The Contribution of Pakistan’s Large Scale Manufacturing Industries Towards Gross National Product at World Prices

Over the period 1949/50 to 1970/71, Pakistan’s large-scale manufacturing sector grew at a compound rate of more than 15 per cent. Its share of GNP increased during this period from 1.5 per cent to 9.4 per cent. Various factors contributed to this growth, not the least of which were the various incentives provided to the manufacturing sector via tariffs, restrictive import licensing, tax holidays and an overvalued official exchange rate. Recently, several studies, and most notably an OECD study by Little, Scitovsky and Scott [10] (hereafter referred to as LSS) questioned the meaning of the growth rates and sectoral shares of manufacturing sector when the goods produced in these sectors are valued at prices distorted by various subsidy and trade restricting policies. They concluded that a better measure of the manufacturing sector’s contribution could be obtained by valuing a country’s gross national product not at domestic prices but at world prices—i.e. the prices that would obtain in the country were there no trade tax or quotas.