The following question appeared in CSS 2005 Economics paper:
'Capital widening and Capital deepening requires the capital stock to grow faster than the labor force. It is time we must change our priorities, unless it is properly developed, tangible results cannot be realized. Discuss with reference to power and communication sector. Give suggestions.'


Please drop your comments here.

@Isa Mohmand

Sorry brother cant comment much as this area relates to growth theory, which is not my main area of interest. My area of study pertains to migration. Frankly I have no idea about power and communication sector.

However some comments:

Pakistan has a an ever increasing demand for power. The demand for power is necessitated due to structural changes in economy as our economy is going out from agriculture based economy to an industrial country. Pakistan hugely relied on hydropwer generated electricity till 1990's after which a huge investment was undertaken in the power sector. However the ever increasing population required continued investment in that sector, as electricity is the main input in the industrial process and also became necessity generally. The greater demand of electricity required continued investment in new power sources as well as the upgradation and maintenance of existing power sources. Political reasons hampered investment in the cheaper hydroelectric sources and at the same time financial constraints hampered investment in higher cost thermal power sources.

Historically communication sector had been laging in terms of investment. But after 2000, Pakistan has attracted huge investment in that sector. Continous investment in that sector made the communication sector booming as well making it a huge contributor to the GDP growth rate.

The high population growth rate has always been a problem for Pakistan, as it always remained within the top ten growing countries in terms of population. Although we need to have more growth in capital than that of population. As we can see the present problems of ever greater demand for necessary capital inputs results in the low production. This is indeed the case that makes Pakistan a typical case of traditional growth models.

However Pakistan can get out of this quagmire if it could use its labor force more effectively. If the labor force is made more trained and skilled, the missing element of capital can be replaced with increase in labor productivity. This is evident from the example of ASEAN countries, where despite the lack of necessary capital, better and skilled labor resulted in higher growth rate.

Another missing link to replace lower capital formation is good governance, continuance of political and economic policies and better situation of law and order. These endogenous variables can result in higher GDP growth despite lack of growth in traditional inputs.