Posted by : Ahsan Khan Thursday, 22 December 2011

At the early stage of classical economists for economic growth and development, labour was the only factor of production. Later on neo-classical economists introduce the capital as a major factor of growth and development. But, today use of modern technology is the most important item of economic growth and development.
The application of science, especially to achieve desirable industrial and commercial objectives is called technology. In other words technology refers to a technique of production that gives large and superior quality of production within a short span of time.
Ø      In simple words:
“Technology is the use of knowledge or the mechanical arts and applied sciences to business, trade, commerce and industry.”
Ø      According to David N. Hyman:
“Technology is the knowledge of how to produce goods and services.”
At present technology is necessary for every nation. Without technology a nation cannot get all its requirements. Technology is cause of improvement of physical and human capital.
Technology comes into a country by following ways: Ø      Inventions Ø      Innovations


  1. Agricultural Growth
For a long time old seeds, traditional techniques, ploughs and waste & garbage etc. were used in agriculture. So, the productive quality and quantity was very low. But due to use of modern techniques of production, there is invention of High Yield Variety (HYV) seeds, fertilizers, threshers, tractors and harvesters, tube-wells and water pumps, insecticides, weedicides and pesticides all this result in growth and development of agriculture. Growth rate of agriculture sector is 2.0 %.
  1. Industrial Development
In the past, life was limited of limited population. In easy life, the use of industrial goods was very low. But now in modern age, use of industrial goods is increasing day by day. Rapidly increasing population is also demanding more industrial goods. In this situation, industrial growth and development is necessary which is possible due to use of technology.   Growth rate of industrial sector is 4.9 %.
  1. Increase in Employment Opportunities
Due to use of technology, better quality and quantity of various goods can be produced. This will lead to increase in the demand for labour. Increase in the demand for labour will reduce the unemployment. Rate of unemployment is 5.5 % that is very high in Pakistan.
  1. Increase in Factor’s Productivity
Technology plays very important role in increasing the productivity of factors of production. Modern technology is helpful to increase the efficiency of labour, which results in increase in production and standard of goods. Value of annual productivity of labour in Pakistan is $ 100.
  1. Reduction in Poverty
Use of technology is also caused in reduction in poverty. Use of technology makes it possible to reduce in cost of production that results in fall in price level. Availability of high standard goods at low prices increases the real income of the people and increase in the purchasing power. Technology opens the new economic sector that creates more jobs for unemployed population.  All this results in reduction in poverty. 21.0 % population is living below poverty line in case of Pakistan.
  1. Time Saving
Today, time is considered as a power and life is so busy. Lengthy and old production process is not affordable now. Technology is helpful to shorten the lengthy production process, it caused in quick yielding and rapid return. Due to technology, production quality and quantity can be improved in minim time period.
  1. Cost Minimization
Because of modern technology, the firms are in a position to reduce the cost of production. By employing technology it is possible to use the same raw material for more output or same output by using less quantity of raw material. On the other hand, wastage of large industries can be used in small industries as a raw material, which caused in reduction in cost of production.
  1. Increase in Marginal Efficiency of Capital (MEC)
Marginal efficiency of capital is the rate of return or profit on capital invested. With the help of technology, a firm can use the capital effectively. There is less wastage and more increase in the efficiency of labour that results in increase in the marginal efficiency of capital.
  1. Increase in Investment
16.6 % investment of GDP is not desirable for the economic development in Pakistan. Use of technology caused to increase in profit margin of the producer. Increase in profit margin will leads to increase in flow of investment. At least 25 % investment is needed for economic growth and development.

  1. Expansion in Foreign Trade
Use of modern techniques of production leads toward better quality and quantity of the products. In foreign trade there is stiff competition among different countries of the world. Use of technology enables a country to compete with other nations, expansion in foreign trade and to earn more foreign exchange reserves.
  1. Increase in Foreign Exchange Reserves
Foreign exchange reserves of poor nations like Pakistan are very short. Our imports are higher than our export that causes scarcity of foreign exchange reserves. Due to technology, it is possible to produce import substitutions and exportable goods. So, technology will help a country to increase its foreign exchange reserves. Foreign exchange reserves of Pakistan are $ 15.0 billion.
  1. Best Use of Capital
Capital is an important factor of production. Technology is useful to use the capital in the best way. Technology can increase in production and standard of goods in minimum time period. So, the return on capital will increase due to use of technology. Profit margin of the producer also increases with the use of technology. Rate of capital formation is only 5%.
  1. Specialization
Technology is helpful to increase the division of labour and specialization in all sectors of economy. Due to technology, division and specialization is possible which leads to inventions and innovations. Division of labour and specialization are helpful to increase in production quality and quantity.
  1. Discovery of Natural Resources
The nature has hidden a lot of its deposits under lands, seas, mountains and in the atmosphere. It is the modern technology that enables the man to find, explore and utilize these resources. Without technology, we cannot use these resources like oil, gas, iron, coal, gold, silver, copper etc. for the betterment of mankind. Share of natural resources to GDP is less than 1 % in Pakistan.
  1. Optimal Use of Resources
Optimal use of resources without using advanced technology is impossible. Backward country can remove its poverty through using modern techniques of production. In developing countries including Pakistan, technology is very helpful to use properly available resources to make development.
  1. Development in Infrastructure
Technology itself is a component of infrastructure. However with its use country’s infrastructure developed. Such as the use of atomic energy, use of CNG in place of petrol, use of computer, improvement of transport and communication network etc. Government has reserved an amount of Rs. 133 billion to develop the infrastructure in the country.

  1. Price Stability
Another role of technology is price stability. Sometimes, due to shortage of production there is increase in the prices of some products. Use of technology makes it possible to produce more within limited time period that helps to maintain the price stability. Rate of inflation in Pakistan is 13.3 %.
  1. High Living Standard
Reduction in poverty and inflation, more opportunities of employment and sufficient availability of goods and services are the symbols of high living standard. Accordingly, technology also helps to develop the living standard of a nation.
  1. Increase in Productivity
In developing countries like Pakistan, still backward methods of production are being used. But use of technology makes it possible to increase the quality and quantity of production in short time.
  1. Better Quality of Product
Through adopting technology, better goods can be produced in a large quantity. Technology is helpful in discovering new designs of the commodities. There is reduction in technical defects of the production due to the use of technology.
  1. Improvement in Efficiency of Labour
Due to illiteracy and low level of training, our labour is less efficient. Technology has also improved the efficiency of labour output per hour. Due to the use of modern tools and implements, efficiency of labour increases that results in more and better output.
  1. Breakdown of Vicious Circle of Poverty
Uses of technology encourage the saving and increase in investment. Technology improves the efficiency of labour and removes the instability in prices. Accordingly, vicious circle of poverty can be removed with the help of technology. 21.0 % population living below poverty line in Pakistan.
  1. Rapid Rate of Capital Accumulation
Rate of capital formation is just 5 % in Pakistan, which is very low as compared to the advanced countries. Low rate of capital formation leads to poverty and unemployment. Technology is helpful to increase the capital formation rate for the economic growth and development. Rate of capital formation should be 20 % to 25 % for economic development.
  1. Economies of Large-Scale
It is impossible to operate large-scale industries without use of technology. Use of technology helps to the producer to manage the business at large-scale. Use of technology causes to install, operate and maintain the industry at large-scale. Due to use of technology, achievement of economies of large-scale is possible.
  1. Expansion in Market Size
In developing countries like Pakistan, market is so limited. Technology causes in more output and more supply of goods, which enlarges the market size. Technology expands not only domestic market but also foreign market.
  1. Removal to Economic Backwardness
Poor countries can remove their economic backwardness through using technology. Technology increases the rate of growth in all sectors of an economy. More and better products are available for population. Use of technology enhances the process of economic development and removes the economic backwardness.
  1. Development of By-Products Units
Use of technology is helpful in establishing by-products units. By-products units refer to those, especially small industries, which use the waste of large industries as a raw material. With the use of technology, it is possible to establish the board, chipboard and hard board industry because it uses the wasted straw of sugar industry.
  1. Helpful for Research
Technology has led to increase of huge investment in scientific research in various sectors of an economy. This scientific research can be used to develop the various sectors of economy.
  1. Inventions and Innovations
Due to use of modern technology, there is division and specialization of labour. Specialization is the foundation for high standard of the goods that leads to inventions and innovations.


  1. Deficiency of Capital
Cost of advanced technology is very high. Poor countries cannot use the technology due to deficiency of capital. Domestic savings are 9.9 % of GDP and investment is 16.6 % of GDP.

2.      Illiteracy

Due to illiteracy, our labour is less efficient and less trained. Accordingly, our labour cannot use the modern technology appropriately. In Pakistan, literacy rate is 57 %. On the other hand expenditure on education sector is 2.0 % of GDP.
  1. Traditionalist Society
People are backward in developing countries like Pakistan. They are passing subsistence life and they do not want to use modern techniques of production.
  1. Import of Technology
Import of technology itself is a big problem. In developing countries, there is shortage of foreign exchange to import the technology.
  1. Adverse Balance of Payment
Import of technology causes more increase in imports of the poor countries. It creates more gaps between the imports and exports. It results in deficit in balance of payment. At present, deficit in balance of payment is $ 10.945 billion.
  1. Limited Home Market
The markets are limited in their size in developing countries like Pakistan, while the advanced technologies are concerned with the industries of large-scale.
  1. Lack of Natural Resources
In Pakistan, natural resources are available. But these resources are remained un-used, ill-used and mis-used. That feels no need for advanced technology. Natural resources contribute to GDP less than 1 % in Pakistan.
  1. Backward Social Set-up
The orthodox and backward social set-up is also an obstacle in the way of use of modern technologies. People are not ready to use modern instruments and thinking.
  1. Lack of Foreign Exchange Reserves
Foreign exchange reserves are necessary to import the modern technology but Pakistan has shortage of foreign exchanges reserves. Foreign exchange reserves of Pakistan are $ 15.0 billion.
  1. Backward Economic System
Most of the developing countries are using the backward economic systems, which are also a hurdle in way of economic development. Implementation of Islamic economic system is required for economic growth and development.
  1. Monopoly of Developed Countries
Advanced technology is under the influence of advanced countries. They charge higher prices while transferring technology to poor countries. Sometimes, advanced nations transfer backward and out-dated technology to poor nations.
  1. Lack of Infrastructure
Technology without infrastructure in developing countries is impossible. Transports and communications are not available in fully advanced form in Pakistan. There is shortage of sanitations and health facilities. Supply of electricity is also less and irregular.

Now, in any production process, technology is as important as factors of production. By employing the modern technology, economic growth and economic development is possible. If a country uses backward methods of productions it will remains backward forever.

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