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Impact of Savings & Invesment on Economic Growth

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    INSTITUTE OF BUSINESSINSTITUTE OF BUSINESS

    MANAGEMENT SCIENCESMANAGEMENT SCIENCES

    INSTITUTE OF BUSINESSINSTITUTE OF BUSINESS

    MANAGEMENT SCIENCESMANAGEMENT SCIENCES

    NAMENAME :: FAIZA ANDLEEBFAIZA ANDLEEBAG. NO.AG. NO.:2009:2009--AGAG--857857

    DEGREEDEGREE :M.COM:M.COMSEMESTERSEMESTER: 4th: 4th

    COURSE TITLECOURSE TITLE: PORTFOLIO MANAGEMENT: PORTFOLIO MANAGEMENTTOPIC:TOPIC: IMPACT OF DECLINE IN SAVINGS &IMPACT OF DECLINE IN SAVINGS &

    INVESTMENT ON ECONOMIC GROWTHINVESTMENT ON ECONOMIC GROWTH

    SUBMISSION DATESUBMISSION DATE :29.05.2011:29.05.2011ASSINGED BYASSINGED BY :Mr. HAMZA MUKHTAR:Mr. HAMZA MUKHTAR

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    ACKNOWLEDGEMENTAll praise and thanks for ALLAH ALMIGHTY the mostgracious and merciful, real bless of the universe, whom Inever heard Nay whenever I knocked at His door, who gaveme the ability to contribute a drop of awareness and

    cognition from the existing ocean of knowledge and wisdom.I offer our countless salutations upon the HOLY PROPHETMUHAMMAD (peace be upon him) the entire source ofguidance for humanity as a whole forever.

    I, pay sincere gratitude to our Advisor Mr. HAMZAMUKHTAR , for his highly specialized guidance and

    especially for giving us chance to enhance our knowledge.

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    CONTENTS Brief introduction of savings, investment &

    economic growth.

    Types of savings & investment.

    Factors affecting savings & investment.

    Relationship of savings, investment & economicgrowth.

    An overview of current economic condition ofPakistan & world. (In context of savings &

    investments) Conclusion

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    SAVINGS

    The part of a persons income that is not spent. Savings can be termed as money that is saved

    through a bank or any other financial organizationthat provides the facility.

    Savings is mostly done for a long period but thegrowth rate of money is very low.

    Sources Of Savings

    Domestic private sector (S)

    Public sector (G-T) Foreign sector (NX)

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    Types Of Savings

    Emergency reserve fund.

    e.g. Banks, Credit Unions, Money market mutual funds. Accumulation fund.

    e.g. (CDs), Ultra short-term bond funds, Short-term bond funds,

    Mortgage-backed bond funds.

    Long-term investments.

    It need to be diversified into five tiers if at all possible.

    College education savings.It may be savings accounts, CDs, stocks or bonds with sometax benefits.

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    INVESTMENT

    The investing of money or capital in orderto gain profitable returns, as interest,income, or appreciation in value.

    In business, the purchase by a producer ofa physical good, such as durable equipmentor inventory, in the hope of improving futurebusiness.

    Total Pakistan investment bond companies1,718.

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    Types Of Investments.

    Short-term investments Bonds

    Stocks.

    Besides these three, there are also, Real estate (Buying a house)

    Commodities (gold & silver)

    Collectibles (Such as baseball cards)

    Mutual funds.

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    Difference b/w Saving & Investments.

    No.

    Objecti

    ve Short term needs. growth

    Vehicles

    Used

    Bank or money marketAccounts, certificates, Of

    deposit (CD).

    Stocks, bonds and

    mutual funds.

    Risk

    The risk factor is almost

    Absent.

    Risk factor is always

    involved with the money.

    Sourceof Retu

    rn

    Interest paid on moneydeposited.

    Interest and capital gains.

    KeyBenefit Money is safe and

    Accessible.

    Returns have outpacedinflation over the long term.

    KeyDrawba

    ck

    Returns historically.Can lose money if securitiesdecline in value.

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    Pakistan Savings Certificates

    Defense Saving Certificates (DSC) Special Saving Certificates Registered (SSCR) Regular Income Certificates (RIC) Bahbood Saving Certificates (BSC)

    Investment Opportunities In Pakistan Saving Scheme Trading and Investment in Stocks Investment in Real Estate in Pakistan Investment in Mutual Funds

    Investment in Forex Market Trading. Investment in Commodities and Precious Metals Investment in various Esoteric Avenues

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    DEFINITION OF

    ECONOMIC GROWTH Economic growth refers to a

    sustainable increase in living

    standards. It implies increased percapita income, better education andhealth as well as environmental

    protection.

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    Factors Affecting Savings &Investment.

    Inflation Interest rate changes. Income tax rates.

    Decline in income level. Expectations Cultural & social factors Political instability

    Exchange rate changes Unemployment

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    Relationship Of Savings, Investment &Economic Growth.

    Increase in savings & investment

    The potential for further investment expands

    and this eventually increases.The economys capacity for growth in terms of anincrease in goods and services.It also provide chances of FDI in a country and increaseeconomic growth as an increase in exports.This can help to improve the standard of living, provide

    more job opportunities and greater prosperity, which isindicative of improved economic growth.

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    Decrease in savings & investment

    The potential for further investment decreases andthis means that fewer goods and services will beavailable for satisfying needs.

    It result in the eventual shrinking of possibilities foreconomic growth.

    Communities in which this happens will eventuallybecome poorer and the possibility of further savingsmight be eliminated, with catastrophic results forinvestment and any capacity for economic growth,increasing poverty, unemployment, etc.

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    Economy Of Pakistan in 2009-10,Economic

    Growth Issues

    Pakistan economic growth faced a serious set back in fiscalyear 2009 because of the depressed consumer credit market,slow progress of public sector programmers, inflation,reduction in subsidies, security threat, instability in the stateand energy crisis.

    Additionally, no attention was given to the agriculture sector.The exports declined by six percent and imports by 10 percent.The only thing that became a silver lining was the increment inremittances by 22%. Shortages of energy and power don't letthe boom entered into the industrial sector. The sanctionapplied by IMF on different sectors creating a hurdle. Thisresulted in unemployment and services sector decline. Becauseof security crisis the graph of investment do not take anysurge.

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    COMPARISON WITH OTHERCOUNTRIES

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    Global Financial Crisis

    In growth and in investment Pakistan lostinvestor because of global economic situation,through financial markets which collapse theexternal demand for its exports and decline in

    availability of external capital to finance orinvest in growth process of the country.According to global financial crisis of 21st

    century was felt on market and investor

    confidence in many developing countries,including Pakistan, as banking systems andasset markets came under stress.

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    e u get Strategy aper2011-14'

    It,addresses the limitation of fiscal managersto bring the economy back on high growthtrack, curb inflation, and generate employment.But the solutions are far and few.

    Worrisome Indicatorsa. Falling Trend Of Investment & Savings.

    There is a falling trend over the past five years, makingfuture prospects of growth and absorbing rapidincreasing labor force dimmer.

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    b.Investment-To-GDP Ratio

    Investment-to-GDP ratio from 22 percent in FY06 is expected

    to be as low as 11.5 percent this year. This is in sharp contrastto our giant neighbours whose investment-to-GDP ratios arehovering around 40 percent.

    c.Decline In FDIAccording to SBP the FDI flow into the state during July to

    November period of this fiscal year fell by 54% but whencombined with portfolio investment reported a decline was25.6%.

    d. Slow Growt

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