ECONOMIC OBSTACLES / FACTORS
The developing countries are facing a set of problems
which are common to all of them, in general, First, we discuss the main economic obstacles impeding economic growth.
(i) Market Imperfections:
By market imperfections, we mean the immobility of factors of
production, price rigidities, ignorance of market trends, static social
structure, lack of specialization, etc. It is due to market imperfections that
productive efficiency is low; resources are un-utilized, is-utilized, or
misallocated, The workers are engaged in occupations where they're marginal
productivity is zero; it is called disguised unemployment which is found in the agriculture sector.
(ii) Lack of Capital:
The rate of saving and investment is
low in developing countries like Pakistan and the rate of capital formation is
also low too. It results in a capital deficiency in the country. Domestic savings
are 8.4% of G.D.P, in 2014-15.
(iii) Natural Resource:
Land, minerals, mountains, coal, gas, oil, forests,
rivers, etc are called natural resources. It is a lack of research and survey
facilities in Pakistan and these are exploited properly. Therefore the
misuse of resources is an important reason for the economic backwardness of
developing countries. There is also a misallocation of resources due to various
social factors.
(iv) Lack of Technology:
The use of a low level of technology in various
sectors of Pakistan's economy is an important obstacle. The masses are also
poverty-ridden due to the use of outdated capital types of equipment and methods of
production. This. will leads to a low level of marginal productivity and capital
formation.
(v) Lack of Entrepreneur:
An efficient, hardworking, and experienced entrepreneur
plays an important role in the production process. He can get the least cost combination of factors of production
by his organizational skill.
(vi) Lack of
Foreign Exchange:
The underdeveloped countries
need a sizeable portion of the investment for the production of capital goods which can
not be obtained domestically, Such goods arc imported from developed countries.
Thus a poor country needs to collect foreign exchange by pushing up the sale of its own goods and services abroad. But it may become all the more difficult to turns savings into foreign exchange.
(vii) The Rise in Public Debt:
Public debt refers to borrowing by a government from within the country or from abroad. In Pakistan, public debt is payable in Rupees and foreign exchange. In order to assess the burden of public debt, we shall have to consider the nature and the purpose of the public debt. The debt may become unproductive in developing countries. It will impose money as well as a real burden on the community. The total outstanding public debt is Rs. 16936 billion in July-March 2015.
(viii) Deficit Budget:
When current expenditure exceeds current revenue, it is called deficit budgeting. It is a serious factor to disturb the fiscal system of the economy. The gap between receipts and expenditures is called a deficit budget. The method of financing used to cover. this gap is called deficit financing.
(ix) Unbalanced Growth:
The objective of economic development cannot be achieved without adopting an appropriate strategy. It implies the most effective way of utilizing the available resources of the economy. The pattern of investment is not designed to ensure a balanced development of various sectors of the economy.
(x) Dualistic
Economy:
Dualism
is a major characteristic of a developing country. Dualism refers
to the condition of a country when two techniques of production exist side by side in the
economy. For example, in Pakistan, modern industries and the old cottage
industries working side by side as well as modern farming and old farming
are being practiced at the same time.
(xi) Low Infrastructure Facilities:
The
undeveloped countries are characterized by a lack of infrastructure facilities these are the means of transport
and communications (e.g. roads, railways, ports, shipping, telecommunication
services) irrigation and power (e.g. avers, canals,
electricity, oil, gas, etc.) the educational and medical facilities. They are
inadequate to serve the existing population.
(xii) Rapid Rate of Population:
The population increases rapidly in developing
countries which has very adverse!y affected their rate of economic growth. In
fact, rapid population growth (i.e 1, 92% in Pakistan) is the greatest obstacle
to economic growth because it slows down the rate of capital formation.
(xiii) Vicious Circle of
Poverty:
The vicious circle of poverty is the main obstacle to
economic growth. The rate of savings and investment in an under-developed country is low to make for rapid economic development. On the other hand, the
inducement to invest is less owing to the small size of markets. It implies a
circular flow of forces in such a way as to keep a country in a state of poverty.
(xiv) Human Resources:
In developing countries, human resources are not fully
developed. There is a shortage of educational and training facilities
for manpower: Therefore,
the manpower is illiterate, unskilled, and inefficient. In Pakistan literacy rate is 58% and
research and training facilities are insufficient. The manpower prefers outdated techniques of production in which marginal productivity is low.
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