Industrial growth in Pakistan 2015: An Overview

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Industrial growth in Pakistan 2015: An Overview #0 Industrial growth in Pakistan 2015: An Overview #1 Industrial growth in Pakistan 2015: An Overview #2 Industrial growth in Pakistan 2015: An Overview #3 Industrial growth in Pakistan 2015: An Overview #4 Industrial growth in Pakistan 2015: An Overview #5 Industrial growth in Pakistan 2015: An Overview #6 Industrial growth in Pakistan 2015: An Overview #7 Industrial growth in Pakistan 2015: An Overview #8 Industrial growth in Pakistan 2015: An Overview #9


Industrial growth 1 Industrial growth in Pakistan By Ayesha Majid Pakistan Economy June 09, 2015 Lahore School of Economics Industrial growth 2 Abstract Pakistan is improving as it has maintained the growth momentum and achievements are broad based touching all sectors of the economy. The growth recorded for 2014-15 is 4.24 percent and will further accelerate in coming years as business climate is improving on fast track with better growth oriented policies of the government. Now situation is improving as the present government has launched comprehensive plan to create investment friendly environment & to attract foreign investors in the country. The investment policy has been designed to provide a comprehensive framework for creating a conducive business environment for the attraction of FDI. Private investment recorded in last year was Rs. 2,513 billion and it expanded to Rs. 2,645 billion for the fiscal year 2014-15. This increase in private investment is the reflection that private investors are showing confidence on government policies and situation is improving. Industrial growth 3 Introduction Pakistan being the 42nd largest economy in terms of its GDP is ranked 140 th around the world in terms of GDP/capita. It has a GDP/capita of $3149/year, which is very low as compare to other developing countries. Economic growth, defined as increase in the number of the goods and services produced by any economy over time. The growth trend throughout Pakistan history is impressive with the highest growth rate of 7% during 80s. However, the current economic growth rate of Pakistan is around 4.5%, which in 2015 is projected to be around 5%. During the last five years, Pakistan economy grew at an average rate of 2.9%. Weakening of the power sector is the main restriction on growth. Power outages have shaved off annual GDP growth 2 percent. Gross Domestic Product (GDP) growth rate of Pakistan is half of its actual potential to produce which is 6.5% per annum. The growth rate is lower than the required rate to sustain the increase employment and Investment. Investment being the major component of economic growth has faced ups and downs in the major sectors of the economy. Investment has a multiplier effect on the national income but it depends on the household’s marginal propensity to consume out of each rupee earned. The higher the MPC the larger will be the multiplier effect and hence the greater will be the national income, which is a sign of increasing growth rate. Investments are of majorly two types, which include foreign direct investment and Portfolio Investment. Finance minister said. revenue collection during first six months of current year were remained at Rs 1162.4 billion as compared to Rs 1031.4 billion collected during same period of last year which was higher by 13 per cent despite reduction of oil prices. Budget deficit for first six months of current financial year had been recorded at 2.4 per cent against the overall target of 4.9 per cent for the year 2014-15. He also said that home remittances during first six months against same period of last year were increased by 15.25 from $7.79 billion to $8.987 billion. Moreover, the exports from the Pakistan for the period July-December 2014-15 decreased by 4.3 per cent. Whereas the imports into the Pakistan increased by 11.68 per cent. Foreign Direct Investment, he said that increased by 19.29 per cent during the period July-November 201415. The investment increased from $354.8 million during July-November 2013-14 to $422.8 million this year.He said that the inflation in the Pakistan has now come down to just over 6 per cent while last year it was 8.9 per cent. Growth in Pakistan Pakistan’s economy faces many ups and downs and there were several domestic and external shocks after 2007. Economic condition of a country was influenced by shattering floods and rains, war for terrorism, and the energy crisis. The Pakistan’s economy in the last five years developed on average at the rate of 2.9 % annually. Industrial growth 4 Sectorial Analysis of Growth To show the overall economic growth trends, it is vital to observe the distinct sectors and sub sectors of GNP. Commodity Product Sector Commodity product sector comprises of agriculture sector and industrial sector. There is continuous growth in both agriculture and industrial sector. Although, the growth in commodity producing sector stayed far-off in its potential due to several problems such as heavy rains, law and order situation and energy crises etc. Agriculture Sector Agriculture accounts for 21% of the GDP and it employs 43.5% of the labor force. It also provides raw materials to major secondary industries in Pakistan. Pakistan exports major agricultural products, which are the source of income for people, and hence leads to increase in national income increasing economic growth. Pakistan being an agrarian economy relies heavily on agricultural based products for its income. The growth rate in this sector is 3.3%, which is less than the previous year 3.5%. The pathetic performance of this sector is due to unfavorable weather conditions causing a fall in the production of major export products. However, the fall in the production of these crops was compensated by the increase in production of sugar cane and wheat. These crops are further subdivided into different categories like important crops and other crops. Important crops like cotton consist of 25% of the production of this sector and had a growth rate of 2.3%, which is far less than the previous year 7.3%. However, the fall in the growth of this sector was compensated by the steady growth of the other crops, which recorded a growth rate of 6.6% recovering from a negative growth rate of 7%. Livestock is the major sub sector of agriculture that contributes to economic growth. This sector creates a lot of job opportunities, as this is labor intensive sector. The share of GDP of this sector is 12 %. This sector provide livelihood to many people directly and indirectly as rural population mainly depend upon livestock and dairy products. Forests have the significant importance in keeping the environment clean and degradation of forests results in many socio and economic problems. Forests provide timber and wood that assist in many ways consequently contributing to economic growth. The growth in the forest sector is recorded as 0.1 % which is far less than the previous year growth that is 1.7% Industrial growth 5 Industrial Sector Manufacturing sector is a subsector of industrial sector that comprise about 63% of share of the overall industrial sector. Manufacturing sector contributes much toward in the development of an economy. Manufacturing sector is showing declining trend from the last few decades. The factors that are responsible for meager growth are power crises, terrorism, and unstable law and order condition. The total share of this sector in GDP is 14.4 % in 2008 that reduced to 13.2 in 2013 and further reduced to 12.9 in 2014. Construction sector is also a sub sector of industrial sector that shows about 11.42 % share of the overall industrial sector. There is continuous growth in this sector due to speedy completion of projects that include flood rehabilitation and other development projects of provincial and federal government. Mining and quarrying sector is also a subcomponent of industrial sector that comprises about 14.74 % of share in the overall industrial sector. Pakistan has huge reserves of minerals such as lime, coal, gypsum, granite etc. Extraction of theses minerals provides raw material and enables a competitive advantage to a country. There was 7.6% growth recorded in this sector in year 2013. Services Sector: The services sector comprises of transport storage & communication (TS&C), finance and insurance; housing s