NATIONAL INCOME

OF PAKISTAN
Definition Of National
Income
National income or national product
is defined as the total market value of
all the final goods and services
produced in a country during a year
is called national income. A country is
high national income is said to be a
prosperous country.
Importance Of National Income
Measure the size of economy and level of
country's economic performance.
Trace the trend or the speed of the
economic growth in relation to pervious
years also in the countries
Make projection about the future
development trend of economy.
Make international comparison of peoples
living standard.
 Different Concept Of
Economic Performance
Gross Domestic Product(GDP)
Gross National Product(GNP)
Net National Product (NNP)
National Income (NI)
Personal Income(PI)
Disposable Income(DI)
Per Capita Income(PCI)
Real and Nominal Income
 Gross Domestic
Product
The most important concept of national
income is Gross Domestic Product.Gross
Domestic Product is the market value of all
final goods and services produced during a
year within the geographical boundaries of
a nation.It does not include the income
earned by resources in foreign countries
but include the income of foreigners
working in an economy.
 Types Of Gross Domestic
Product
Nominal GDP
Real GDP
Nominal GDP
Nominal GDP is increase when inflation rate is increase
even if the volume of the goods and services produced
is unchanged. Nominal GDP use the current price.
Real GDP
Real GDP is not change when inflation rate is
change,real GDP is change when production level is
change.Real GDP use the constant price.
 Calculation Of GDP
Three Approaches to measuring GDP
Expenditure Approach
Expenditure approach is calculated the GDP
by measure the total spending on all final
goods and services during a given period
GDP=C+I+G+(X-M)
C=total consumption, I=tot investment
G=government
expenditure,X=export,M=import
 Approaches
.Income Approach
Using the income approach GDP is calculated by adding up
the factor incomes to the factor of production in society
GDP=National income(NY)+Indirect Business taxes(IBT)
+Capital consumption allowance and depreciation(CCA)
+Net factor payments(NFP)
.Value Added Approach
Some of the goods in the raw form then it is passes into
the production process. The value of the goods is
increased.
The value of sales of goods-purchase of intermediate
goods to produce the goods sold.
 Gross National Product(GNP)
Gross national product is the market value of all
final goods and services produced by a nation
during a year,in and outside the nation.
GNP=GDP-income of foreigners working in a
country+income of countryman working abroad
Net National Product(NNP)
Net National Product(NNP)is the net production
of final goods and services in a country during
the year.It is GNP-depreciation
NNP=GNP-Depreciation
 NI AT FACTOR COST
Availability of natural resources
Availability of natural resources and
its maximum exploitation increase
the size of natural income. A country
which have large resources can easily
increase national income.
 STOCK OF FACTOR OF
PRODUCTION
It is an important factor which can
increase the national income. The
factor of production are land, labour ,
organization, capital. If these factor
are available in a large quantity then
we can easily increase national
income.
STATE OF TECNOLOGY
If advance technology and latest
equipment used in the process of
production then more goods can
lie produced which increase the
volume of national income
 Mean Of Transportation And
Communication
The well developed mean of
transport and communication
facilitate the exchange of goods and
services. Increase the mobility of the
factor of production. And in this way
the volume of national income
increase.
SUPPLY OF RAW MATERIAL
If the raw material available in
the large quantity then the size
of the national income increase
and vice versa.
 The Technical Know-
How
The technical know how also
influence the size of national
income. If the people of the
country are well experienced and
trained then the size of the
national income increase
otherwise decrease.
 Per Capita Income
Total national income divided by total
population. It is not average income
(because it is include children and
non working population) but save as
an indicator of a country s living
standard.
 Formula
Per capita income=
national income /total
population.
 Personal income
In economics personal income referred to
an individual total earning from wages ,
enterprises and other venture. It is some
of all the income received by all individuals
or household during a given period .
Personal income is that income which is
actually received by the individual and
household in the country during the year
from all resources
 Formula
P.I = N.I CORPORATE TAXES
-UNDISTRIBUTED CORPORATE
PROFITS SOCIAL SECURITY
CONTRIBUTION+ TRASFER PAYMENT
Causes Of Low Per
Capita Income
 Causes of low per capita income
may be divided into following
three categories:
A. Economic Causes
B. Social Causes
C. Political Causes
 ECONOMIC CAUSES

1. Vicious Circle of Poverty:

Vicious circle of poverty is the largest reason
of low per capita income. Developing countries
including Pakistan are trapped into VCP. A poor
country is poor forever due to the VCP. 21.0 %
population is very poor population in Pakistan.
 2. Unemployment
Unemployment is the major cause of low
per capita income. Unemployment means
no source of income and result is low per
capita income. Rate of unemployment is
5.5 %, 16 % is underemployed and 20% is
disguised unemployed in Pakistan.
3. Lack of Foreign Investment
Due to backwardness, political instabilities
and improper availability of infrastructure
the attraction for foreign investment is not
suitable. Foreign investment (Jul-Mar) is $
1.8 billion in Pakistan. Foreign investment
is reduced by 45%. Lack of foreign
investment means less employment
opportunities and low per capita income.
4. Low National Income
Low per capita income in Pakistan is also
the result of low level of national income.
Low level of national income means low
level of saving and low level of investment.
All these factors contribute toward poverty.
5. Use of Backward Technology

Techniques of productions used by

developing countries are backward. Due to
out-dated methods of production,
productivity level is low. Low level of
productivity means narrowness of market
and reduction in exports and increase in
imports.
 6. Increase in Utility
Charges
Utility charges like water, gas, electricity,
telephone bills etc. are increasing day by
day in Pakistan. More utility charges lead
to reduction in the saving of population
and its result is low per capita income. At
present growth rate of electricity and gas
sector is 0.4 %
 7. Poverty
Poverty in Pakistan is very common, 21.0
% population is treated as poor population.
Poverty is also a cause of low per capita
income. Low per capita income means low
level of saving and low level of investment.
Its result is poverty.
8. Backward Agricultural Sector
People have adopted just subsistence
farming styles in agriculture sector. They
are not farming according to the
commercial patterns. Sometimes, due to
natural calamities and use of backward
techniques of production, there is
reduction in production and it decreases
the income of poor farmers. Its share in
GDP is only 21.5 %.
9. Absence of Credit Facilities
Poor population is needed credit facilities
to take an active part in economic
activities to remove low per capita income.
But in Pakistan, availability of credit is not
desirable. Poor people has no access to
credit it is only for rich landlords.
Conditions for credit issuing are so tights
and credit is not given in time.
 10. Improper Income
Distribution
Imbalanced distribution of resources is an
additional cause of low per capita income
in Pakistan. This situation leads to increase
the gap between rich and poor. Due to
undesirable distribution of income and
wealth, poor population is unable to take
part in economic activities to remove
poverty. 20 % rich population has complete
control over the 50 % national resources in
Pakistan.
11. Low level of Productivity
Due to use of backward technologies and
inefficiencies of labour & entrepreneur,
productivity level in Pakistan is very low as
compare to developed countries. Value of
annual productivity of Pakistani labour is
much lower than the value of labour of rich
nations. Annual value of productivity of
labour is only $ 100 against $ 2500 in
advanced countries in Pakistan
12. Low level of Saving
Low level of saving is mainly due to low
income. It leads to less investment and
less return. Due to less return people
remains poor forever. Domestic savings are
9.9 % of GDP. Low level of saving means
low per capita income in Pakistan.
 SOCIAL CAUSES

1. Population Pressure:
Rapidly rising population is also a
cause of poverty. Existing population is
already not provided basic necessities of
life. Therefore, increase in population will
lead to decrease the per capita income.
Now population of Pakistan is 169.94
million with growth rate of 2.05 %
2. Dishonesty & Corruption
Low per capita income is also due to
dishonesty and corruption in management.
Officers receive a huge amount of illegal
money for the legal and illegal job. These
unnecessary payments reduce the savings
of poor and result is low per capita income.
 3. Illiteracy
Lack of education and training is also a
cause of low per capita income. It reduces
the abilities to work. Sometimes a worker
due to illiteracy remains unemployed or
underemployed. Similarly, lack of skill in
entrepreneur also reduces his profit and its
result is low per capita income. Literacy
rate in Pakistan is 57 %.
4. Backward Infrastructure
Non-availability or availability of backward
infrastructure is also an additional reason
of low per capita income and poverty. Low
level of education, backward state of
technology, poor health, inefficiency of
labour and poor system of transportation &
communication are cause lowper capita
income and poverty. Backward
infrastructure causes low attraction for
foreign investment.
 5. Low Living
Standard
Pressure of foreign counties in our
economic activities, backward standard of
productivities and improper basic facilities
to population reduces the living standard
of population. Low living standard is a
symbol of low per capita income.
Expenditure on health sector is only 0.55 %
of GDP.
 POLITICAL CAUSES
1. Law and Order
Law and order conditions are at their
poor stage. A huge portion of saving of
population is wasted in costly and lengthy
legal process that leads to low per capita
income. Chief Justices Iftikhar Muhammad
Chohdery himself has to wait for a very
long time.
 2. Poor Governance
Instable government and instability in the
policies of government are another cause
of low per capita income and poverty.
Every government remains failed to
establish such policy that leads to reduce
the poverty
 3. Landlordism
Ignorant but big landlords control our
whole economy. They have no sense of
social welfare. In government they take
those actions that are in their personal
interest. Their actions badly affect the
encouragement of per capita income
 4. Nepotism
Nepotism means the murder of talent and
abilities. It refers to the employment
opportunities according to relation not
according to worth. If population is poor
but is talented it remains poor due to
nepotism. 16 % employed labour force is
performing their services below their
capabilities.
Khalid
Muqeet

Bc13010
How to
increase per
capita
income in
 Per Capita Income
Total national income divided by total
population. It is not average income
(because it is include children and
non working population) but save as
an indicator of a country s living
standard.
 Formula
Per capita income=
national income /total
population.
High National
Income:-
High level of national
income means high level of
saving and high level of
investment. when savings
and investment increase
the per capita income is
also increase.
Upgrade
Agriculture
Sector:-
Agriculture is central to economic
growth and development in Pakistan.
Being the dominant sector it
contributes 21.4 percent to GDP,
employs 45 percent of the countrys
labour force and contributes in the
growth of other sectors of the
economy. Govt should make a huge
part in budget for upgrade agriculture
Increase the
level of
production:-
Due to use of backward
technologies production level in
Pakistan is very low as compare
to developed countries.Govt
should introduce and facilitate
modern technologies in Pakistan
for the increase in the level of
production.
Credit Facilities:-
Poor population is needed
credit facilities to take an
active part in economic
activities to remove low per
capita income.Govt should
take steps for increase and
better availabilities for credit
facilities and credits give on
time.
Use of modern
technologies:-
Techniques of productions used by
developing countries are backward. Due
to out-dated methods of production,
productivity level is low. By the use of
modern technologies we can increase
the production and productivity level
and when the production is high fulfill
the our domestic demand and exports
to other countries.