How Can the Digital Economy Get Pakistan Out of the Economic Crisis?

How Can the Digital Economy Get Pakistan Out of the Economic Crisis?

Pakistan’s Economic Crisis and Digital Economy | DailyWriteups | Opinions

The following article, “How Can the Digital Economy Get Pakistan Out of the Economic Crisis?”, is written by Nimra Fawad, a student of Sir Syed Kazim Ali. Moreover, the article is written on the same pattern, taught by Sir to his students, scoring the highest marks in compulsory subjects for years. Sir Kazim has uploaded his students’ solved past paper questions so other thousands of aspirants can understand how to crack a topic or question, how to write relevantly, what coherence is, and how to include and connect ideas, opinions, and suggestions to score the maximum.

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Outline

1-Introduction

Although there are several aspects of the digital economy, such as the monopoly of tech giants, that should be addressed to promote its growth in Pakistan, at this critical juncture when the country’s economy is on the edge of collapse, no other remedy is more paramount than it for reversing this plight, as it can boost commerce, raise employment opportunities, and improve taxation in the country.

2-Digital economy and its fundamental pillars

3-The current economic plight of Pakistan

4-How can the digital economy get Pakistan out of the economic crisis?

  • By promoting e-commerce in the country
  • By enhancing the productivity of the industrial sector
  • By improving the efficiency of the services industry
  • By modifying the manual processes of the agricultural sector
  • By bringing transparency to the state’s affairs
  • By ensuring the Foreign Direct Investment(FDI) in the country
  • By upgrading the country’s tax system 
  • By increasing employment opportunities for the youth

5-How can the digital economy further worsen the country’s economic situation instead of improving it?

  • By raising the monopoly power of tech giants
  • By escalating cybercrime regarding financial transactions

6-Critical analysis

7-Conclusion 

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Answer to the Question

In this era of the fourth digital revolution- where the fusion of technologies exponentially heralds the transformation of entire production, management, and governance systems- the digital economy has emerged as the most potent force leading a country to survive and thrive socioeconomically. Shifting all activities from traditional to online boosts productivity in all economic sectors more efficiently and profitably. Therefore, countries from Finland and Ireland to Singapore and South Korea that have a sizeable share of economies depend on Information and Communication Technology, are well positioned worldwide. On the other hand, Pakistan is among the countries still reliant on agrarian economies. Consequently, it has sunk into the quagmire of economic miseries, such as unemployment and an inefficient tax system. However, as every setback is a setup to come back, there is still a chance for Pakistan to revamp its economic prosperity through the digital economy. For instance, by adopting the internet in business, sales and purchase ratios can be upgraded by improving customer satisfaction, pushing its commerce sector into overdrive. Furthermore, it can generate employment opportunities for the youth by promoting Small and Medium Enterprises (SMEs). Moreover, the digital economy can upgrade the taxation system, helping the government unveil the informal economy. Nonetheless, critics argue that the digital economy would strengthen the monopoly power of tech giants like Amazon, potentially becoming a stumbling stone in enhancing the country’s GDP. Notwithstanding, this is nothing more than an assumption, as the government, to avoid this situation in the future, has already taken a comprehensive Digi-Pakistan National Skills Development Program initiative to transform its youth into a productive workforce equally. Hence, without exaggeration, the digital economy can get Pakistan out of the economic crisis. 

Delving deep into the understanding of the concept, ‘Digital Economy’- also called Internet Economy, New Economy, or Web Economy- refers to all economic activities performed via digital technologies. For instance, from online banking to electricity and digital marketing to logistics automation, all are included in this phenomenon, which has improved economic transactions and professional interactions. Revolutionizing all these aspects of the economy makes a country resilient to internal and external socioeconomic shocks, allowing it to participate in global value chains. However, the country cannot avail the benefits of the digital economy without having digital infrastructure, digital platforms, digital financial services, digital business, digital skills, and a trusted environment upon which the digital economy standstills. It is because these fundamental pillars offer high-speed internet for online interactions, support digital transactions, provide paying channels, support new or established firms, and safeguard data from cybercrimes. In short, the digital economy enhances the country’s economic growth by making financial practices efficient, convenient, and faster. 

Currently, Pakistan is confronted with several economic challenges, so it cannot attain prosperity. One is rising unemployment, inefficient taxation system, trade deficit, and inflation. According to the State Bank of Pakistan, the government has lost approximately 574 million rupees in tax revenue. Consequently, the Pakistani rupee has been severely devalued in the past two years. In a word, the economic crisis has eroded the country’s economic grounds.

Now, it is imperative to shed some light on how the digital economy can get Pakistan out of the economic crisis. First, e-commerce has the potential to rejuvenate the country’s economic stability. Through technologies, the government can enhance the sales and purchase of goods and services by improving user experiences. As an illustration, most of Amazon’s sellers make at least $1,000 per month in sales, as evident from Jungle Scout. Not only this but also this fact and figure eventually demonstrate the beneficial economic outcomes of e-economy in the context of a company’s growth and the country’s revenue generation. To summarize, the digital economy can overcome the country’s economic crisis by promoting online commerce services and supporting new or established firms’ growth. 

Moreover, the new economy can enhance productivity in the industrial sector. It empowers each supply chain end, improving enterprise innovation and upgrading manufacturing structures. In this regard, China is one of the top countries already benefiting from the digital economy to a great extent. Data from the Ministry of Industry and Information Technology showed that the country has nurtured over 100 industrial internet platforms with regional solid and industry influence, with 76 million industrial equipment connected to the platforms. Ultimately, this helps it expand its financing channels for the enterprise worldwide. Hence, it is true that the digital economy and industrial production go hand in hand. 

Similarly, the web economy significantly contributes to escalating the efficiency of the service industry. These service companies leverage digital technology to offer customers innovative financial products and services, including peer-to-peer lending, mobile banking, and online investment platforms, deepening financial inclusion in all areas. Likewise, as per the report from Statistica, India has had the highest number of digital banking users in the world in 2022, with roughly 295.5 million users. Fortunately, the benefits of adopting e-banking provide a competitive advantage over global powers. Moreover, it enhances the mobilization of home remittances through formal channels there. Therefore, the digital economy is no less than a boon for flourishing the country’s service industry. 

Afterwards, the digital economy has great significance in modifying the manual processes of the country’s agricultural sector. It helps farmers work more precisely, efficiently, and sustainably through the installation of network-connected “smart” devices as a part of IOT (Internet of Things) or Software as a Service (SAAS) based Ag-tech in the process of digital farming. To illustrate, companies like Cropin are becoming one-step solutions for driving farm management, traceability, sales management, and risk management in the agricultural sector. Consequently, a country can increase its agricultural productivity, export, and farmers’ income and improve food and nutrition security, thus boosting its GDP. On the whole, the digital economy is a key to making the country’s agricultural sector outcome-oriented. 

Likewise, the internet economy can bring transparency in the state’s affairs, which is the road to economic development. All online financial transactions remain recorded, reducing the black money and corruption in the country’s government sectors. Similarly, the article “Digitalization as an Anti-Corruption Strategy” states that digitalization can alter opportunities for bribery by reducing arbitrariness, increasing transparency, and enabling accountability by dematerializing services and limiting human interactions.” As a result, the country can fix the fiscal deficit peril, pushing it towards prosperity. In a nutshell, the digital economy promotes transparency in the country, ensuring economic prosperity.   

Next to it, the continual inflow of Foreign Direct Investment in the country through the digital economy can revive its economic stability. The reason is that foreign investors can now see complete details of the company’s data, accounts, and shareholders on online platforms, which satisfy their investment queries. Furthermore, raising the productivity of businesses through online platforms and skilled labour can force Multinational Companies to invest in the country. In this regard, India is among very few countries where FDI inflows were not adversely impacted by COVID-19 due to the availability of ICT skilled professionals, and it has attracted more than 54% of FDI in ICT from FY2016 to FY2020, as per FDI Markets. Indeed, raising FDI in the country expands its market access, foreign exchange earnings, and human capital growth. Hence, by growing the FDI in the country, the digital economy can contribute to the economic development of the country.    

Moving forward, the digital economy plays an inevitable role in reforming the country’s tax system. Promoting online financial transactions brings undocumented economy into the government records. Consequently, the country can easily control rampant inflation by securing more revenue through proper tax collection. According to the United Nations Development Program report, by encouraging the informal sectors to get registered, enduring a digital payment system, and reinforcing the laws regulated by the authority, nations can achieve sustainable development goals related to poverty eradication. Similarly, through digitalization, the government can take action against illegal economic activities to mitigate its financial losses. Overall, the digital economy is one of the most effective tools for shifting the informal economy into the country’s formal economy, contributing to its economic growth. 

Lastly, the new economy can unlock multiple employment opportunities for youth. As it gives rise to numerous Small and Medium Enterprises in the country, several new job roles are automatically generated in these new companies for the youth. Likewise, the U.S. Bureau of Labor Statistics (BLS) estimates that employment for software developers will grow 22% from 2020 to 2030, far outpacing other industries. This would eventually improve the economic condition of people as well as the country. By and large, the digital economy is a panacea for all economic conundrums of the country, as it guarantees multiple employment opportunities for the people. 

Notwithstanding, some people claim that shifting to a digital economy would further exacerbate the economic crisis in the country. Few firms would dominate the various aspects of the economy with monopoly power like Amazon, jolting the country’s economic foundations by raising prices and, in turn, inflation. However, opponents ignore that it can happen only if the country’s youth remain digitally unskilled and unable to open new multiple-store businesses. However, to empower Pakistani youth, the government has already launched the Digi-Pakistan National Skills Development Program, preventing the tech giants from preserving their monopoly power and allowing people to collaborate with multinational companies. As a result, Pakistan would get a chance to strengthen its economic footing.

Similarly, it is supposed that the digital economy would increase cybercrime in the country. With the use of technology, criminals could easily commit crimes, such as theft, fraud, and money laundering. Although this concern is valid, it is incomplete because cybercrime prevails in those societies only where people have little cyber security awareness. By using strong passwords, keeping privileged accounts protected, and having strong backups and recovery plans, people can quickly secure their financial assets and reduce vulnerability to these crimes. Not only this, but also to tackle these sorts of challenges, the government has established the National Cyber Security Policy, enabling the country to grow economically. So, without any doubt, the digital economy can fix all of Pakistan’s economic woes. 

Critically, in this age of technology, the economic development of Pakistan is impossible without the digital economy. This is because conventional means have proven ineffective in addressing the country’s unemployment, inflation, and inadequate taxation issues. That is why it faces manifold hurdles in its economic growth. However, on the other hand, the digital economy offers solutions to all the country’s economic problems. It can boost the productivity of all economic sectors, from agriculture to industry, commerce to service industry, by transforming their manual procedures. Therefore, it can be inferred that the digital economy is a prerequisite for the country’s economic progress. 

Overall, the digital economy is crucial for the economic development of Pakistan. Through it, the country can improve its trade and industrial production, reducing its balance of payment crisis. Furthermore, transparency can be ensured in the government sectors, which would help it overcome the catastrophic menace of corruption. Consequently, Pakistan can attain the desired revenue and flourish in its economic sectors. So, it can be concluded with evidence that the digital economy can help Pakistan escape the financial crisis. 

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