Chapter 1

ECONOMIC DEVELOPMENT
AND ITS DETERMINANTS

Q.1 Discuss in detail concept of economic development. Also

differentiate between economic Growth and economic
development.
Q.2 What is economic development and how can it be measured? Which
method do you think is the best and why?
Q.3 Natural and Power Resources in Pakistan and its role in Economic
Development.
Q.4 Discuss the factors or determinants or pre-requisites of economic
development?
Q.5 Describe the role of technology in our economic development. What
are the problems in this regard in Pakistan?
Q.6 Define economic planning? Give its various types. Why economic
planning is needed for economic development?
2 ECONOMICS OF PAKISTAN

Q.1 Discuss in detail concept of Economic Development. Also

differentiate between economic Growth and economic development.

ECONOMIC GROWTH:
The concept of economic growth is sometimes mixed with economic
development. Economic development is a wider term and economic growth
simply means, “Increase in Production” or “Increase in income”.
1. According to Maddison:
“The raising of income level is generally referred as economic growth in
rich countries”.
2. According to Friedman:
“Growth is an expansion of system in one or more dimensions without a
change in its structure.”
ECONOMIC DEVELOPMENT:
1. Meier and Baldwin: “Economic development is a process whereby an
economy’s real national income increases over a long period of time, and if
the rate of development is faster than the rate of population growth then the
per capita real income will increase”.
2. Economic development is defined as the process of increase volume of
production along with the improvement in technology, a rise in the level
of living, institutional changes, etc. In short, it is the progress in the socio-
economic structure of the economy.
Thus
➢ Economic development is a process.
➢ Increase in real national income.
➢ Over a long period of time.
Key Differences between Economic Growth and Economic Development:
The fundamental differences between economic growth and development
are explained in the points given below:
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 3

Economic Growth Economic Development

Economic Growth refers to the increase Economic Development not only refers
in the value of the real output of goods to the Economic Growth but also to the
and services in the country. progressive changes in the socio-
economic structure of a county.
Related to
Economic Growth is related with Economic Development is related with
developed countries of the world. Underdeveloped and developing
countries of the world.
When will it happen?
Economic Growth takes place when the Economic Development takes place
rate of change of Real National Income when there is an increase in the Real per
is higher than the rate of change of capita income of the people in the
population in a country in a certain time country for a long period of time.
period.
Focused on
Economic Growth is a measure for Economic Development focuses on the
measuring how much money is flowing development of the society and
from one individual to another increasing the quality of life of the
individual in the economy. people of the country.
Nature
Economic Growth is considered as one Economic Development is a broader
of the instruments for achieving concept which includes Economic
Economic Development. On the Growth, Infrastructural, social, and
contrary Economic growth alone can't political factors.
bring the Economic Development.
Scope
Economic Growth is considered as a Economic Development is considered
narrow measure and single dimensional as a whole measure and
in nature as it only focuses on the Multidimensional phenomenon because
income of the people of the country. it focuses on the income of the people
and also on the improvement of the
living standards of the people of the
country.
4 ECONOMICS OF PAKISTAN

Duration
Economic Growth is a short term Economic Development is a long term
process as changes in income is process because to develop various
calculated every year generally. facilities to improve the life of the
people takes more time.
Government support
Economic Growth is an automatic Economic Development highly require
process and may not require governmental support and intervention
governmental support or intervention. because without developmental policies
of the government, Economic
Development is not possible.
Measure of
Economic Growth is quantitative in Economic Development is qualitative in
nature because it is concerned with how nature because it focuses on improving
much of goods and services are the quality of life of the people in the
produced in the country in a certain country.
period of time.
Wealth distribution
Economic Growth does not focus on Economic Development concentrates on
fair distribution of wealth among the a balanced growth of the economy and
people in the country. fair and equitable distribution of the
wealth among the people.

Q.2 What is economic development and how can it be measured?

Which method do you think is the best and why?
OR
Discuss the main measures of economic development in a
country.
OR
How economic development can be measured? Discuss briefly
the problems being faced in this regard in the underdeveloped
country like Pakistan.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 5
INTRODUCTION:
Economic development is very important concept for every country. If the
country is economically developed, it enjoys great influence in this world. If the
country is economically backward, it is not able to enjoy good relationship with
the world and its citizens are bound to live.
DEFINITION:
Generally Speaking:
Economic development, on the other hand, is a broader term. It indicates
an increase in citizens’ quality of life and is often measured using the Human
Development Index.
“Economic development is a process whereby an economy’s real national
income increases over along period of time and if the rate of development is
greater than the rate of growth of population, then the per capita income will
increase”.
(Meier and Baldwin)
“Economic development is a process in which output of a country
increases over a long period of time”.
HOW TO MEASURE ECONOMIC DEVELOPMENT?
We have many measures to estimate the economic development of a
country. Theses measures, in brief, are:
➢ Increase in real GNP.
➢ Increase in real per capita income.
➢ Human development index.
➢ Physical quality of life index
The above measures of economic development are discussed now in brief.
INCREASE IN REAL GNP:
GNP:
GNP is the value of all goods and services being produced by the nationals
of the country in a given period of time usually a year.
Real GNP:
Real GNP is arrived at by deducting the value of inflation from nominal GNP.
6 ECONOMICS OF PAKISTAN

Real GNP = Nominal GNP − Inflation

OR
Real GNP is the value of GNP at constant prices of some base year.
Nominal GNP:
Nominal GNP is the value of GNP at current prices.
Criteria:
➢ According to this method if the real GNP of a country increases in particular
period of time, this country will be considered economically developed.
➢ If the real GNP of a country does not increase in particular period of time,
this country will not be considered economically developed.
INCREASE IN REAL PER CAPITA INCOME:
Per Capita Income:
Per capita income is per person income of the country in a given period of
time usually a year.
Per capita income = Total National Income / Total Population
Real per capita income is arrived at by deducting the value of inflation from
nominal per capita income.
Real per capita income = Nominal per capita income − Inflation
OR
Real per capita income is the value of per capita income at constant prices
of some base year.
Criteria:
➢ According to this method if the real per capita income of a country
increases in particular period of time, this country will be considered
economically developed.
➢ If the real per capita income of a country does not increase in particular
period of time, this country will not be considered economically developed.
HUMAN DEVELOPMENT INDEX:
This method was presented by “United nations development organization”
in 1990. Under this method development in a country is judged by following
points.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 7
1. Health facilities
2. Education
3. Decent living standard
4. Political Freedom
5. Human rights
6. Self respect
Criteria:
➢ According to this method if the above mentioned facilities are being
provided in a country that country is making economic development.
➢ According to this method if the above mentioned facilities are not being
provided in a country that country is not making economic development.
PHYSICAL QUALITY OF LIFE INDEX:
This is relatively a new approach of measures economic development.
Under this approach development is measured by two points.
1. Reduction in poverty. And
2. Satisfaction of basic needs
Criteria:
➢ According to this method if the poverty is decreasing in a country and basic
needs of the people are being fulfilled in a country that country is making
economic development.
➢ According to this method if the poverty is not decreasing in a country and
basic needs of the people are not being fulfilled in a country that country is
not making economic development.
BEST METHOD FOR MEASUREMENT:
Most of the economists consider real GNP method as best method for
measurement of national income due to following reasons:
1. National income is the name of country’s production in the period of
one year and increase in goods and services of a country is indeed
economic development.
2. United Nations and its most of the members also use this method.
3. Countries having high per capita income are not listed among
developed nations like Arab countries. Because per capita income is
not a suitable standard.
8 ECONOMICS OF PAKISTAN

4. Countries having high National Income like Germany, Japan, are

included in economically developed nations. Which means national
income is the standard to judge the country’s economic development.
5. Ultimately National Income is the real indicator; other indicators are
derived from national income like per capita income is derived from
national income. So better is to use National Income as criteria of
economic development.
Q.3 Natural and Power Resources in Pakistan and its role in
Economic Development.
INTRODUCTION:
Resources like mineral, power, water and forest have a huge influence on
the economic and social development of a country. Availability of natural
resources is the necessary but not a sufficient condition of economic and social
development. If a country is rich in resources and these resources are optimally
used then there is more possibilities of economic and social development.
1. Coal:
Coal which is also named as black gold is found into huge quantities in
Thar, Chamalang, Quetta and other sites. Thar reserves are estimated 850 Trillion
Cubic Feet. There is enough coal in Pakistan Thar area (though a part of coal is
not of good quality) that it can be used for power generation for next 100 years
without relaying on other i.e. hydro / oil resources. Pakistan recently discovered
one low and four low-to-medium quality coal seams in the Punjab.
2. Natural Gas:
Natural gas production is at a high level in Pakistan. Estimated reserves are
885.3 billion cubic meters. Gas fields are expected to last for another 20 years.
The Sui gas field is the largest, accounting for 26% of Pakistan’s gas production.
Gas deposits of Sui discovered in 1953. Daily production is 19 million cubic
meters a day. Under the barren mountains of Balochistan and the sands of Sindh,
there are untouched oil and gas reserves. Major users of natural gas areas are
Karachi, Lahore, Faisalabad, Multan, Rawalpindi and Islamabad.
3. Crude Oil:
Oil is found deep below the surface of the earth. We do not produce enough
oil for our needs. The search for mineral oil in Pakistan Started in 1968 and first
test hole was drilled near Mianwali.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 9

Inspite of all favourable factors, the scale of petroleum discoveries to date

has not been a substantial one. The reason, above all, may be that enough drilling
has not been done. The geological conditions in parts of Pakistan are favourable
for the formation of trapping of oil. Crude oil contributes about 44.6% to total
energy supply of the country.
4. Uranium Production:
Pakistan has a long history of exporting small amounts of uranium to the
west. The Tumman Leghari mine in South Punjab, Baghalchur mine, Dera Ghazi
Khan Mine and Issa Khel / Kubul Kel mines in, Mianwali District. Pakistan has
recently used some in its own nuclear power and weapons programs. Pakistan
produced about 45 tonnes of Uranium in 2015
5. Mineral Salt:
Salt is being minned in the region since 320 BC. Khewra Salt Mines are
among world oldest and biggest salt mines. Salt has been mined at Khewra since
320 BC, in an underground area of about 110 square kilometres (42 sq mi).
Khewra salt mine has estimated total of 220 million tonnes of rock salt deposits.
The current production from the mine is 325,000 tons salt per annum.
6. Iron Ore:
Iron ore found in various regions of Pakistan including Nokundi, Chinot
and the largest one in Kalabagh (less than 42% quality), Harripur and other
Northern Areas.
7. Gems and Other Precious Stones:
A number of precious stones are minned and polished for local as well as
export purposes. The centre point of this operation is Khyber-Pakhtoonkhwa.
These includes Actinolite, Hessonite, Rodingite, Agate, Idocrase, Rutile,
Aquamarine, Jadeite, Ruby, Amazonite, Kunzite, Serpentine, Azurite, Kyanite,
Spessartine (garnet), Beryl, Marganite, Spinel, Emerald, Moonstone, Topaz,
Epidote, Pargasite, Tourmaline, Garnet (alamandine), Peridot, Turquoise, Garnet
(green, grossular), Quartz (citrin & others) and Vesuvianite. The export from these
gems is more than 200 Million dollar.
10 ECONOMICS OF PAKISTAN

POWER RESOURCES
Electricity is one of major source of power in Pakistan due to improper use
of coal and oil resources.
A. HYDRO ELECTRICITY:
Nature has provided suitable environment in Pakistan. To produce
hydroelectricity environment is better for it. The northern and north western area
of Pakistan is suitable for building of dams. We can produce hydroelectricity to
create steep slopes in rivers and canals. Its best example is the Ghazi Barotha
project in river Indus. Both public and private sectors have planned to increase the
production of hydroelectricity in Pakistan. Pakistan's total hydroelectricity
production is 4963 Megawatt. Pakistan has the capacity of production of 30000
MW from its river Indus, Jehlum and Chenab.
Important Hydroelectricity Stations:
There are three hydroelectricity stations working in Pakistan:
1. Tarbela Dam:
This dam is situated on Indus River. The Tarbela dam produces 70% of the
total hydroelectricity production of Pakistan. Its installed generation capacity is
3478 MW. The Tarbela Dam was constructed in 1976 and its cost was about Rs.18
billions. This dam is about 9000 feet long. The Tarbela is one of the biggest dams
of the world.
2. Mangla Dam:
This dam is located on Jehlum River. This dam installed generation capacity
of power is 1000 MW which is 20% of total hydroelectricity of the country. This
dam was constructed and completed in 1967 the height of this dam is 110 meters.
This dam is made of concrete. This is second biggest dam in Pakistan.
B. THERMAL ELECTRICITY:
The Thermal power stations are generating electricity by gas, oil and coal in
Pakistan. The 49.8% of the total electricity is produced by the thermal power. The
thermal power production is 4921 MW in Pakistan. There are 13 thermal power
stations working in Pakistan. The biggest station is working in Karachi this station
generates 1756 MW. The second biggest station is working in Multan. It generates
260 MW.
Important Thermal Stations:
Other important thermal plants are in Faisalabad, Kotri, Pasni, Guddu,
Jamshoro, Muzaffargarh, Sukkur and Larkana etc.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 11
Future Plans:
A large number of projects have been planned to meet future energy
requirements of Pakistan. This project is working rapidly. If this project works
better than our country will make progress by leaps and bounds.
C. SOLAR ENERGY:
The energy that we get from sun is called solar energy. The climate of
Pakistan is extremely hot and dry. Pakistan is situated near the Tropic of cancer so
the sun rays are vertical most of the year. These days are hot. That's why the
season of summer is longer than winter in Pakistan. The sun rises most time. We
can use this energy to the maximum in life. This is the cheapest source of energy.
Use of Solar Energy:
We have abundance of this energy but important thing is the maximum use
of it. This energy is used to operate small machines and motor in future the solar
energy will become the biggest source of energy of the world because other
sources are costly and difficult to exploit.
D. ADVANCE SOURCES:
1. Atomic Energy:
Atomic energy is the advance source of this world. Although this source of
energy is very sophisticated and multi disciplinary system. As the rapid growth of
population sources are also increasing at the same rate. That’s why it is an
important source of energy in developing countries.
2. Pakistan is an Atomic Power:
By the grace of Allah Pakistan has become a great Atomic Power. Pakistan
has operated Atomic blasts in Chagi in Balochistan on 28 May 1998. Pakistan had
to face many difficulties to achieve progress in the atomic program.
3. Nuclear Power Technology:
Nuclear Power technology was introduced in Pakistan in 1971 when a plant
of 136 MW capacity namely Karachi. Nuclear power plant (KANUPP) was
installed. This plant has been operating safely for more than 31 years. IN other
important Cheshma nuclear power project is also working with the help of China.
This has been connected to the national grid on June 13 2000. It has a gross
capacity of 325 MW and is located near Cheshma Barrage on left bank of river
Indus.
12 ECONOMICS OF PAKISTAN

ROLE / IMPORTANCE / INFLUENCE OF NATURAL

RESOURCES ON ECONOMIC DEVELOPMENT
Economic and social development of a country mainly based on the natural
resources. Influence and importance of resources are discussed below:
A. INFLUENCE OF RESOURCES ON ECONOMIC DEPLOYMENT:
1. Urbanization:
Utilization of natural resources has increased the process of urbanization in
the country. It has developed some new cities and developed the some existing
cities.
2. Transportation:
Extraction of resources and movement of resources develops the transport
system in a country. Transportations like railways, road, water and air transport is
playing a vital role in the economic and social development of a country.
3. More Employments:
Natural resources like forests, fisheries and oil extractions have provided a
lot of jobs to population. More employment opportunities develop the social set up
of a country.
4. Increase in Forex:
Pakistan is exporting food items, textile goods, petroleum and some other
goods which is only and only possible due to availability of natural resources.
Accordingly natural resources increase the forex resources of a country.
5. High Living Standard:
Availability and proper use of natural resources is compulsory to improve
the living standard of the population. Natural resources play very important role in
the economic development that leads to high living standard.
6. Agriculture Development:
Availability of natural resources like fertile land, favourable climatic
conditions and more water resources are necessary for the development of
agriculture sector. Resources are also required to develop the agro based industries.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 13
B. INFLUENCE OF RESOURCES ON SOCIAL DEVELOPMENT:
7. Communication:
Economic development mainly based on availability and proper use of
resources. It leads to the development of communication system.
8. Infrastructure Development:
Development of infrastructure like water, sanitation, roads, energy and
electricity is possible only with the help of various natural resources. Developed
infrastructure is necessary for the economic and social development of a country.
9. Industrial Development:
Development of agriculture sector means the development of industrial
sector. Power and energy resources like oil and gas etc. are like primary
requirement of industrial development. Iron and steel resources are helpful to
develop the industrial sector. Furniture and fishing industries are mainly depend
upon natural resources.
10. Increase in Production:
Natural resources are helpful to increase in level of productivity by
applying modern techniques of production. If a country is rich in resources it
means there are more possibilities to enhance the production.
Q.4 Discuss the factors or determinants or pre-requisites of
economic development?
INTRODUCTION:
Economic growth and development is not the result of any one factor.
These depend upon various factors like, natural resources, stock of capital,
manpower, technology, attitude of the people and political condition in the
economy.
Basic Facts: (Source: Economic Survey of Pakistan 2018-19)
• Saving rate: 10.1%
• Per-capita income: $1497/annum
• Literacy rate: 63%
Pre-requisites are those conditions and factors, which are necessary for
economic growth and development. Factors of development may be classified into
two types:
1. Economic factors and
2. Non-economic factors
14 ECONOMICS OF PAKISTAN

1. ECONOMIC FACTORS:
Economic factors play very important role in the economic development of
a country. Some major factors of economic developments are as follow:
(i) Developed Natural Resources:
Availability of natural resources is very important for the economic
development. All the minerals, forests and fisheries are known as natural
resources. If a country is rich in natural resources, it is then able to make rapid
progress in growth.
(ii) Capital Accumulation / Capital Formation:
Capital formation or accumulation refers to the increase in real stock of
assets of a country over a time. The process of capital formation is also an
important requisite for economic development.
(iii) Energy Resources:
Power resources such as Coal, Gas, Oil, Electricity etc., are very important
for economic uplift of a country. All the sectors of the economy are in need of
these resources. Without these power resources economic development is impossible.
(iv) Trained Labour Force:
By human capital we mean the body of human knowledge that contributes
to productive activities. Economic development also depends upon human capital.
An uneducated and untrained population cannot help the country for economic
development.
(v) Developed Infrastructure:
Social overhead capital is also called infrastructure such as Roads,
Railways, Communications, Transport, Electric power and Research centers etc.
Improved Social Overhead Capital is essential for the economic growth of any
country.
(vi) Modern Technology:
Technology is the pool of technical knowledge. This is a human heritage
available to all countries irrespective of the country which first developed
particular technology.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 15
2. NON-ECONOMIC FACTORS:
These factors provide a suitable atmosphere for economic development.
These are social, political and administrative factors.
A. SOCIAL FACTORS:
The social set-up & cultural values have a great impact upon pace of
development in a country. One has to look into the following points regarding
socio-cultural conditions for attaining rapid economic growth.
(i) Honesty:
This behaviour must be based upon modernism, rationalism & scientific
approach instead of conservatism, bias, favouritism, & nepotism conduct of
people.
(ii) Technical Education:
Technical education is one of the most important factor for economic
development. Educated population is helpful to raise the level of income and
output in the economy by using their skills.
B. POLITICAL FACTORS:
(i) Political Stability:
A country can put itself on the road towards progress and prosperity only
when its govt. is stable. Political instability adversely effects the process of
economic development.
(ii) Strong Opposition:
A patriotic and strong opposition can keep the govt. run its affairs smoothly
and uprightly by its existence and sharp criticism against the official policies.
(iii) Strong Economic Policies:
To achieve the targets of Economic Development there must be the strong
policies in the country. Without effective planning the goals of growth and
development will remain just dreams.
C. ADMINISTRATIVE FACTORS:
(i) Law and Order:
Peace must prevail for speedy development. Growth process gets slowed
when law and order situation is put to jeopardy. Robbery, theft, agitational politics
smash upward trends.
16 ECONOMICS OF PAKISTAN

(ii) Strong Management:

The administrative factors have an important bearing on the economic

progress of a country. If the administration of a country is efficient, honest and
capable, it can give a big push to the economic development.
(iii) Accountability:

Accountability is an important factor for the economic development. Check

and balance on administrative actions regarding the exercise of authority and use
of resources is very important for smooth functioning and growth of economy for
any country.

HOW FAR DO THEY EXIST IN PAKISTAN?

As far as the case of Pakistan with reference to pre-requisites of economic

development is concerned, following points explain the situation rightly.

Firstly all the factors necessary for economic development are not
available in required quantity like we have not sufficient amount of savings for
economic development. Skilled labour, energy resources and quality human
capital is also not available.

Secondly if some factors are available, they are not found in good form like
transport and communication, infrastructure. These factors are available in very
poor condition.

Thirdly if some factors are available in good form they are not used
properly and productively like natural resources and capital.

Fourthly some factors are totally absent in country like good governance,
political stability and institutional development.

CONCLUSION:

If the above mentioned factors and conditions are fulfilled by any country,
it can make development very easily and quickly. If the above mentioned factors
and conditions are not fulfilled by any country, it can not make development very
easily and quickly.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 17

Q.5 Describe the role of technology in our economic development.

What are the problems in this regard in Pakistan?
OR
Technology is considered an important factor for economic
development of a country. Discuss
OR
What steps have been taken by the Government of Pakistan to
develop of use of technology? Why is it important?
INTRODUCTION:
Technology now a days is considered a very important factor of economic
development. It is very useful to utilize other human and non-human resources. In
LDCs including Pakistan the techniques of production are mostly outdated which
keeps the development process of different sectors at low pace.
DEFINITION:
Meaning of Technology:
By technology we mean “the body of scientific and technical knowledge
which is used to improve production process”.
In other words “technology is a knowledge or technique to facilitate the
production of goods and services”.
TECHNOLOGICAL PROGRESS AND ECONOMIC DEVELOPMENT:
New and improved ways to complete the economic and social tasks such
as; growing crops, making cloth, construction and means of transport etc., are the
result of technological progress. Technology takes place in a country in two ways
i.e., (a) Inventions (b) Innovations.
ROLE OF TECHNOLOGY:
Following are the main aspects of the importance of technology.
1. Economic Development:
Modern technology enhances the performance of different sectors of the
economy. In Pakistan transfer of technology is required in agriculture and
industrial sector. We are an agrarian society but the main cause of our agriculture
backwardness is the use of out dated and traditional technology. Using agricultural
mechanization agricultural out-put level can be increased.
18 ECONOMICS OF PAKISTAN

2. Increase in Production:
There are different methods of production. A firm should adopt only that
method which suits best to its circumstances. Modern technology not only affects
the out-put but also increases the productivity of inputs. Modern technology
suggests the optimum input combination.
3. Decrease in Cost of Production:
An entrepreneur always tries to coordinate the inputs at the minimum level
of cost. Computerized plants machines etc. give large amount of production. In
this way the firm’s per unit cost decreases. Besides it there are many internal and
external economies.
4. Use of Industrial Waste:
Products which are made of large-scale industrial waste are called by
products. Like the sugar mills waste is used as the raw material of paperboard hard
board etc. This is due to modern technology.
5. Better Quality Products:
The quality of Pakistan production is low. Owing low quality we cannot
attract customers abroad. We need modern technology because only its use can
upgrade the quality four output.
6. Developed Natural Resources:
Full employment level of resources is essential for development. Use of
modern means of production increases the volume of production. Through modern
technology huge resources can be discovered. Moreover through modern technology
factors of production can be substituted.
7. Increase in Employment:
Modern technology promotes skill and research. It introduces the principle
of devilish of labour and specialization. It trained the about force and
entrepreneurs. It pushes the economic development and creates job opportunities.
8. Strong Infrastructure:
Technology itself is a component of infrastructure. However with the use of
it a country can develop its infrastructure. Such as the use of atomic energy, use of
gas in place of petrol, use of computer improvement of transport and
communication network etc.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 19
9. Specialization:
According to “Gallbraith”, as the use of technology increases in a society,
the specialization also increases. This results in increase of national income and
per-capita income.
10. Increase in Trade:
The basis of international trade is “a country exchanges its excess
production with the excess production of another country.” So, by using
technology production and international trade also increased.
11. Better Financial System:
By adopting new methods and equipments efficiency of financial system
such as, banks, stock exchange etc., has also improved. Computers and
telecommunication system have made possible excess for every one to
international financial markets.
12. Research and Development:
Research and Development is pre-requisite for economic development of a
country. Technology is a key factor for making research in any sector such as,
agriculture, industry and service etc.
PROBLEMS:
Following are the hurdle in process of technological change in Pakistan:
1. Lack of Capital:
Lack of capital is one of the main problem in this regard.
2. Lack of Education:
Illiteracy and our education system are the obstacles.
3. Lack of Interest:
Our society is conservative and people do not want to change their life
style.
4. High Cost:
Initially we have to import modern technology it increases the import cost
and adverse B.O.P.
5. Affordability:
Use of modern technology is not affordable due to limited markets and
slow turn over.
20 ECONOMICS OF PAKISTAN

6. Poverty:
Agriculture is the dominant sector in Pakistan being an agrarian economy.
Mostly people prefer primary occupations.
7. Lack of Facilities:
There is lack of incentives in Pakistan so people having extra ordinary
abilities prefer to work abroad.
MEASURES TO REMOVE PROBLEMS:
Following measures can be adopted to remove the problems being faced in
diffusion of technology:
1. Technical Educational:
In under developed countries maximum educational facilities should be
provided to the people. Educated people can be innovative.
2. Training Centers:
Training centers should be promoted in the economy to equip the labour
with training and technical skill.
3. Reduction in Import Duties:
Govt. should reduce duties and taxes on import of technology to encourage
the import of necessary technology.
4. Loan Facility:
If we have an efficient financial and capital market i.e. banks and financial
institutions then people would be induced towards savings and use for import of
technology.
5. Tax Concessions:
To encourage business savings, tax concessions should be allowed to those
who save higher ratio of their profits and invested for import of technology.
6. Proper Guidance:
Proper guidance should be provided to investors in technical, financial and
marketing matters. Many people have funds but are unable to invest due to
ignorance.
7. Basic Infrastructure:
Basic infrastructure facilities should be provided in the form of roads,
electricity and telephone for implementation of technology.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 21
CONCLUSION:
The result of the above discussion is that technology is really prime mover
of economic growth of a country. Without technology quick economic
development is not possible in a country. Technology is the pivotal factor in the
economic development of a country.
Q.6 Define economic planning? Give its various types. Why
economic planning is needed for economic development?
WHAT IS ECONOMIC PLANNING?
According to Charles Bettleheim:
“An economic plan is concerned with whole of economic life, or the
entire activity of an economic unit”.
TYPES OF PLANNING:
1. Centralised and Decentralised Planning:
Centalised planning indicates that economy is being managed by a single
centralized authority, while under decenterlised planning different sectors are
controlled and planned by different authorities.
2. Integrated and Partial Planning:
Under integrated planning we study economy as a whole and work for the
improvement of all the sectors but under partial planning we study economy by
each sector separately.
3. Functional and Structural Planning:
Functional planning leads to the improvements in the functional efficiency
of the economy while structural planning improves the structure of the economy.
4. Physical and Financial Planning:
Under physical planning all the resources for the plan and its targets are
determined in physical terms while in financial planning the financial matters are
discussed.
5. Corrective and Development Planning:
Such planning deals with removing imbalances and hurdles to achieve
steady growth.
22 ECONOMICS OF PAKISTAN

NEED/IMPORTANCE/ROLE/OBJECTIVES OF ECONOMIC PLANNING:

1. Control on Poverty:
With planning, economic development is possible. National Income and per
capita income can be raised and poverty can be removed.
2. Productive Use of Resources:
Planning makes possible optimum utilization of resources. In planned
economy, huge amount is spent on advertisement.
3. Industrial Development:
Without industrial development no county can make progress. Planning is
necessary for the establishment of new industries. We can find this objective in
various plans of Pakistan.
4. Control on Regional Disparity:
With planning the regional economic disparity can be removed. In plan
special fund are allocated for the development of backward areas.
5. No Shortage:
Planning prevents the artificial shortage of goods created by businessmen to
earn more profit. The prices of commodities are not allowed to fluctuate.
6. Productive Competition:
Wasteful competition among the producers ends with planning. In an
unplanned economy, huge amount of money is spent on advertisement.
7. Fair Income Distribution:
In developing countries there is unfair distribution of wealth. The Poor are
becoming poorer and the rich are becoming richer. Through planning the state can
reduce the inequalities in income.
8. Increase in Employment:
With planning, optimum utilization of resources becomes possible. So there
is a need of employment of competent persons.
9. Terms of Trade:
Unfavorable terms of trade adversely affect the rate of economic growth.
The state through planning can control the volume and direction of foreign trade.
So the country can move on the path of economic development.
[CHAPTER 1] ECONOMIC DEVELOPMENT AND ITS DETERMINANTS 23
10. Better Co-ordination:
In under developed countries, millions of producers work without bothering
as to what the other businessmen are doing. The planning authority can co-
ordinate the working of individuals n a proper way. So country can make progress
at the highest growth rate.
11. Population Control:
When the size of population is greater than the size of national resources, it
becomes dangerous for the economy. So population can be controlled with
effective planning.
12. Decision Making:
The decisions of the state are superior as compared to that of individuals.
Individuals’ have limited knowledge and scope for economic activity. The states
can develop the country economically at a desired level.
13. No Food Shortage:
Self-sufficiency in food provides a sound and solid base for the economy.
So this objective can be achieved through planning. In the 8th five year plan the
target is proposed for the agriculture sector.
14. Economic Stability:
The period of prosperity in business is followed by a period of adversity. So
planning is a powerful instrument to eliminate the business fluctuations.

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