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Economy of Pakistan since 1947

Published on 19th Aug, Edition 34, 2013


Pakistan’s achievements in income, consumption, agriculture and industrial production are extremely impressive and have lifted millions of people out of poverty levels. However, the achievements do pale when looked against the missed opportunities. Pakistan faced numerous economic issues in 1947 because India refused to give Pakistan its share of sterling reserves. The situation was so bad that Pakistani government couldn’t pay salaries to its employees. Pakistan was way behind India at the time of independence, yet it has managed to survive. The industrial units in Pakistan in 1947 could be counted on fingers. In 1947, Dalmia Cement Factory at Karachi and Associated Cement Company at Wah together produced 28,000 tons of cement; Colony Textile Mills Okara was the only textile mill; Railways workshop at Mughalpura Lahore was one of the best engineering facilities in the sub-continent; there were three sugar mills in the country, one was in the then East Pakistan and two in present Pakistan; there was no paper or paper board mill; there was no edible oil processing industry, no bicycle manufacturing unit, no soda ash plant or polyester fiber unit.

Today, Pakistan’s economy is the 27th largest in the world. Presently, Pakistan is manufacturing and producing tanks, jet fighters, missiles, textile products, cars, tractors, motorcycles, jeeps, heavy vehicles chemicals, construction material, fertilizers, glass items, papers, software etc. Pakistan has now a cement production capacity of over 50 million tons; over 75 sugar mills with a production capacity of over six million tons; over 70 units producing fine paper for text books, periodicals and school note books.

Textile, cement and sugar were the industries for which raw material was locally available and these are the main large scale industrial sectors of the country. In its initial years after independence, the planners facilitated the establishment of those industries for which raw material was available in Pakistan. In this process, they however neglected some established engineering industries, which denied the country a good engineering base.

There was a time when Pakistan’s growth was one of the fastest in the South Asia, then came a time when it was one of the lowest. The overall picture that emerges from examination of economic indicators is that Pakistan has made significant economic achievements. The salient features of Pakistan’s economic history are:

  • Pakistan is self sufficient in most food production.
  • Per capita incomes have expanded more than seven-fold in US dollar terms.
  • Pakistan has emerged as one of the leading and successful producers of cotton and cotton textiles.
  • Pakistan has developed a highly diversified base of manufactured products for domestic and world markets.
  • Physical infrastructure network has expanded with a vast network of gas, power, roads and highways, ports and telecommunication facilities.

Presently Pakistan’s GDP is US$240 billion (2012); GDP per capital is US$1,378; exports over US$24 billion; imports over US$33 billion; public debt is 50 percent of GDP; and credit ratings by Standard & Poor’s is B Minus, which is a “Stable” category. As a matter of fact, these indicators do not show the full potential of Pakistan even then this is a remarkable growth while knowing the economy condition at the time of independence.

Pakistan’s manufactured exports in the 1960s were higher than those of Malaysia, Thailand, Philippines and Indonesia. If investment in educating the people and upgrading the training, skills and health of the labor force had been up to the level of East Asian Countries and a policy of openness to world market would have been maintained without any break, Pakistan’s exports would have been at least US$100 billion instead of US$24 billion. Had the population growth rate been reduced from 3 percent to 2 percent, the problems of congestion and shortages in the level of infrastructure and social services would have been avoided, the poor would have obtained better access to education and health and the incidence of poverty would have been much lower than what it is today.

Oil and gas sector in Pakistan has seen phenomenal growth since the independence in 1947, as till now 791 wells have been drilled by various local and international exploration companies with over 250 oil and gas discoveries. During the last sixty five years, not only hundreds of textile mills have been established, but food industries including vegetable ghee and sugar mills, cigarette manufacturing units, cement plants and fertilizer factories have also been established. Presently, share of the manufacturing sector is 24 percent in the country’s gross domestic product, though this share may further go up when the engineering, automobile and other value added industries make headway in the coming years. The number of telephone connections went up from just 50,000 in 1950 to over 120 million in 2012.


Despite this record of sustained growth, Pakistan’s economy is characterized as unstable and highly vulnerable to external and internal shocks. However, the economy is continuously proving to be unexpectedly resilient in the face of multiple adverse events concentrated into an eight-year period.

Though over time, Pakistan economy has progressed very well but the fact of the matter is it’s almost half of what could have been achieved. The corruption in public and private sector has effectively rusted the entire economic system.

Since 1947, agriculture continues to be the single largest sector and is the main source of livelihood for over 66 percent of the population. Agriculture accounts for almost 23 percent of GDP and employs approximately 44 percent of its workforce. Though the annual production has increased over time but per person yield has dropped. Moreover, as such no effective measures have so far been taken to increase the yields as compared to India, which is primarily due to lesser incentives to the farmers.

Despite substantial increase in the production of major agricultural crops, Pakistan has still not been able to achieve food self-sufficiency and has to spend billions annually on import of wheat, edible oil, tea and similar necessary food items. On manufacturing side, Pakistan has yet to make a breakthrough in value added industries. Country is dependent on imports to meet its requirements of machinery, electrical and mechanical goods, transport equipment, steel and chemicals.

Pakistan has neglected human development, due to which country began to slip in growth, exports, revenues, and development spending and got entrapped into external and domestic indebtedness. This was due to both fundamental structural and institutional problems as well as to poor governance. It is important to learn lessons from the history and focus on long term solutions instead of finding temporary solution. Government needs to stabilize rupee against other countries.

There was no industrial base at the time of independence yet Pakistan survived its early years on the strength of good governance. It is the need of the day that all four provincial and federal governments focus on governance and implement such policies, which could benefit each and every citizen of this country and more importantly put back the country on the right track.


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