Role Of Agriculture In The Economic Development Of Pakistan

ROLE OF AGRICULTURE IN THE ECONOMIC DEVELOPMENT OF PAKISTAN Agriculture is of immense importance for Pakistan. At the time of independence Pakistan was primarily agriculture based country. But as time progressed Pakistan turned into more diversified country as industrialization took hold. But development of industries had not eliminated the existence of agriculture in Pakistan although the share of agriculture had decreased significantly since its birth. The role of agriculture in the economic development of Pakistan cannot be denied and Pakistan is still characterized as an agricultural country. In the subsequent assignment I will be discussing the contribution of agriculture in the economic development of Pakistan. 1. Increasing the GDP of the economy Agriculture has a great contribution towards the GDP of Pakistan. Economic development takes place when the GDP of a country increases. At the time of independence agriculture had the largest contribution towards the GDP of Pakistan. But with the passage of time service sector became the largest contributor of GDP and now agriculture has the third largest share in the GDP of Pakistan. According to World Bank In the year 2007, 20% of the GDP of Pakistan came from the agriculture sector of the economy. Livestock and fisheries are an important source of employment as well as they also consist of the exports of the country and help in increasing the GDP of the country. Livestock accounts for 40 percent of the agricultural sector and 9 percent of the total GDP. Pakistan ranks fifth in the Muslim World and twentieth worldwide in farm output. It is the world's fifth largest milk producer. The country is the 5th largest producer of milk in the world. This implies that agriculture is the back bone of Pakistan’s economy and has integral role in the economic development of the country. 2. Source of Employment Agriculture industry is the major source of employment in Pakistan. As more than half of the population of Pakistan lives in rural areas. In 2007-08 Development Report of UNDP 65% of the total population of Pakistan lived in rural areas in 2005. In rural areas

agriculture is the sole means of their subsistence and employment. According to the Economic survey of Pakistan agriculture remained to be the dominant source of employment.43.61% of the total employment is provided by agriculture in the FY 200607. As a developing country consistent employment is of huge importance for the country and directly and indirectly agriculture is the biggest source of employment in the country. Employment leads towards increased GDP of Pakistan and higher per capita income of people. High per capita income results in improved standard of living of the people which means more access to basic needs, better health facilities, quality education etc, which are all the signs of economic development. In this way employment as a result of agricultural activity is adding momentum to the economic development of Pakistan. 3. Increasing the Tax Revenue of the Government Economic development is one of the prime responsibilities of any government. The higher the government collects tax revenue, the greater the money it will have to spend on developmental projects. Agriculture helps the government by increasing its tax revenue. As agriculture employs 43.61% of the Pakistan’s labor force and has 20% contribution to towards the GDP of the country this increases the per capita income of the country and as per capita income increases government’s collection of tax revenue from individuals also increases. Also as agriculture provides raw material to many of the important industries of Pakistan, therefore, as agriculture expanded in the country, industrial activity too took hold. Expansion in industrial sector also lead towards increased tax revenue for the government from the industrial sector. In this way the agriculture has a significant role in increasing the tax revenue of the government. The Government of Pakistan used this tax revenue to bring in structural changes into the country by investing in its institutions in order to make them more efficient, by expanding the span of education with in the country and many more. 4. Sustaining the Population The population of Pakistan is increasing at the rate of almost 2% per year according to Human Development Report (2007-08) of UNDP. Pakistan is the sixth most populous country of the world while second most populous country in the Muslim world according

to Food and Agriculture Organization (FAO) of United States. In order to sustain such a massive population agriculture is playing a key role. Agriculture is providing food to this ever increasing population. Wheat is the most consumed food item of Pakistan and fortunately it is the most cultivated crop of Pakistan. Imagine what if Pakistan is not an agricultural country. Then to sustain a population of almost 158.1 million the country would have to import all the food items creating a further deficit in its balance of payments and increasing the country’s debts causing the economic growth of this developing country to slow down. Thus agriculture is playing a dual role in the development of Pakistan by providing food to its massive population and supporting economic growth by reducing imports of food items. 5. Contribution towards Exports Major exports of Pakistan consist of agriculture items like wheat, rice, cotton. According to FAO Pakistan exports rice, cotton, fish, fruits, and vegetables. In 2005-06 the major share of Pakistan exports went to 9 countries, account for 55.9% of total exports. 62.6% of Pakistan’s total exports are Agriculture Commodities and Textiles Products, 33% of which are Raw or Low value added products. Agriculture is helping the country to earn foreign exchange through exports. Foreign exchange, in turn, helps Pakistan to import those items which either it cannot produce in the domestic market or produces them expensively than other countries. Through foreign exchange Pakistan imports high-tech equipments and capital intensive machineries and raw material for its industries like industrial machinery, computer and computer parts etc. Foreign exchange through export of agriculture items helps the central bank to stabilize its currency and reducing debt burden of Pakistan. 6. Raw material for Industrial Sector Industries are of major importance in the economic development of any country. Agriculture is helping many industries in Pakistan by providing raw material to these industries. Cotton is a major crop of Pakistan which is also an important export of Pakistan and raw material of textile industry. Textile industry is significant and world famous industry of Pakistan. Likewise sugar industry uses sugar cane as raw material and

sugar cane is also among one of the important crops of Pakistan. Sports goods of Pakistan are famous world wide. They are major exports of Pakistan. Raw material for these sports goods is obtained from the skins of live stock which is also a part of agricultural activity. Livestock is also used in the manufacturing of leather, which is again one of the important exports of Pakistan. These industries have innumerable benefits to the economy of Pakistan. They provide employment to the pool of the labor, they add up to the exports of Pakistan, they bring in new technology with in the country which not only increases the quantity but also the quality of output and many more benefits. All these benefits of industrialization are largely derived from agriculture sector of Pakistan which accelerates the economic development of the country.

7. Development of Rural Sector and Improving the Standard of Living A prerequisite for development with in the country is the development of rural sector. Almost 65% of Pakistan’s population lives in the rural sector. The progress of rural areas is indispensable for the development of Pakistan’s economy. Agriculture had been a milestone towards the advancement of the rural sector of Pakistan. It is not only the means of subsistence for the villagers but is also the biggest source of employment for them. As agriculture expanded in rural areas their development took roots-roads started to develop and rail tracks were laid down in rural areas to make transportation agricultural products efficient to the domestic and foreign market and to the industries. Also electricity became available,. Also as agriculture provided income to the rural people their expenditure on education and health increased. According to the report, the growth originating in agriculture is four times more effective in reducing poverty than the growth coming from non-agriculture sectors. The World Development Report 2008 recommends that the growth originating in agriculture is four times more effective in reducing poverty than the growth coming from non-agriculture sectors. It further says that in the emerging countries, the agricultural agenda should focus on reducing the disparity between rural and urban incomes and raising the incomes of the rural poor. Thus agriculture helps in reducing the income inequality between rural and urban areas of Pakistan. All this lead

towards higher standard of living of the villagers, signifying the growth of the rural as well as that of the whole country.

8. Development of Banking Sector Agriculture has also contributed largely in the development of banking sector. As the governments realized the immense importance of agriculture for the economy of Pakistan, they continually strived to bring in more financial assistance to the farmers for rapid development in the agricultural sector resulting into expanding banking sector. Commercial banks opened up their branches in the rural sector to assist farmers by providing them with loans on feasible terms. Increased significance of agriculture for the economy had led towards specialization in the banking sector e.g. the creation of Agriculture Development Bank of Pakistan (ADBP) which is now converted to Zarai Taraqiati Bank Limited (ZTBL). ZTBL is being established with the aim to uplift the agriculture and rural sector by raising farm productivity, streamlining the institutional credit and increasing income generating capacity of the farming community.

This

specialization in banking sector assists the development of agriculture sector of Pakistan. Network of commercial banks indicate the development of any country. They strengthen the financial system of a country and makes flow of funds convenient in an economy by taking money from those who have money in excess (depositors) and providing money (loans) to those who have a shortage of money (borrowers). When banking system operates efficiently on a large scale potential entrepreneurs can avail money easily for starting up their business, thus accelerating the economic development. Banking system is considered to be the back bone for the economy of Pakistan- the largest share in GDP of 54% in 2007 as per World Bank is made by the service sector which also includes banking, and agriculture has contributed a lot to the development of banking sector by attracting large number of banks in rural areas. 9. Infrastructural Development Infrastructure is a fuel to economic development. Well developed infrastructure assures quick transportation of goods and services (which may include raw material or finished

goods) and provides facilities like electricity etc for smooth production process. As agriculture developed in Pakistan and as it starts providing raw material to some industries and as the demand of agricultural products soared in the domestic market, the development of infrastructure in those areas took hold. In order to make distribution system more efficient and to facilitate the high production of agricultural products infrastructure started to develop more rapidly. Like the province of Punjab is the most populated province of Pakistan and agriculture is its biggest source of employment. It is also one of the most industrialized province. Faisalabad, a city of Punjab, is the hub of textile industry of Pakistan. Because of large scale practice of agriculture in Punjab, it is one of the most developed provinces in terms of infrastructure. As agriculture expands it brings with it infrastructural development which helps in the economic prosperity of the country. The most developed areas of Pakistan are those that have a sound infrastructure. By initiating infrastructure development agriculture had played a major role in the economic development of Pakistan. In these manifold ways agriculture had contributed in the economic development of Pakistan. In order to further increase the development of the economy the government should introduce policies which increase the efficiency of agriculture. E.g. government should introduce modern means of production through the initiation of technology in the agriculture sector. The government should also revise land reforms as small lands are not as productive as the large ones and should also increase the ownership of land to farmers and must take steps to eliminate feudalism. Effective measures for agriculture will definitely add up to the development of the weak economy of Pakistan.