09 Mar

Snap Shot of Industrial Sector:

As per the official survey, the industrial sector contributed 12.4% to the GDP in 2022. It has been divided into three tiers, i.e., Large Scale Manufacturing (LSM), Small Scale Manufacturing (SSM), and Slaughtering. LSM dominates the overall manufacturing sector as it contributes 9.2% to the GDP and accounts for 74.3% of the sectoral share, SSM contributes 2% of the GDP, and its sectoral share is 15.9%. Similarly, slaughtering accounts for 1.2% of the GDP and 9.7% of the sectoral share (GOP, 2022).

No country in the world is self-sufficient to produce all the products, Every country has to trade certain goods to meet the demand. Pakistan has the fifth largest trade market in the world after China, India, the US, and Indonesia, but the country was ranked 42nd in terms of nominal GDP. The exports of India and Indonesia are  $322 and $183 billion, and exports in Pakistan were US $25.3 billion in 2020, surpassing the set target, i.e., US $22.7 billion (Zulkifa,2020).

Causes and Removal of Industrial Backwardness in Pakistan :

The backward industrial sector is the second major sector of the economy of Pakistan. Industrial sector plays an important role in the development process of any country. Since the latter part of the 18th century manufacturing as a human, occupation got much importance. The modern concept of industry-manufacturing goods began in Great Britain in the late 18th century.

Problems or Causes of Industrial Backwardness

Causes of industrial backwardness may be divided into the following four major categories:

  • Historical causes
  • Economic causes
  • Social causes
  • Political causes 

Each one is discussed below.

Historical Causes

1. The Policy of British Rulers :

There were no favors for the Muslims due to the British government, before independence in the sub-continent. The British exported the raw material at a cheaper rate to Britain so that the industrialization process in the sub-continent is to be stopped.

2. Lack of Technical Knowledge :

Modern technology was introduced at the beginning of the 20th century. The British used the modern methods of production in Britain. However, in the sub-continent, they used the old method of production in all the manufacturing units. Therefore, the quality and quantity of production were very low. It creates a bad view of our industry world level.

3. Industrial Share :

Before partition, there were 921 total industrial units in the sub-continent. However, out of 921 industrial units, Pakistan got only 34 industrial units that are just 3.69 % of total industrial share. Accordingly, we started our economy without the industrial sector.

Economic Causes

1. Disputable Industrial Strategy :

It is a huge barrier in the way of industrial advancement. In the history of Pakistan, there was a policy of import substitution, in the early 1950s. There was a trend of industrialization in the 1960s. The policy of Nationalization was adopted in Z.A Bhutto's period and Zia-ul-Haq adopted the policy of Privatization. The investors are always hesitant to make an investment in such situations.

2. Lack of Mineral Resources :

There is an acute shortage of mineral resources like oil, coal etc. These resources are necessary for industrial development. Due to the lack of mineral resources, the rate of industrial development in Pakistan is very low. The contribution of natural resources to GDP is 0.8 % in Pakistan.

3. Low Investment and Low Savings :

Deficiency of capital is one major problem in the way of industrial development. Pakistan is fundamentally under developed and there is a shortage of capital in the country. Industrial development is impossible without capital. Sufficient capital is a major condition for industrial development. Total investment and domestic savings are 6. 13.4% and 9.5% of GDP respectively.

4. Lack of Technical Know-how :

There is a lack of technical and skilled workers in the country due to the high rate of illiteracy. The efficiency of labor is very low due to the use of backward and orthodox technology. It is also the main cause of industrial backwardness.

5. Lack of Infrastructure :

The infrastructure for industrial development is necessary. There is a shortage of infrastructure in Pakistan. For example, gas, electricity, transport, roads, railways network and communication are not available up to the requirement of industrial development.

6. Inflationary Pressures :

Rate of inflation is very high in Pakistan. The prices of imported machinery, oils, chemicals and spare-parts are rising very sharply. These factors contribute to industrial backwardness. The very high rate of inflation is 37% in Pakistan.

7. Inadequate Industrial Credit

There is a shortage of active financial institutions in Pakistan, which may provide credit services industrialists according to their needs. Terms and conditions for the provision of credit are very tight.

8. Unfavorable Industrial Structure

There are inequalities in industrial growth in Pakistan. Manufacturing of consumer goods is preferred over capital goods. No doubt the return on consumer goods is more but capital goods are necessary for economic development.

9. Limited Market for Capital Goods

The narrowness of domestic and foreign markets for the industrial goods is also a major hurdle in the way of industrial development. The small size of the market is due to low purchasing power, low standard of goods and the high cost of production etc.

10. Lack of industrial Consultancy Firms

The investment in modern industries is not only costly but also risky. The capitalists are regularly withdrawn and hesitant in investing their capital in new industrial ventures. No doubt, deficiency of capital is a problem in Pakistan, but the major problem is that existing capital is not properly utilizing due to lack of consultancy firms.

11.Lack of Industrial Research

Research work for the industrial sector is not satisfactory due to lack of technical education and in addition to that, there is a shortage of technological universities in the country. Improvement in production and reduction in the cost of production is impossible due to lack of research. The number of technical and vocational institutions in Pakistan is more than 1522 out of which 1140 are in the public sector. These are providing training to 3,00,000 persons.

12. Frequent Breakdown of Electricity

Like other power resources, electricity is also insufficient in Pakistan to meet the domestic needs. There is irregular supply and frequent breakdown of electricity in Pakistan. It affecting the industrial production in the country. The growth rate of the electricity and gas sector, in Pakistan, is -21.1%.

13. Economic Sanctions

Advanced countries are not willing to improve backward countries. They have created various trade zones among themselves. As a result, they import and export among themselves. Therefore, the export volume of developing countries remains very low. On the other hand, developed nations have imposed various sanctions on import and export with poor nations.

14. Global Recession

The global economic recession in the last years adversely affected the growth of the manufacturing sector. The donor countries usually interfere in our internal affairs and economic activities in the time of recession.

15. Adverse Balance of Payment

Adverse balance of payment is a new cause of industrial backwardness. To make industrial development, we have to import modern machinery and advanced technology from other countries. However, due to a shortage of foreign exchange, we cannot import such items to make rapid economic development. 

Social Causes

1. Lack of Education

People have no idea how to set up the industry due to a high degree of illiteracy. They have no sufficient resources to start heavy projects. The efficiency of unskilled, untrained and illiterate labor is very low that causes industrial backwardness. The literacy rate just 57.7 % and expenditures on the education sector are only 1.8 % of GDP, which is the lowest in Asia.

2. Faith & Fate

Man should work hard first and then put the result in the hands of ALLAH. Mostly, our people are irrational, they believe in faith and fate. They do not want to take the risks. They are working just to meet their basic needs. There is no commercial mind in Pakistan.

3. Corruption

Corruption is a great evil, which is still increasing at a very high rate in Pakistan. It is found in government as well as the private sector also. Due to corruption, illiterate and dishonest workers come forward and cause industrial backwardness. Pakistan is at number 140th out of 180 countries at the table of the most corrupt nations.( Transparency International )

4. Climate and Weather

Climate and weather conditions are also a big cause of backwardness in various industries. There is an inter-relationship between the industrial and agriculture sector. If the weather is not good, it causes agricultural backwardness and it results in industrial backwardness.

5. Cultural Disturbance

The cultural disturbançe in the country have slowed down the production in the manufacturing sector. In addition to this, a shortage of raw material has an adverse effect on production. There are various caste systems in the country.

Political Causes

1. Political Instability

An additional cause of industrial backwardness is political instability. Since partition, the political situation of Pakistan is not satisfactory. There are regular changes in the governments and government policies. Domestic as well as foreign investors feel the risk of making investment due to political unrest. All these result in industrial backwardness.

2. Kashmir and Water Issues

Since freedom, the Kashmir problem has been disturbing our economy. People in Pakistan remain worried about the danger of war with India due to Kashmir and water issues. Therefore, Pakistani and especially foreign people hesitate to invest.

3. Burden of Refugees

At the time of partition, Pakistan had to face a serious problem of refugees coming from India and there was a shortage of resources in Pakistan. Now Pakistan is also facing this problem in the form of Afghan refugees.

4. Wars with India

The two big wars fought in opposition to India in 1965 and 1971. It creates many economic problems. Now the situation is that both Pakistan and India have to keep up a huge part of their budget for defense.

Measures or Suggestions to Improve Industrial Sector

The following measures are suggested to improve the industrial sector of Pakistan.

  • More allocation of funds for industrial research is required, which is necessary, for the industrial development.
  • Industrial sector can be promoted by increasing capital.
  • Saving and investment should be increased to develop the industrial sector.
  • To promote the industrial sector, there should be technical knowledge.
  • Tax concession is also needed to increase the investment in new industries.
  • In time, the supply of raw material is necessary for the improvement of the industrial sector.
  • Advanced infrastructure is necessary for the industrial development of Pakistan.
  • Financial institutions should provide credit facilities to the industrial sector at flexible terms and conditions.
  • There should be an expansion of markets, at the domestic and foreign level, of industrial goods.
  • Foreign investment should be encouraged; more incentives should be given to investors.
  • Political stability is compulsory for the development of industrial sector.
  • High degree of technical education is required to produce skilled, technical and efficient workforce.
  • The problem of load-shedding and irregular supply of electricity should be removed.
  • Commercial policy and self- reliance policy should be adopted to remove industrial backwardness.
  • Foreign exchange reserves and the balance of payment position should be favorable to develop the industrial sector.


All the above factors are causing industrial backwardness. Backwardness is not bad but remaining backward is so bad. So, Pakistan needs to make industrial development through the following.

  • Use of advanced technology
  • Development in infrastructure
  • Provision of credit facilities
  • Increase in industrial consultancy firms Recommended
* The email will not be published on the website.