In developing, predominantly agricultural economies like Pakistan, the importance of industry lies in the additional employment, foreign exchange earning through exportable goods and improve balance of payments by substituting the imports. This development stimulates then other sectors of the economy. The main problem undertaken in this study is to identify that Pakistan being an agricultural country, most of its industry is agro based. As such cotton being its main cash crop and cotton textiles being its major industry, have been of paramount importance to its economy. It contributes 60% to 65% of annual export earnings and 9% of the GNP. It is however observed that not much serious attention has been paid over the years on the production and exports of high-value added products. This study has examined those factors which have limited the desired growth in production and export of high-value added products. Through this study an attempt is made to focus upon comparative and competitive advantages in the production of cotton textiles and explore the possibilities of switching over to high-value added goods.

Pakistan's cotton, textile, and apparel industries are key sectors of the nation's economy; their performance can contribute to either a rise or fall in poverty. These vital industries have faced a variety of challenges and opportunities in recent years, including world cotton price instability, liberalization of the multilateral clothing and textile trade, and sharp swings in the Pakistani macroeconomic situation. Using a computable general equilibrium (CGE) model and drawing on a national survey of Pakistani households, the authors of this report evaluate the consequences of several recent or prospective economic changes on Pakistan's cotton, textile, and apparel industries and poverty levels. The economic changes include an increased inflow of foreign capital, higher world cotton and textile prices, government subsidization of the textile industry, increased productivity in the cotton and textile sectors, and other possible developments. By presenting these scenarios, the report offers policymakers and analysts a guide to anticipating and shaping the future of economic growth and poverty reduction in Pakistan.