats a combination of revenue, services, expenditure, manufacturing of final commodities. If the growth a country is rise its mean That increase in investment in a country if increase in investment then the unemployment is low and employment oppertunities is rise. There will be more income of individual, the countrys exports also rise and forigh direct investmment is rise the country.

Unemployment Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the number of people in the labor force. Unemployment rate can be defined by either the national definition, the ILO harmonized definition, or the OECD harmonized definition. The OECD harmonized unemployment rate gives the number of unemployed persons as a percentage of the labor force (the total number of people employed plus unemployed). As defined by the International Labor Organization, unemployed workers are those who are currently not working but are willing and able to work for pay, currently available to work, and have actively searched for work.

In Pakistan situation Unemployment rate is as follow: Years Unemployment rate (% of total labor force) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 6.87 7.82 8.27 8.27 7.69 7.69 6.2 5.325 5.202 5.46 5.55 5.95

Last 10 years the unemployment is high in 2002 and 2003 because the political instability and emergency is enforce by army. The lots of people is unemployed , the investor withdraw his money . the invest was goes thats way the unemployment is created. In That era the dictor was ruling.

Poverty As many as 45.7% of the entire population is living under the poverty line, according to a doorto-door survey carried out by Benazir Income Support Programmed (BISP). The results sharply negate the outcome of another official survey which calculated incidence of poverty at 12%. The 80 million people live below the poverty line. The survey did not include Federally Administrated Tribal Areas where it was delayed because of the security situation. BISP needs Rs106 billion next year just to feed 40 million people, currently covered in the programmed. However, the finance ministry has budgeted Rs 60 billion, which is only 56.6% of the demand. The US would soon provide $75 million under Kerry Lugar Act for the BISP. The federal government has provided Rs126 billion to the BISP in the past four years while an amount of Rs26 billion was given by the foreign lenders.

years 1987 1991 1997 1999 2002 2005 2006 2008

Poverty 89.16 88.18 83.26 66.54 73.91 60.31 60.98 60.19

Inequlity The government has made the agriculture policies more aligned to the international practices that would help bring better distributions in incomes and provide a remedy of the situation. Secondly, he added, the government considerably enhanced the expenditure on the social safety nets that would help the poorest of the poor of the country. Growth without equality would enhance gap between haves and have-nots adding poverty cannot be alleviated without removing inequalities. Pakistan has a low share of spending on social safety nets and with the rolling out of the BISP such spending increased from 0.3 per cent of the GDP in 2003-04 to 0.9 per cent, including selected subsidies meant to assist the poor. This spending is a very low amount compared to other developing countries, points out the analysis Pakistan towards an integrated national safety net system.

The study notes that both in the private and public sector there are various social safety nets but they are inadequate and for better coordination there is a need for an umbrella organization in the private sector. The study calls for establishment of rural migration centers to process visas, work contracts, and loan arrangements for prospective external migrants. The system of migration needs to be regularized. The government may enter into agreements such as the agreement signed with Malaysia. The public expenditure crucially depends on the availability of the public revenues. Since government is withdrawing withholding taxes they must be replaced with proper income taxation so that the indirect taxes on products consumed by less well-off are withdrawn. Major sufferers of poor governance are the common masses who are denied justice and there is poor delivery of services. Poor governance results in distorted priorities, poor policy formulation and ineffective implementation with serious implications for social welfare. Three main areas of governance are civil service reforms, judicial & police reforms and devolution.

Size and trends of Budget deficit

Government budget deficits can be cured by cutting spending, raising taxes or a combination of the two. Deficits must be financed by borrowing money. Interest must be paid on borrowed funds, which worsens the deficit. Years 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Pakistan -156,351,000,000.00 -157,792,000,000.00 -127,191,000,000.00 -140,585,000,000.00 -110,083,000,000.00 -208,174,000,000.00 -322,425,000,000.00 -361,961,000,000.00 -761,721,000,000.00 -605,575,000,000.00 -741,752,000,000.00 -1,168,907,000,000.00

Pakistan recorded a Government Budget deficit equal to 5.50 percent of the country's Gross Domestic Product in 2011. Government Budget in Pakistan is reported by the Government of Pakistan. Historically, from 1990 until 2011, Pakistan Government Budget averaged 4.36 Percent of GDP reaching an all time high of 8.80 Percent of GDP in December of 1990 and a record low of -6.30 Percent of GDP in December of 2010. Government Budget is an itemized accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). A budget deficit occurs when a government spends more money than it takes in.

Size and Trends BOP The KSE-100 index (Pakistans benchmarked stock market) has increased from 1521 points in June 2000 to 12370 points in April 2007 a rise of over 10,800 points or an increase of 713 percent. Similarly aggregate market capitalization has increased from Rs 392 billion ($ 7.6 billion) in June 2000 to Rs 3604 billion ($ 59.4 billion) in April 2007, showing a rise of over Rs 3200 billion ($ 53 billion) or an increase of 819 percent. The listed capital at KSE has increased from Rs 236.4 billion in 2000 to Rs 535.5 billion in March 2007. Turnover of shares at KSE has increased from 48 billion in fiscal year 1999-2000 to 105 billion shares during fiscal year 200506. Similarly daily turnover of shares at KSE has increased from 202 million shares in fiscal year 2000-01 to about 320 million in fiscal year 2005-06. Portfolio investment has increased from a negative $ 140 million in fiscal year 2000-01 to $ 1819 million during July-April 2006-07. Pakistans stock market is benchmarked through the Karachi Stock Exchange 100-index (KSE100). This index stood at 9989 points at the end of the fiscal year 2005-06. Aggregate market capitalization also increased by 35.0 percent from Rs 2801 billion in June 2006 to Rs 3781 billion ($ 62.3 billion) as of 31st May 2007. During the period from July 2006 to March 2007 the listed capital on KSE increased from Rs 496 billion to Rs 536 billion, reflecting an increase of 8.1 percent. The market capitalization increased from Rs 2801 billion ($ 46.5 billion) to Rs 3066 billion ($ 50.5 billion) in the same period reflecting an increase of 9.5 percent in the value of shares. The average daily turnover of shares was 209 million. The KSE 100 Index increased from 9989 points in June 2006 to 12370 points as on April 30, 2007, reflecting an increase of 24 percent.

Size and Trends in Current Deficit The current account deficit stood at $ 3,394 million during July-April 2011-12.This deficit in the current account was largely caused by the widening of trade and services account deficit.

However, continued support from current transfers in the form of workers remittances helped in containing further increase in the current account deficit during the period under review. The trade deficit expanded mainly due to the 14.5 percent growth in imports and the 0.1 percent increase in exports; thereby widening the trade deficit by 49.2 percent during the period. The major factor behind the widening of the trade deficit was the sharp rise in the import bill during July-April 2011-12 which increased due to the higher international prices of crude oil

Money growth, exchange rate, wages and Inflation

Pakistans monetary policy aims at stabilizing economic growth through a number of channels. It influences the future expectations of economic activity and inflation. A sound fiscal position is important for achieving macroeconomic stability. This occurs through efficient resource allocation and the mobilization of domestic savings. Because of this, the central bank through its monetary policy and strategies plays an influential role. The global financial crisis that erupted in late 2007 not only produced the severe worldwide economic contraction, it has also hampered the ability of central banks to successfully manage the economy. In reaction to the crisis, markets of developed economies responded in a variety of ways, such as creating measures aimed at specific sectors, as well as more general stimulus packages aimed at keeping financial institutions buoyant. On the other hand, economic activity in emerging and developing economies remained relatively vigorous on account of strong internal demand. The global economic activity rebounded in 2010 on the back of better macroeconomic performance and continued accommodative macroeconomic policies. Unfortunately,

performance slowed later in the year because countries with large public and private debt burdens faced serious problems accessing sovereign debt markets. Consequently, heightened concerns about long term debt sustainability in various parts of the world have posed additional risks, not only to financial stability, but also for the ability to access safe assets.