There are many barriers and difficulties in the way of economic development of less developed countries. Development for developing nations is desirable but not achievable due to a lot of hurdles. These obstacles are grouped into the following five categories:
Economic Obstacles
Social Obstacles
Cultural Obstacles
Political Obstacles and
Administrative Obstacles
A. ECONOMIC OBSTACLES
Some of the main economic obstacles are given below:
1- Deficiency of Capital and Foreign Exchange
There is scarcity of capital and foreign exchange in Pakistan. Lack of capital and foreign exchange are a big hurdle in way of economic development. Per capita income is very low i.e., $ 1095. Low level of per capita income results in low saving and low investment. Domestic saving is just 9.9 % of GDP in Pakistan; it should be 25 % for rapid economic development. Foreign exchange reserves of Pakistan are just $ 15.0 billion.
2- Vicious Circle of Poverty
According to Ranger Nurkse, vicious circle of poverty is the greatest obstacle in way of economic development. In developing countries there is low income that leads to low saving and low investment. Low level of investment causes low rate of capital formation, which stops the economic development. Rate of capital formation is just 5%.
3- Backward Natural Resources
No doubt, developing countries including Pakistan have rich and many resources. But due to backward state of technology these resources are un-utilized, under-utilized or mis-utilized. So, the improper utilization of natural resources is also a hurdle in the development procedure. Share of natural resources to GDP is less than 1 %.
4- Backward State Technology
Use of backward technology is another problem of economic development. Due to use of backward technology productivity level of our labour and its efficiency is very low. Productive quality and quantity is also inferior due to use of old means of production. Annual value of productivity of our labour is about $ 100 as compare to the more than $2500 in advanced countries.
5- Inflation
High rate of inflation is also a hurdle in way of economic development. Rate of inflation is 13.3 % in Pakistan. Due to inflation purchasing power of people decreases, their consumption increases and saving decreases. Low saving leads to less investment and a country remains poor and backward.
6- Low Per Capita Income
Per capita income of Pakistan is very low as compared to the rich nations. Low per capita income is due to low level of national income and high rate of population growth. Low per capita income results in low saving and low investment. So, in the economy, capital formation rate is low that is a serious obstacle in way of economic development. Per capita income in Pakistan is $ 1095.
7- Internal and External Debts
To operate some major projects, government has to take loans from national and international resources. These debts and their services charges are increasing day by day. While taking loans from abroad we have to follow the terms and conditions of foreign donors that is the obstacle in our growth and development process. Today, the burden of total public debts is Rs. 8160 billion and an external debt is $ 53.9 billion.
8- Dependence on Agriculture
In Pakistan, about 68% population is living in 46,894 villages. Their main occupation is agriculture that is at backward stage. Old methods of cultivation, less credit facilities, unorganized markets and limited irrigation facilities are factors, which are hurdle in the process of economic development. Total cropped area of Pakistan is 23.8 million hectares which is about 28% of total area.
9- Dualistic Economy
Dualistic economy refers to the huge difference between various economic sectors. There are vast regional and income disparities in Pakistan. There is co-existence of fully advanced and fully backward state of technology in the same sector at the same time. Similarly, population of Pakistan is very rich and very poor; it is also a hurdle in economic development.
10- Deficit Balance of Payment
Pakistan is facing the persistent deficit in its balance of payment since 1947 with the exception of 5 or 6 years. Higher imports volume than exports are an obstacle in way of economic development. At present, imports of Pakistan are $ 25.107 billion, exports are $ 14.162 billion and deficit in balance of payment is $ 10.945 billion in 2009-10.