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Objectives of economic planning

1. To increase per capita income

2. Higher level of employment
3. Price stability
4. Reduction in inequalities in income distribution
5. To remove BOP difficulties
6. Reducing regional disparities
7. Self sufficiency in food
8. Redressing imbalances in the economy
9. Increase savings
10.Provision of social services
11.Long term economic growth
Various forms of economic planning
1. Central planning
2. Indicative planning
3. Development planning
• Sectorial planning
• Geneal planning
• Functional planning
• Structural planning
Objectives of privatization
1. To reduce the drain of govt. resources
2. To create greater oppertunities for private sector
3. To improve productivity
4. To develop viable capital market
5. To release govt resources for social and physical infrastructure
6. To facilitate economc activities

Measures taken by the govt. of Pakistan for the promotion of industries

1. Industrial policy of 1948

2. Setting up of PIDC
3. Provision of industrial credit
4. Tariff protection
5. Establishment of large industrial estates
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6. Export bonus scheme

7. Foreign investment
8. Nationalization of industries
9. Deregulation and liberalization
10.Privatization programme of 1991
11.Export processing zones
12.Fiscal and monetory incentives
13.Deletion policy
14.Trade with Afghanistan
15.Improvement in the performance of public sector industries
16.Reduction ininterest rates
17.Long term textile policy
18.Self assesment sheeme
19.Income from software export
20.Foreign direct investment

Obstacles in the way of effective economic planning in Pakistan

1. Lack of statistical data

2. Lack of technical persons
3. Lack of public cooperation
4. Political instability
5. Foreign assistance
6. Natural clamities
7. Dualism
8. Over ambitiousness

Stratigy of economic planning

1. Growth rate
2. Investment policy
3. Saving potintials
4. Balance of payments
5. Regional disparity
6. Employment
7. Resource allocation
Conditions or requirements of successful planning
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1. Realistic goal of the plan

2. Appropriate policies and instruments
3. Adequate information
4. Rational institutions
5. Suitable administrative and technical appratus
6. Public cooperation
Objectives of manpower planning in Pakistan
1. To expand labour force
2. To improve the level of existing manpower
3. To remove unemployment and underemployment
4. Cooperation between labour and producer
5. Export of manpower
Measures to remove unemployment in Pakistan
1. Control over the population
2. Exploration of new resources
3. Increase in investment
4. Agricultural development
5. Encouragement of foreign private investment
6. Emphasis over technical and vocational education
7. Scarpping the existing socio economic set up
8. Over hauling the political and administrative set up
9. Introduction of labour intensive technologies
10.Job creating oriented fiscal and monetary policies
Importance of human resource development
1. Better use of physical capital
2. Increase in productivity
3. Abolition of social and economic backwardness
4. Increase in employment oppertunities
5. Social revolution

Importance of agricultural in Pakistan

1. Major contribution to GDP
2. Food availability
3. Supply of rawmaterial to industries
Muhammad Saleem Ullah
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4. A big source of employment

5. Industrial development
6. Source of foreign exchange earnings
7. Extended markets
8. Greater potentialities
9. Strategic importance
Problems faced by agricultural sector in Pakistan
1. The defective land tenure system of the country
2. Defective rural socio economic set up
3. Soil health problems
4. Weak financial position
5. Limited cultivable area
6. Lack of cold storage and warehouses
7. Problems of agricultural marketing
8. Inadequate public polisy and agriculture reserch

Importance of foreign aid in Pakistan

1. Remove paucity of capital

2. Removal of technological backwardness
3. Construction of infrastructure
4. Establishment of key industries
5. Exploration of natural resources
6. Raising the level of unemployment
7. External and internal economies of scale
8. Economic and social changes
9. Removal of BOP deficit
10.Increased govt. revenue

Causes of deficit in BOP of Pakistan

1. Low export potential

2. Ever increasing demand for imports
3. Detoriorating terms of trade
4. Increase in invisible payments
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5. Fall in workers remittances

6. Capital account problems

Importance of industrial development for Pakistan

1. Increase in employment oppertunities

2. Increase in output and income
3. Agricultural development
4. Development of allied and related sectors
5. Attainment of internal and external economies
6. Industrialization brings social and economic changes
7. Insustrialization will reduced BOP deficit
8. The increased savings and investment
9. Increased govt. revenues
10.Defence requirements

Causes of industrial backwardness in Pakistan

1. Lacking the industrial base

2. Lack of minerals
3. Deficiency of capital
4. Dispoted and controversial industrial strategies
5. Lack of infrastructureal facilites
6. Complecated official procidure
7. Lack of consultancy facilities
8. Poor quality of manufactured goods
9. Lack of technical know how and industrial disputes
10.Tariff structure
11.Inflationary tendencies
12.Social political factors

Causes of high birth rate in Pakistan

1. Illiteracy
2. Religious considerations
3. Concept of earning hand
4. Reduced or limited opportunity cost of bearing a child
5. Sociological and cultural set up
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6. Early marriages
7. Reduced access to birth control centers
8. Reduced death rate
9. Lack of fear of fall in standard of living
10.Poor reluctant hesitant and apologetic role of govt. to control population

Importance of man power planning in Pakistan

1. Market imperfections
2. Utilization and exploration of natural resources
3. Better education and training
4. Educational planning
5. Structural changes in the economy
6. Rapid increase in population

Economic importance of capital formation

1. Increase in imployment
2. Increase in productivity
3. Economies of scale
4. Size of the market
5. Industrial development
6. Self sufficiency
7. Controlling the inflation
8. Mineral resources
9. Economic welfare
10.Urbanization
11.Technical changes

Causes of low capital formation in under developed countries

1. Vicious circle of poverty
2. High birth rates
3. Hoarding
4. International demonstration effects
5. Lack of proper infra structure
6. Lack of entrepreneurial abilities
7. Unproductive expenditures
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8. Unequal income distribution

9. Inflation
10.Market imperfections
11.Problems of money markets

Causes of disparities in income distribution in Pakistan

1. Differences in productive assets

2. Govt. policies
3. Corruption and dishonesty
4. Inflation
5. Rising population
6. A blend of socio economic factors
7. Poverty
8. Apital intensive techniques
9. Regional disparities
10.Agricultural backwardness
11.Foreign trade sector
12.Political instability

Concept of economic planning

• Introduced by Norwegian professor Kristian in 1910

• Planning is a program
• It is a govt.decision making process
• Arthus Lewis book ‘Principles of Economic planning’

Need and role of economic planning

1. Wider oppertunities
2. Public oriented goals
3. Better use of resources
4. Greater resources
5. Production pattern
6. Larger savings and investment
7. National tasks and emergencies
8. Problems rising from foreign trade
9. Coordination between economic activities
Muhammad Saleem Ullah
B.Com,ACMA,M.Sc,B Ed
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10.Distribution of income
11.Social and sociological problems
12.Market imperfections and price distortions

Limitations of economic problems

1. The phenomenon of advance calculations

2. High cost of management
3. Suppression of initiatives
4. Lack of freedom

Long term planning(last for period of 10 to 30 years)

1. Greater freedom of choice

2. Scope of planning gets broadended
3. It play an educative role
4. Structural changes
5. Stimulant
Planning techniques
1. Creation of a planning agency
2. More and more informations about country
3. Nature of the plan
4. Fixing the plan period
5. Setting the objectives
6. Determination of the growth rate
7. Financial resources for the plan
8. Sectoral allocation of determination of priorities
9. Role of govt.
10.Formations of economic policies
a. Budgetory policy
b. Tax policy
c. Credit policy
d. Foreign trade and foreign exchange policy
e. Triff policy
f. Price policy
g. Wage policy
h. Manpoer policy
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i. Immigration policy
j. Nationalization policy

Determinents of capital output ratio(COR)

1. Availability of natural resources

2. Growth of population
3. Amount of capital employed
4. Degree and nature of technological progress
5. Rate of investment
6. Composition of invest
7. Quality of managerial and organizational skill
8. Changes in demand
9. Changes in factor prices
10.Employment policy
11.Industrialization
12.Spread of education
13.Stages of economic development
14.Export promotion

Limitations of cost benefits analysis

1. Difficulties in cost assesment

2. Difficulties in assesment of benefits
3. Ignoring joint costs and benefit
4. Adjustment for risk and uncertainity
5. Problems of externalities
6. Ignoring opportunity cost
7. Non market items
Technology and economic development
Technology means the body of knowledge which can be used to produce
goods and services from economic resources
Appropriate technology which is based upon the needs for providing
employment.It should be according to the stage of development and with in
the prevailing economic policy framework of the economy
Impacts of technology
1. More output
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2. Much increase in productivity

3. Expension of industry
4. Mass production
5. Increase in MEC
6. Division of labour
7. Scientific research
8. Increase in per man per hour
9. National and international trade

Analysis of major economic and non economic problems facing Pakistan

1. Problems relating to natural resources

2. Human resource problems
3. Sectorial problems
4. Problems of capital formation
5. Problems of foreign trade and aid sector
6. Administrative problems
7. The blind of socioeconomic problems
8. The mixture of social and institutional problems
9. Problems pertaining to atmosphere

Benefit Cost ratio/Profitabilty index

A benefit-cost ratio (BCR) is an indicator, used in the formal discipline of cost-benefit analysis, that
attempts to summarize the overall value for money of a project or proposal. A BCR is the ratio of the
benefits of a project or proposal, expressed in monetary terms, relative to its costs, also expressed in
monetary terms. All benefits and costs should be expressed in discounted present values.
Rationale
In the absence of funding constraints, the best value for money projects are those with the highest net
present value. Where there is a budget constraint, the ratio of NPV to the expenditure falling within the
constraint should be used. In practice, the ratio of NPV to expenditure is expressed as a BCR. BCRs
have been used most extensively in the field of transport cost-benefit appraisals. The NPV should be
evaluated over the service life of the project.
Problems

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A major shortcoming of BCRs is that, by definition, they ignore non-monetised impacts. Attempts have
been made to overcome this limitation by combining BCRs with information about those impacts that
cannot be expressed in monetary terms, such as the UK's New Approach to Appraisal framework.
A further complication with BCRs concerns the precise definitions of benefits and costs. These can vary
depending on the funding agency.
Economic rate of retun/Internal rate of return
Interest rate at which the cost and benefits of a project, discounted over its life, are equal. ERR differs
from the financial rate of return in that it takes into account the effects of factors such as price controls,
subsidies, and tax breaks to compute the actual cost the project to the economy.
Opportunity cost of capital
The OCC is the expected return that your are giving up by investing in a project rather than in the stock market. In
other words, it is the project's opportunity cost of capital.
Transfer payments

Capital output ratio

COR also dependents upon the availability of natural resources in the country. A country
which is abundant in natural resources has a low COR because it can substitute the natural
resources of capital. In other words, the resources rich country in order to boost output cans
utilize the resources rather capital. As the case of china, Norway is known as very high
capital out-put ratio country because she is not endowed with natural resources.
The amount of capital employed in a country is an important factor which determines the
size of COR. If the average life of capital is assumed constant, then COR is determined by
the proportion of national income invested annually.The technical progress and innovations
also determine the COR. If the technology development is such a nature that capital is
employed intensively, the COR will rise. On the other hand, the countries which employ
relatively more labor in the process of production, the value of COR will be low.
COR also depends upon the rate of investment. The higher the rate of new investment, the
higher is COR. A country which doubles its capital in 10 years will have a higher output per
unit of capital than a country which doubles it in 20 years.

Discount rate

Discounting

Discounted cash flow

Benefit cost analysis

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Shadow prices
Shadow price is basically a term from Economics. It is change in the objective value of an
optimal solution. The optimal value is of an optimization problem that is obtained by
relaxing the constraint by one unit. Practically, the shadow price is the maximum price that
a company is willing to pay for an extra unit of a given resource. Shadow price provides
powerful insights into problems to the decision makers. This can be shown with the help of
an example. If a person has a constraint which limits the labor to 60 hours per week. In this
case, the shadow price tells how much that person will be willing to pay for an additional
hour of labor. Another example can be that the price of keeping a production line
operational for an additional hour is the shadow price.

In a more formal setting, it is considered as the value of Lagrange multiplier at optimal

solution. Thus the infinitesimal change in the objective function arising from an infinitesimal
change in the constraint.

Project evaluation techniques

• Pay back period

• Net present value method
• Internal rate of return
• Accounting rate of resturn
• Profitablity index

Role of industrialization in economic development of the country

1. Increase in national income

2. Higher standard of living
3. Economic Stability
4. Improvement in balance of payment
5. Stimulate progress in other sectors
6. Increase employment opportunities
7. Promoting specialization
8. Rize in agricultural production
9. Easy to control industrial actvity
10.Large scope of industrial progres
11.Reduction in the rate of population growth
12.Increase in saving and investmen
13.Provision for defence
14.Lessor preasure on land

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15.Development of markets
16.Incese in the government revenue

Muhammad Saleem Ullah

B.Com,ACMA,M.Sc,B Ed
muhammad_ullah17@yahoo.com