AGRICULTURE- THE BACKBONE OF THE ECONOMY OF PAKISTAN

PROF. SAEED AHMAD SIDDIQUI
(feedback@pgeconomist.com)

Aug 13 - 19, 20
12

Agriculture is the life cord of economy of Pakistan. Agriculture, at the time of inception, was the base of Pakistan. But with the passage of time as industries began to establish, the nature of economy of the country changed. Nevertheless, industrial development could not change the importance of agriculture for Pakistan although agricultural output, in comparison of the beginning, decreased substantially. Significance of agriculture in the development of Pakistan can't be denied and this is the reason that Pakistan is still recognized as 'agrarian'. Socio-economic activities in Pakistan revolve around the center of agriculture because:

INFRASTRUCTURAL DEVELOPMENT: Infrastructure is the fuel for economic growth and development. Well developed infrastructure facilitates transfer of goods and services (raw materials for finished goods and productive services) and provides facilities for production like electricity, roads etc. When agricultural development took place and agricultural goods moved towards markets, infrastructure also developed in these areas. Infrastructure expanded to transfer increasing agricultural products and to make distribution system better. For instance, Punjab is the most populous province of Pakistan where agriculture is main source of employment. Apart from it, Punjab is also the largest industrial province where Faisalabad is the textile hub. Punjab, due to excessive agricultural activities is the most developed province in infrastructure.

INCREASE IN GDP OF THE ECONOMY: Economic development and increase in GDP are complementary and agriculture has played the decisive role for increase in GDP of Pakistan. At the time of inception of Pakistan, agriculture was contributing dominantly in GDP of the country. But service sector, with the passage of time occupied this position and today agriculture is put at number three. Live stock and fisheries are not only the important source of employment but are the big co-sharer in GDP of Pakistan. Live stock occupies 40% of agricultural sector while contributes 9% to GDP. Pakistan is 20th. at world level and 5th. amongst Muslim countries in providing farm output. Moreover, Pakistan is at number five in producing milk. On the basis of these facts and figures it can confidently be said that agriculture is the backbone of Pakistan and has been playing important role in the development of the country.

DEVELOPMENT OF BANKING SECTOR: Agriculture has also played an important role in boosting the banking sector of Pakistan. The government, realizing the importance of agriculture for the development of Pakistan, provides easy and concessional loans to the farmers due to which banking sector continued to expand fast. Commercial banks established their branches in rural areas and l introduced specialization in banking system. Consequently, ADP (Agricultural Development of Bank of Pakistan) was established which has now been converted into ATBL (Zarai Tarraqiati Bank Ltd.). The aim of this bank is to increase agricultural product and streamline the institutional credit so that income generating capacity of farming community may be increased.

SOURCE OF EMPLOYMENT: Agriculture is the main source of employment in Pakistan. Approximately 70% of total population of Pakistan resides directly in the rural areas of the country and depends for its subsistence and employment on agriculture. According to Economic Survey of Pakistan, agriculture is the biggest (43.61%) source of employment. Pakistan, being a developing economy, needs a consistent source of employment so agriculture is directly or indirectly and biggest source of employment. Level of employment determines GDP thereby per capita income of a country. Increase in per capita income Improves living standard (quality and quantity of food, shelter and cloth) the indicator of economic development. The agricultural activities, in this manner, can accelerate the pace of economic development of Pakistan.

GROWTH OF AGRICULTURAL SECTOR AND IMPROVEMENT IN LIVING STANDARD: Development within the country is conditioned by growth and development of agricultural sector because 70 percent of population of Pakistan resides in rural areas. Agricultural sector provides not only livelihood to the rural population but also an important source of employment for them. When the agricultural sector expands, the road net-work is spread for shifting surplus agricultural products to the urban markets. Roads help in carrying raw materials and food products for exports. The farmers spend the increased income on health and education developing and improving both the sectors. Analysis reveals that growth brought by agricultural sector is 4 times more than the growth brought by any non-agrarian sector. In accordance with the report of World Development 2010, the growth of agricultural sector is more effective in alleviating poverty than other non-agricultural sectors. The same report suggests that in newly emerging countries the agricultural agenda should focus on reducing income disparity between rural and urban population. It is, therefore, a must to increase rural income. Agriculture, in this way, is the source of reducing income disparity between rural and urban population. It is, therefore, proved that improvement in the rural living standard can be the guarantee for overall development of Pakistan.

PROVISION OF RAW MATERIALS FOR INDUSTRIES: Industries pay the key role in the development of country. Most of the industries in Pakistan are agro-based therefore, agriculture provides raw materials required by them. Cotton is the main agricultural product which is not only an important item of exports but also provide raw material to the textile industry of Pakistan. Textile is world famous industry of Pakistan. Similarly, raw material (sugarcane) is provided by agriculture to the sugar industry of the country. Sports goods industry is also a important export industry gets raw material (leather and skin) from cattle raised in the rural areas. These agro-based industries play a crucial role in providing employment, increasing in exports, improving living standard which is strategically important from different angles and introducing new technology. All these benefits can be extracted from agricultural sector increasing and improving growth and development of the economy of Pakistan.

SUSTAINING THE POPULATION: Rate of population growth in Pakistan is 2 percent a year which is fairly high for a developing country like Pakistan. The gravity of the problem can be appreciated by the fact that the existing population (18 million) is more than double fold of 1970. In other words, county has been shrink to half but population has gone double. Pakistan, at world level, is sixth populous and second amongst Muslim world. The role of agriculture is most significant in sustaining such a massive population. Wheat, amongst all the food grains, is consumed dominantly in Pakistan but fortunately wheat is mostly cropped. Just imagine that where could Pakistan stay in the absence of agriculture? For importing wheat and other grains, huge amount of precious foreign exchange was required to spend making the balance of payments more unfavorable and retarding economic development of the country. Agriculture, in this way, play dual role; supplying food grains to the population and secondary, curtailing expected import of food grains.

SUPPORT TO EXPORTS: Most of exports from Pakistan include agricultural items like rice, wheat, cotton etc. According to FAD, Pakistan exports rice, fish, cotton, fruits and vegetables. Pakistan, during 2011-12, exported agricultural goods to 9 countries consisting used in importing the goods that either can be produced at higher cost or can't produce at all. Foreign exchange is also used for importing high-tech equipments and capital intensive machinery and raw materials for industries. Foreign exchange also helps the State Bank of Pakistan to reduce debt burden.

INCREASE IN TAX REVENUE OF THE GOVERNMENT: Economic development should be the first priority of government. The more is the tax collection the more would be the public expenditure on the development projects of the country. Agriculture helps in increasing the tax revenues of the government. Agriculture provides employment to 43.61 of labor force of Pakistan and contributes 20 % to GDP of the country due to which per capita income increases. Increase in Per capita income increases also the tax revenue of the government. Agriculture provides raw materials to many of the local industries therefore expansion of agriculture would certainly expand the industrial activities. Expansion in industrial sector would increase government revenue. The government, using its increased revenue initiate new development projects and can increase the pace of development.

In the light of these manifold ways, agriculture has played very important role in economic development of Pakistan. For further development in the economy, the government of Pakistan should adopt the policies which can guarantee the agricultural development for instance, introducing new production methods through modern technology, revision of land reforms awarding the land ownership rights to the landless farmers. Consolidation of fragmented land holdings because small farms like the large farms can't give surplus production. Last but not the least, measures should be taken to abolish feudalism. Effective measures for developing agricultural sector would certainly support the weak economy of Pakistan.

"The glorious economic and political integrity of the country is associated with the development of agriculture of the country because the farmers of Pakistan are the real Pakistan.