what is economics?

1. the branch of knowledge concerned with the production,

consumption, and transfer of wealth.
2. the condition of a region or group as regards material prosperity.
"he is responsible for the island's modest economics"
What is the best definition of economics?
Economics is the study of scarcity and its implications for the use of
resources, production of goods and services, growth of production and
welfare over time, and a great variety of other complex issues of vital
concern to society.
 OVERVIEW OF PAKISTAN'S ECONOMY
• The economy of Pakistan is the 27th largest in the world in terms of
purchasing power parity (PPP) and 38th largest in terms of nominal
Gross Domestic Product. In 2014-15, the GDP was recorded at 4.24
percent up from 4.02 percent in 2013-14.
• Traditionally the economy of Pakistan has been semi- industrialized
with agriculture as the major contributor to GDP, with centers of
growth along the Indus River. Over the decades services and industrial
sectors have developed significantly. The service sector has grown to
become the biggest contributor to GDP, calculated at 58.8 percent in
2014-15. During the same period, the agricultural and industrial
sector respectively accounted for 20.9 percent and 20.3 percent of
the GDP.
 OVERVIEW OF PAKISTAN'S ECONOMY
With a large population, majority of which is young, Pakistan is a
consumption oriented economy. Consumption, investment and exports are
the drivers of the country with exports being the biggest driver of
economic growth. Most of Pakistan’s exports are to Afghanistan, United
States of America, United Arab Emirates, European Union, the United
Kingdom and the Middle East. Major exports include agricultural products,
textile products, sports goods, leather & leather products, surgical
instruments, light engineering goods and services. The import bill accounts
mostly for the import of fuel, heavy machinery and industrial equipment.
Major sources of imports are China, Saudi Arabia, United States, Malaysia,
United Arab Emirates, United Kingdom, the European Union and Japan.
Pakistan is a fast urbanizing country. The biggest industrial hub is the port
city of Karachi (Sindh Province). Other industrial canters are located in
major cities of the Punjab Province. A vast population lives outside major
urban canters in small towns and villages practicing traditional trades of
economy i.e. agriculture, animal husbandry and small scale cottage
industry.
 OVERVIEW OF PAKISTAN'S ECONOMY
The country’s economic management is based on liberalization including
privatization of state-owned corporations as well as de-regulation and
economic restructuring. The objective is to create a market-based
competitive economy through innovation and investment. Pakistan is
implementing extensive fiscal control programmes aimed at reducing non-
developmental expenditures and increasing government revenues through
tax reforms.
I n 2014 Pakistan ranked 3rd amongst the top ten best per forming capital
markets in the world for the third consecutive year. A series of initiatives
have helped stabilize the capital market. This has led to a stable financial
outlook on the long-term rating by Standard & Poor.
The historical agreement with the Chinese Government on China-Pakistan
Economic Corridor (CPEC), good reviews from IMF, issuance of Ijara Sakuk
Bond, Euro Bond after a period of 9 years, decline in unemployment rate
from 6.2 to 6.0 percent all point to a faster growing economy.
MAIN ECONOMIC SECTORS
Services Sector
Sector Overview
In recent years, the services sector has grown at a considerably faster rate than
the commodity producing sector of the Pakistani economy. It has emerged as
the most significant driver of economic growth. In 2014-15 the services sector
contributed 58.8 percent of the GDP and registered a growth rate of 4.95
percent. This sector has potential for further growth.
The sub-sectors are: Transport, Storage and Communication; Wholesale and
Retail Trade; Finance and Insurance; Housing Services (Real Estate); General
Government Services (Public Administration and Defines); and Other Private
Services (Social Services).
During 2014-15, the growth of these sub-sectors were as follows: Transport,
Storage and Communication - 4.21 percent, Wholesale and Retail Trade - 3.38
percent, , Finance and Insurance - 6.18 percent, Housing Services - 4.0 percent,
General Government Services - 9.44 percent and Other Private Services - 5.94
percent.
Investment Potential
• Pakistan is home to a host of multinational companies and financial institutions.
There is room for further investment in fi nancial and insurance markets.
• The demand for large scale commercial transportation and mass-transit systems
is growing with the expansion of road infrastructure. Foreign investors can take
advantage of this opportunity and invest in the transport sector.
• With a 190 million population, over 50 percent of which is the middle class,
Pakistan is now a consumption driven society. Demand for branded products and
international franchises is also increasing as new and modern shopping malls are
coming up in major cities.
• There is tremendous potential of investment in the tourism industry in Pakistan
which is endowed with many tourist attractions. These are historic sites such as
remnants of the Indus Valley Civilization at Mohenjo-daro, Harappa and Taxila as
well as architectural marvels of the Mughal era and the breathtaking beauty of
Gilgit-Baltistan where the second highest peak of the world i.e. K-2 is located.
 Agriculture Sector
Sector Overview
Pakistan has a rich and vast natural resource base covering various ecological and climate zones. It
also has one of the largest canal water irrigation systems in the world. This gives the country the
potential for producing a variety of food commodities. Land totaling 22.45 million hectares is already
under cultivation, 16.5 million hectares of which are located in the Punjab Province.

Dairy
Pakistan has huge dairy industry, with the country ranking fourth among milk producing countries
with a production of 45,529 tons of milk which is worth Rs. 177 billion (approximately US$ 1.77
billion). This sector has immense potential for further development . Milk production can easily be
multiplied by applying mechanized farming techniques and scientific breeding methods. Foreign
investors have found the dairy sector as an attractive avenue for investment.
Livestock and Poultry
Pakistan has the 3rd largest livestock population in the world.
Traditionally this sector has been dominated by small producers to
meet their food security needs and supplement this income. The
livestock and poultry sector performs a vital role in Pakistan’s
economy with contribution of around 12 percent of GDP. During
2014-15, livestock share in the agriculture sector value addition
stood at 56.3 percent. Livestock recorded a growth of 4.12 percent.
Major livestock and poultry products include meat, eggs, animal
and hides. The major share of production is consumed locally.
Meat demand in Pakistan is growing at approximately 6 percent
per annum and there is increased potential investment in
production and distribution of meat, poultry and good quality
slaughters houses.
Fisheries:
Pakistan has a total coast line of 1050 km. with a total fishing area of
approximately 300270 sq.km. These fishing areas are rich in marine life
and are home to species of commercial significance. Apart from marine
fisheries, inland fisheries (based in rivers, lakes, ponds, dams etc.) are
also commercial significant. Fisheries add substantially to the national
income through export earnings. In 2014-15 the fisheries sub-sector
registered a growth rate of 5.75 percent.

Crops
With a share of 11.1 percent in value addition of agriculture sector crops
contribute 2.3 percent to the GDP. This sub-sector has grown mildly at
1.09 percent over the last year. Similarly growth has been registered
production of crops such as onion, grams, lentils, chilies and potatoes.
The fruit and vegetables production has remained stable.
Investment Potential
• Of the total 16.5 million hectares of cultivable land in Punjab, a vast
1.7 million hectares is still available for corporate farming.
• As much as 30% of horticultural produce that goes to waste every
year can be converted into economic gain by investing in
agribusiness value chain industries.
• Despite being 4th largest milk producer globally and an average
annual milk demand growth of 20 percent, only 8 percent of milk is
processed in Pakistan. There is significant potential for setting up
processing units and chillers for local consumption and export.
• Despite having the 3rd largest livestock population, the average
yield of milk per animal is one of the lowest in the world.
Opportunity for investment exists in breed improvement, animal
husbandry, veterinary medicines and genetic research labs.
• Meat demand in Pakistan is growing at 6 percent per annum.
Fattening farms using modern techniques are a potential area of
investment. Likewise, slaughter houses, meat processing units, Halal
meat export, organic farming are significant areas of investment
and growth potential.
Industrial Sector
The industrial sector in Pakistan contributes 20.30 percent to the GDP. It has four
sub-sectors including mining and quarrying, manufacturing, electricity and gas
generation and distribution, and construction. Each sub sector of the industrial
sector has its own role and significance in the economy. Performance of these sub-
sectors is given below:

Manufacturing Sector
Manufacturing sector accounted for 13.3 percent of GDP and employed 14.2
percent of the total employed labour force. There are three subsectors: Large Scale
Manufacturing, Small Scale Manufacturing and Industrial processing.

Large Scale Manufacturing (LSM) contributes 10.6 percent of GDP and dominates
the overall manufacturing sector, accounting 80 percent of the sector share. Small
Scale Manufacturing accounts for 1.7 percent of total GDP and 13.0 percent of
Manufacturing. Industrial processing accounted for only 7.0 percent of overall
Manufacturing sector.
The manufacturing sector showed growth during July-March 2014-15
in products such as Iron and Steel at 35.63 percent, Automobiles at
17.02 percent, Leather Products at 9.62 percent, Electronics at 8.21
percent, Pharmaceuticals at 6.38 percent, Chemicals at 5.94 percent,
Non-Metallic mineral products at 2.56 percent, Petroleum Products
at 4.73 percent, Fertilizers at 0.95 percent and Textile at 0.50 percent.

Construction Sector
The contribution of construction in industrial sector is 12.0 percent. It
provides employment opportunities to 7.33 percent of labour force.
This sub-sector has potential for growth as demand is high, especially
for low cost housing. The construction sector recorded a growth of
7.0 percent last year.

Electricity generation & distribution and Gas Distribution

This sub-sector of industry plays an important role in development of
the country and also contributes to the growth of all sectors of the
economy. Its share in industrial sector is 8.2 percent.
Mining and Gems
Sector Overview
• Pakistan has enormous mineral potential including
precious metals and dimension stones. Availability of
abundant raw material, low cost of production,
talented, artisans and mining concessions by the
government makes this a primary sector for
investment.

• Pakistan has abundant reserves of coal, copper, rock

salt, limestone and onyx marble, China clay, dolomite,
fire clay, gypsum, silica sand and granite, as well as
precious and semi- precious stones. This sub-sector
contributes 2.9 percent of GDP. Mining and quarrying
recorded a growth of 3.8 percent in 2014-15.
 Investment Potential
• Pakistan Mineral Development Corporation offers joint venture in the
following projects:

• Gold and Base Metals Exploration in the Northern Areas of Pakistan

• Coal Briquetting Plants
• Coal mining for small thermal power plants
• Production of Ultra Refined SaltInvestment Potential
• Pakistan Mineral Development Corporation offers joint venture in the
following projects:

• Gold and Base Metals Exploration in the Northern Areas of Pakistan

• Coal Briquetting Plants
• Coal mining for small thermal power plants
• Production of Ultra Refined Salt
Investment Potential
• As the 4th largest cotton producer and well
developed textile industry, significant opportunities
exist in setting up value-addition units, such as
apparel lines.
• With the rising quantity and quality of domestic
consumption, the textile industry is looking to expand
capacity to meet the local demand. This provides
investment opportunity.
• The investors in textile sector can take advantage of
the Pakistan’s GSP Plus Status with European Union,
which allows Pakistani products to enter the EU
markets on concessional rates.
Energy
Sector Overview
As the Pakistani economy develops, the country face a severe power deficit as
the demand for electricity has grown at a faster pace than the generation
capacity. Power deficit is estimated to cost the economy 2 percent of GDP per
annum. Current power deficit stands between 5,000- 8,000 MW. Current
energy mix for power generation is heavily dependent on power generation
(approximately 70 percent of generation mix). The Government’s focus is to
encourage investments in indigenous resources to generate cheap electricity
such as coal, nuclear, hydropower, solar and wind energy generation.

Investment Potential
Pakistan offers attractive incentive packages for power generation.
These include
• Guaranteed uptake of power produced by
Independent Power Producers (IPP) at profitable
prices per unit.
• Liberal and transparent policy for investors to set up
IPP projects.
• One-Window facilitation for power projects – Private
Power Infrastructure Board (PPIB).
• Guaranteed Power Purchase Agreement (PPA) for
IPPs, backed by sovereign guarantee of Government
of Pakistan (GoP).
• 20 percent return on wind energy and between 14-17
percent return on equity in coal and solar energy.
PROSPECTS OF ECONOMIC GROWTH
Year 2014-15 was a good year for Pakistan’s economy, with projected GDP growth crossing 4
percent, driven by vibrant manufacturing and service sectors and improving energy availability.

With tax reforms and collection and restricted current and development expenditure, the
economic indicators have improved. The Inflation Index (CPI) is the lowest since 2003, steady at
4.8 percent and the fiscal deficit is contained at around 3.8 percent of GDP. External reserves
have grown with coordinated monetary and exchange rate policies. Private investment is also on
the rise along with increased FDI.

In addition to monetary and fiscal policies, Pakistan’s recent economic growth has been driven
mainly by the services and manufacturing sectors. Acceleration in growth of large-scale
manufacturing comes from strong performance of agro-based industries, iron and steel,
construction, cotton yarn and textiles. On the demand side, growth continues to be driven by
increase in household consumption.(1)