INFLATION :
According to gardener Ackely " A persistant I and appreciable rise in the general level of prices is called inflation".
CAUSES OF INFLATION
There are so may causes of inflation in the less developing countries like pakistan.
DEMAND PULL INFLATION :
It is generated when the aggregate demand increases than the supply. Following are the causes of demand pull inflation in pakistan.
HIGH MONETARY EXPANSION :
The supply of money is expanding quickly every year but the supply of goods and service is not increasing according to that ratio. Due to this prices are rising.
FOREIGN REMITTANCES :
These are sent by the Pakistan who are working abroad to those families who are living in pakistan. Their purchasing power is increasing day by day. In other world their demand is increasing. So aggregate demand has increased then the aggregate supply.
FOREIGN AID :
The volume of foreign aid is also increasing with the passage of time. So when this aid is used inside the country it increases the demand.
CONSUMPTION HABITS :
In Pakistan urban particularly feels proudness in spending money on those items which are commonly used in the advanced countries. So there is a demonstration effect also in Pakistan. The increased expenditure has contributed the inflationary pressure.
CONSTRUCTION OF HOUSES :
Since 1970, the people are spending their savings in the purchase and construction of houses. So this expenditure has also contributed inflation.
NATIONALIZATION OF INDUSTRIES :
After the nationalization of industries in Pakistan the investors class is hesitating to do the investment due to the fear of nationalization. Now they are using their resources in speculation and in hoarding. So supply of production is hot increasing rapidly.
INCREASE IN POPULATION :
The rate of population growth in Pakistan and in other less developing countries is 3% to this aggregate demand is increasing day by day and price level is rising.
Saturday, August 28, 2010
Friday, August 27, 2010
MEASURES TO CORRECT THE BALANCE OF PAYMENT
MEASURES TO CORRECT THE BALANCE OF PAYMENT
PROPER UTILIZATION OF RESOURCES :
The less developed countries like pakistan should utilize their natural resources properly. It will increase the production and exports of the country.
INCREASE IN LABOUR INTENSIVE INDUSTRIES :
Pakistan should prefer the labour intensive industries. Because labour is cheap as compared to the machinery. It can reduce the import of machines and can reduce the cost of production. The demand of cheap goods can increase.
INCREASE IN SMALL SCALE INDUSTRIES :
We should increase the small scale industries like Korea, Taiwan and Hong king. We can increase our production and export with small capital. We can increase the export of sport and carpets. Pakistan can nut afford to import the heavy machinery.
CHANGE IN THE EXPORT PATTERN :
Since independence we are exporting raw material and few primary goods. Now if we want to correct our balance of payment we shall have to increase the exports of manufactured goods.
DECREASE IN THE IMPORTS :
The consumption goods may not be imported and people should use the local manufactured goods. People shall have to be motivated to use Pakistani goods.
IMPROVEMENT IN QUALITY :
We should improve the quality of the product to capture the world market by attracting the quality of the product.
REDUCE THE COST :
For increasing exports it is necessary the we should reduce the cost of production. Because in the competition lower price attract the other countries.
JOINT PROJECTS :
We can increase the industries with the help of foreign investors. It will be useful for increasing the exports.
REDUCTION IN EXPORT DUTIES :
The government should reduce the export duties and should provide incentives to the exporters. It will increase the exports. Credit and licence facility should be provided to exporters.
REVISION IN IMPORT & EXPORT POLICY :
The government should frame such type of import and export policy that if encourage the exports and discourage the imports.
PROPER UTILIZATION OF RESOURCES :
The less developed countries like pakistan should utilize their natural resources properly. It will increase the production and exports of the country.
INCREASE IN LABOUR INTENSIVE INDUSTRIES :
Pakistan should prefer the labour intensive industries. Because labour is cheap as compared to the machinery. It can reduce the import of machines and can reduce the cost of production. The demand of cheap goods can increase.
INCREASE IN SMALL SCALE INDUSTRIES :
We should increase the small scale industries like Korea, Taiwan and Hong king. We can increase our production and export with small capital. We can increase the export of sport and carpets. Pakistan can nut afford to import the heavy machinery.
CHANGE IN THE EXPORT PATTERN :
Since independence we are exporting raw material and few primary goods. Now if we want to correct our balance of payment we shall have to increase the exports of manufactured goods.
DECREASE IN THE IMPORTS :
The consumption goods may not be imported and people should use the local manufactured goods. People shall have to be motivated to use Pakistani goods.
IMPROVEMENT IN QUALITY :
We should improve the quality of the product to capture the world market by attracting the quality of the product.
REDUCE THE COST :
For increasing exports it is necessary the we should reduce the cost of production. Because in the competition lower price attract the other countries.
JOINT PROJECTS :
We can increase the industries with the help of foreign investors. It will be useful for increasing the exports.
REDUCTION IN EXPORT DUTIES :
The government should reduce the export duties and should provide incentives to the exporters. It will increase the exports. Credit and licence facility should be provided to exporters.
REVISION IN IMPORT & EXPORT POLICY :
The government should frame such type of import and export policy that if encourage the exports and discourage the imports.
Thursday, August 26, 2010
Balance Of Trade And Balance Of Payment
BALANCE OF TRADE :
Balance of trade is difference between the various exports and imports of visible goods of a country during a given period of time. If the value of visible items exports exceeds then the value of visible goods imports then the balance of trade is said to be favourable.
BALANCE OF PAYMENT :
Balance of payment is a record of economic transaction between the residents of the one country and the rest of the world during the period of one year. Under balance of payment we include visible as well as invisible goods.
FAVOURABLE BALANCE OF PAYMENT :
if the total value of imported goods and services exceeds than the total value of exported goods and service, during a year the balance of payment is said to be unfavorable. In case of opposite situation it will be unfavorable.
CAUSES OF UNFAVOURABLE
BALANCE OF PAYMENT IN THE LESS DEVELOPED COUNTRIES LIKE PAKISTAN :
Since independence of pakistan balance of payment condition was not satisfactory. Accept few years pakistan is facing deficit in her balance of payment. the deficit in her balance of payment. The deficit is met by the loans. The deficit is increasing day by day.
IMPORT OF MACHINERY :
Developing countries are importing machines and technology to improve the industrial sector. It has made the balance of payment unfavourable because the value of capital goods in increasing day by day and we want to industrialize our economy.
EXPORT OF RAW MATERIAL :
Exports of pakistan depends upon raw material and semi manufactured goods. The prices of raw material are very low in the world market. So our balance of payment remains unfavourable. For instance the product of cotton reduced in 1995 due to virus so it also affected adversely our balance of payment because we imported cotton instead of exporting.
DEPENDENCE OF AGRICULTURE :
Many countries like pakistan mainly rely on the exports of primary goods like rice and cotton. If climate is unfavourable then production of agriculture sector decreases which affects the balance of payment badly.
PAYMENT FOR FOREIGN SERVICE :
Every year pakistan pays a lot of foreign exchange for various service like transport. Insurance and exports. It makes our balance of payment unfavourable.
UNFAVOURABLE TERMS OF TRADE :
Pakistan paying higher prices of imports as compared to the price at which it gest from export.
POLITICAL UNREST :
Many less developed countries like pakistan are facing political unrest which is the main cause of low production. Ultimately balance of payment remains unfavourable. In this situation investor fears to do the investment.
ADVANCED COUNTRIES POLICY :
The import policy of advanced countries is not favourable for the poor countries. They impose restrictions on the imports and create problems for the poor countries. They have also created unions against developing countries.
IMPORT OF WHEAT :
Pakistan is facing the food shortage problem and spending a huge amount of foreign exchange on its import. In the past we imported many times like wheat and it has affected our balance of payment.
AFGHAN REFUGEES PROBLEM :
Afghan inflow was a heavy burden on our economy. It reduced our exports and increased our imports.
DOMESTIC PROBLEMS :
Floods trabela dam problem and nationalization of industries reduced the production and export of the countries reduced the production and exports of the country. Up till now majority of afghan refugees is living in pakistan and most of them have got the national identity cards in pakistan.
FALL IN FOREIGN REMITTANCES :
During the year 1984-85, pakistan working abroad sent 2.88 dollars to pakistan. Now with the passage of time it is falling day by day.
DEVALUATION:
In 1972 pakistan devalued its currency upto 131%. This devaluation also increased the deficit in the balance of payment. Delinking in 1982 and now there is gradual fall in the value of currency.
Balance of trade is difference between the various exports and imports of visible goods of a country during a given period of time. If the value of visible items exports exceeds then the value of visible goods imports then the balance of trade is said to be favourable.
BALANCE OF PAYMENT :
Balance of payment is a record of economic transaction between the residents of the one country and the rest of the world during the period of one year. Under balance of payment we include visible as well as invisible goods.
FAVOURABLE BALANCE OF PAYMENT :
if the total value of imported goods and services exceeds than the total value of exported goods and service, during a year the balance of payment is said to be unfavorable. In case of opposite situation it will be unfavorable.
CAUSES OF UNFAVOURABLE
BALANCE OF PAYMENT IN THE LESS DEVELOPED COUNTRIES LIKE PAKISTAN :
Since independence of pakistan balance of payment condition was not satisfactory. Accept few years pakistan is facing deficit in her balance of payment. the deficit in her balance of payment. The deficit is met by the loans. The deficit is increasing day by day.
IMPORT OF MACHINERY :
Developing countries are importing machines and technology to improve the industrial sector. It has made the balance of payment unfavourable because the value of capital goods in increasing day by day and we want to industrialize our economy.
EXPORT OF RAW MATERIAL :
Exports of pakistan depends upon raw material and semi manufactured goods. The prices of raw material are very low in the world market. So our balance of payment remains unfavourable. For instance the product of cotton reduced in 1995 due to virus so it also affected adversely our balance of payment because we imported cotton instead of exporting.
DEPENDENCE OF AGRICULTURE :
Many countries like pakistan mainly rely on the exports of primary goods like rice and cotton. If climate is unfavourable then production of agriculture sector decreases which affects the balance of payment badly.
PAYMENT FOR FOREIGN SERVICE :
Every year pakistan pays a lot of foreign exchange for various service like transport. Insurance and exports. It makes our balance of payment unfavourable.
UNFAVOURABLE TERMS OF TRADE :
Pakistan paying higher prices of imports as compared to the price at which it gest from export.
POLITICAL UNREST :
Many less developed countries like pakistan are facing political unrest which is the main cause of low production. Ultimately balance of payment remains unfavourable. In this situation investor fears to do the investment.
ADVANCED COUNTRIES POLICY :
The import policy of advanced countries is not favourable for the poor countries. They impose restrictions on the imports and create problems for the poor countries. They have also created unions against developing countries.
IMPORT OF WHEAT :
Pakistan is facing the food shortage problem and spending a huge amount of foreign exchange on its import. In the past we imported many times like wheat and it has affected our balance of payment.
AFGHAN REFUGEES PROBLEM :
Afghan inflow was a heavy burden on our economy. It reduced our exports and increased our imports.
DOMESTIC PROBLEMS :
Floods trabela dam problem and nationalization of industries reduced the production and export of the countries reduced the production and exports of the country. Up till now majority of afghan refugees is living in pakistan and most of them have got the national identity cards in pakistan.
FALL IN FOREIGN REMITTANCES :
During the year 1984-85, pakistan working abroad sent 2.88 dollars to pakistan. Now with the passage of time it is falling day by day.
DEVALUATION:
In 1972 pakistan devalued its currency upto 131%. This devaluation also increased the deficit in the balance of payment. Delinking in 1982 and now there is gradual fall in the value of currency.
Wednesday, August 25, 2010
Major Exports Of Pakistan
COTTON:
It is the most important cash crop of pakistan. Now due to its importance our farmer in increasing in cultivation. In 1993-94 8.0 Million bales were exported to other entries. Pakistan earned 3.083 billion dollers forign exchange in 1993-94. Government has also allowed the exporters to purchase cotton directly from the ginners. Pakistan faced the cotton crises in 1995 due to low product.
RICE:
Pakistan is earning a lot of forign exchange by exporting rice to the middle east countries. Pakistan has a monopoly in trade of basmati rice. In 1993-94 Pakistan earned 8214 million dollers. Pakistan shall have to pay special attention to the quality and cost of rice. India and china are our competitors in the world trade of rice.
CARPETS:
Pakistan export the hand made and machine made carpets. Pakistan has a tough competition with china and india. Pakistan earned million dollers every year by exporting it si west germany, U.S.A, France, U.K and Itly.
LEATHER:
in the field of export pakistan leather industry is playing very important role. Our Leather industry has improved the quality of product according the world market standard itly, Japan, Spain are the main buyers.
SPORTS AND SURGICAL GOODS:
Various other items like sports surgical goods and jewllery is also exported to other countries. Durning 1995-96 pakistan earnest million dollars by exporting these goods.
FISH AND FISH PRODUCT:
the export of fish and fish product export is increasing day by day. Pakistan earns million dollars foreign exchange by exporting it every years.
It is the most important cash crop of pakistan. Now due to its importance our farmer in increasing in cultivation. In 1993-94 8.0 Million bales were exported to other entries. Pakistan earned 3.083 billion dollers forign exchange in 1993-94. Government has also allowed the exporters to purchase cotton directly from the ginners. Pakistan faced the cotton crises in 1995 due to low product.
RICE:
Pakistan is earning a lot of forign exchange by exporting rice to the middle east countries. Pakistan has a monopoly in trade of basmati rice. In 1993-94 Pakistan earned 8214 million dollers. Pakistan shall have to pay special attention to the quality and cost of rice. India and china are our competitors in the world trade of rice.
CARPETS:
Pakistan export the hand made and machine made carpets. Pakistan has a tough competition with china and india. Pakistan earned million dollers every year by exporting it si west germany, U.S.A, France, U.K and Itly.
LEATHER:
in the field of export pakistan leather industry is playing very important role. Our Leather industry has improved the quality of product according the world market standard itly, Japan, Spain are the main buyers.
SPORTS AND SURGICAL GOODS:
Various other items like sports surgical goods and jewllery is also exported to other countries. Durning 1995-96 pakistan earnest million dollars by exporting these goods.
FISH AND FISH PRODUCT:
the export of fish and fish product export is increasing day by day. Pakistan earns million dollars foreign exchange by exporting it every years.
Sunday, August 22, 2010
Role Of Foreign Trade In The Economic Development
IMPORTANCE:
Foreign trade plays very important role in the economic development of any country. Pakistan also exports a lot of agricultural product to other countries and imports the capital goods from other countries. The role of foreign trade can be judged by the following Facts
MARKET EXPANDS:
The demand factor plays very important role increasing the production of any country. The foreign trade expands the market and encourage the products. In pakistan home marke is very limited due to poverty. So if is necessary that we should sell our product in other Countries.
INCREASE IN INVESTMENT:
Foreign trade encourages the investors increase the investment to produce more Goods. So the investment increase.
REMOVAL OF MONOPOLIES:
Foreign trade also discourages the monopolies. Whenever any monopolist increase the price government allows the import of goods to reduce the price in the country. Formation of monopoly is also discouraged by the international trade.
REMOVAL OF FOOD SHORTAGE:
Pakistan is also facing the food shortage problem. To remove the food shortage pakistan has improved the wheat many times. So due to foreign trade we solved this problem many times.
AGRICULTURAL DEVELOPMENT:
Foreign trade has played very important role for the development of our agriculture sector. Every year we export rice, cotton, fruits and vegetables to other countries. The export of these goods makes our farmer more prosperous. It inspires the spirit of development in them.
INCREASE IN EMPLOYMENT:
With the rise in the demand of food domestic resources are fully utilized and it increased the rate of development in the country and reduces the unemployment in the world.
INDUSTRIAL DEVELOPMENT:
Now the share of industrial sector is increasing day by day in the export. The government of pakistan has also provided various incentives to the industrialists to improve the export of this sector. So the rate of industrial development has increased.
FOREIGN EXCHANGE EARNINGS:
Foreign trade provides exchange which can be used to remove the poverty. By improting technology we can utilize our resources.
RISE IN NATIONAL INCOME:
Foreign trade increases the scale of production and national income of the country. to meet the foreign demand we increase the producitvity on large scale so GNP also increases.
USEFUL FOR THE WORLD PEACE:
Today all the countries are tied in trade relations with each other. So foreign trade also prevails peace and prosperity in the country.
Foreign trade plays very important role in the economic development of any country. Pakistan also exports a lot of agricultural product to other countries and imports the capital goods from other countries. The role of foreign trade can be judged by the following Facts
MARKET EXPANDS:
The demand factor plays very important role increasing the production of any country. The foreign trade expands the market and encourage the products. In pakistan home marke is very limited due to poverty. So if is necessary that we should sell our product in other Countries.
INCREASE IN INVESTMENT:
Foreign trade encourages the investors increase the investment to produce more Goods. So the investment increase.
REMOVAL OF MONOPOLIES:
Foreign trade also discourages the monopolies. Whenever any monopolist increase the price government allows the import of goods to reduce the price in the country. Formation of monopoly is also discouraged by the international trade.
REMOVAL OF FOOD SHORTAGE:
Pakistan is also facing the food shortage problem. To remove the food shortage pakistan has improved the wheat many times. So due to foreign trade we solved this problem many times.
AGRICULTURAL DEVELOPMENT:
Foreign trade has played very important role for the development of our agriculture sector. Every year we export rice, cotton, fruits and vegetables to other countries. The export of these goods makes our farmer more prosperous. It inspires the spirit of development in them.
INCREASE IN EMPLOYMENT:
With the rise in the demand of food domestic resources are fully utilized and it increased the rate of development in the country and reduces the unemployment in the world.
INDUSTRIAL DEVELOPMENT:
Now the share of industrial sector is increasing day by day in the export. The government of pakistan has also provided various incentives to the industrialists to improve the export of this sector. So the rate of industrial development has increased.
FOREIGN EXCHANGE EARNINGS:
Foreign trade provides exchange which can be used to remove the poverty. By improting technology we can utilize our resources.
RISE IN NATIONAL INCOME:
Foreign trade increases the scale of production and national income of the country. to meet the foreign demand we increase the producitvity on large scale so GNP also increases.
USEFUL FOR THE WORLD PEACE:
Today all the countries are tied in trade relations with each other. So foreign trade also prevails peace and prosperity in the country.
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