Domestic Savings Rate (%) Leading Issues in the Economy of Pakistan: Agenda for Reforms The pattern of growth in expenditure raises some doubts about the validity of the GDP growth rate estimate from 2013-14 to 2017-18. The very unexpected finding is that almost 92 percent of the increase in the size of the GDP is due to the increase in household consumption expenditure. Such a high marginal propensity to consume is very unusual. The same pattern is visible after 2017-18. It may be because household consumption expenditure is estimated as a residual and has been overstated because other expenditures were inadequate in explaining the apparent increase in aggregate demand in the economy. The big increase in household consumption expenditure in the five years of the PML(N) Government also implies that the domestic saving rate was low in the economy during these years, as shown in Figure 1.1. The same pattern is observed in the initial three years of the PTI government. Figure 1.1: Domestic Saving Rate (Derived from the Pakistan Economic Survey)(% of GDP) Source: PES 1.4 Investment Pakistan historically has had a relatively low level of investment as percentage of the GDP. It is close to half the level in other South Asian countries. However, the incremental capital­output is lower, and this has enabled an economic growth rate on average of 4 to 4.5 percent. 8