The economic landscape in the early 1970s witnessed growing disparities between East and West Pakistan, leading to East Pakistan's declaration of independence and the emergence of Bangladesh in 1971. Subsequently, Pakistan underwent notable transformations in both its political and economic spheres.

Under martial law authorities, amidst challenging macroeconomic conditions, the socialist Pakistan People's Party gained empowerment. This period grappled with numerous economic challenges, including a surge in poverty incidence to 55% during 1971–72. Pakistan also confronted heightened import costs due to the global oil price shock in October 1973, a severe global recession from 1974 to 1977, cotton sector failures in 1974–75, pest infestations affecting crops, and massive floods in 1973, 1974, and 1976–77.

One significant economic issue during this time was high inflation, with prices increasing by an average of 15% per annum between 1972 and 1977. The fiscal deficit/GDP ratio averaged 8.1% during 1973–77, indicating substantial fiscal challenges. Trade imbalances were apparent, with trade deficits rising from US$337 million in 1970–71 to US$1,184 million in 1976–77.

The military coup d'état of 1977, leading to the establishment of a martial law regime that initiated denationalization, deregulation, and privatization policies. Agriculture experienced modest growth at a rate of 2.4% per annum, while large-scale manufacturing expanded at a rate of 5.5% per annum during the 1970s.

Large and medium-scale private manufacturing played a significant role, contributing 75% of the total value-added and investment in manufacturing during the 1970s. The remaining 25% of value-added came from small-scale manufacturing.

Overall, this period was marked by significant political and economic changes, driven by challenges posed by economic disparities, political shifts, and efforts to address issues such as inflation, fiscal deficits, and trade imbalances.

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