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Agriculture
Instructor: Prof.Dr.Qaisar Abbas
Course code: ECO 400
Lecture Outline
1. Agriculture sector
2. Agricultural policies
Agriculture Sector
Agriculture includes:
ii. Improvement in per acre yield through quality fertilizers to compensate for land
deficiencies in many less developed countries.
iii. Pesticides and insecticides have expanded the acreage a single farmer can tend
by reducing the time required to disinfect the crop.
iv. Irrigation has made double cropping feasible in many countries
where formerly one harvest a year was standard.
vi. New shorter plants have been discovered that are more responsive
to fertilizer. Similarly, some sturdier types are more disease-resistant.
vii. Botanists have been able to breed the photosensitive genes out of
plants . Making planting possible at any time of the year.
Impact of Green Revolution:
Impact on Agricultural Production Per Acre Yield Year Million Tons 1963-64
11.1 1968-69 17.0 Agricultural Income Year Income (In current prices)Rs.
billion 1959-60 7.7 1969-70 15.5
Benefits of Green Revolution:
Benefits of Green Revolution General Factors High yield varieties were
introduced, which gave more production. Progress in fertilizer manufacturing
was observed. Better quality pesticides and insecticides increased acreage of
land. Better management of human resource was made through optimal
utilization of already available farm labor and induction of newly trained
laborers. An effective utilization of non-human resources was made. Water
availability was ensured, keeping in view its quantity required.
Impact on Employment:
Impact on Employment The introduction of the new high yielding wheat and
rice technology has resulted in an increase in the demand for labor. The net
effect of the increase in demand for labor lead to a significant rise in real
wages. The increase in labor use has been due to greater labor utilization per
unit of cropped area, and in some cases to high cropping intensity. Even
mechanized forms typically were utilizing increased labor inputs per hectare
although simulation results conducted by some researchers indicate that labor
inputs per hectare might be expected to decline substantially under fully
mechanized techniques combined with adoptions of the HYV technology
Tripling in cotton production over the 1980s due to the use of quality
seed and proper incentives to the sector
Agriculture Sector
1947- Agriculture accounted for 53% of GDP. 2005- 23% of GDP, 21% of GDP in
2011.
Pakistan ranks 5th in Muslim World & 20th worldwide in farm output.
In 2005 Wheat production was 21.591 million metric tons- more than all of Africa
and nearly as much as all of South America. (FAO)
Livestock sector contributes half of the value added in agriculture sector amounting
to nearly 11% of GDP- more than the crop sector.
Pakistan is Asias largest camel market, Second largest apricot and ghee market,
third largest Cotton, Onion and Oil market.
Total supply of Agri credit has increased from Rs. 87 million in 1959-60 to Rs 47.93
billion in 2004.
Supply for other inputs has been increased i.e tractors imported and locally
manufactured, fertilizers, seeds, irrigation
Despite of this increased input, the output has not been increased accordingly.
The agriculture has lost significant growth momentum as its growth slowed
down to 2.7 % in 2000s as against 4.4& in 1990s and 5.4% in 1980s.
Major crops remained the victim of natural calamities during the last few
years and three out of last four years witnessed negative growth in the
major crop sector. It causes declining trend of agriculture sector contribution
in GDP.
Agriculture Growth
Total geographical area 79.6 million hectares. 27% of this area under cultivation.
80% of this area irrigated, but approx. 20% of area in Irrigation Canal. Most of the
area is affected by water logging and salinity. An additional area of 2.8 million ha.
affected by solidity.
no subsidies, high cost of inputs, crop and livestock insurance, lack of veterinary
services, lack of mechanization, primitive management and use of modern
techniques, lack of education and training, seed quality, research and dissemination
of knowledge
Salient Features
undocumented economy
lack of investment
Institutional Arrangements
Major & Minor Crops
Cotton: 8.2% of value added in agri and about 2% to GDP.
Rice: it earns substantial amount of foreign exchange. 5.4% of value added in agri and 1.3%
to GDP.
Other major crops are tobacco, mustard and rapeseed, maize and barley.
Minor crops are major oil seed crops i.e cottonseed, rapeseed/mustard, sunflower, canola.
Most of these crops are imported which is about 70.85 % of total availability and remaining
29.15% is made available through farming.
Most of the pulses, tomato, potato, onion are other minor crops
Series of Major Problems
Firstly, despite the policy makers stress on crop diversification, the economy
is dependent on cotton for more than half of its export earnings. This strong
dependence is dangerous given the climatic and viral-induced setbacks that
cotton production has historically experienced throughout Pakistans history.
Secondly, the avowed objective of food security, which should have been
possible given the favorable resource endowment of the country __ one of the
largest irrigation systems in the world__ has not been achieved so far.
Thirdly, the rapid increase in population, with the growth rate estimated at 3
percent has substantially reduced the per capita agricultural production rate.
Fourthly, growth in the most recent decade has come from more extensive,
and not intensive, agriculture.
Series of Major Problems
Sixthly, the government price system has been criticized for inducing a
number of distortions and incorrectly trying to remedy the situation through a
series of input subsidies.
Finally, erratic and inconsistent policies and poor planning and management,
for example of the irrigation system, deficiency in providing fertilizer, lack of
quality control on pesticides, inadequate investment in rural infrastructure, and
improper research and extension services, have all played havoc with
Pakistans agriculture.
Agriculture Credit
ZTBL, Commercial Banks, Cooperatives and other private domestic banks
are the main providers of credit to the farmers.
In 2003-04, loans extended to the farming community was in the form of:
Microcredit Scheme. Rs. 25,000 can be advanced to both men and women
against security. Loans are recoverable within 18 months.
Major Issues in Agri. Credit
Phase 2.Between 1960-65 trend was reversed, growth rate was 3.9%
Phase 4 i.e between 1970-77 growth rate declined to 1.67% due to number
of exogenous and policy related features.
The pricing policy of agri input and output determine direction of agri
productivity and also income distribution of small farmers.
A good agri pricing policy can be defined as the one where prices act as an
incentive to produce certain goods in required quantities.
Agri Pricing Policy
National Commission of Agri (NCA) analyzed the issues in the pricing policy of the first two
decades.
Govt fixed the consumer retail prices of agri goods at low levels which depressed the
market prices for producers.
For a decade after independence, no systematic attempt was taken to develop agri sector.
Barter trade was a common feature where agri products were exchanged for industrial
machinery and input.
Agri Pricing Policy
Due to these policies agri sector was taken as a medium to protect industrial
sector. NCA argued that the main objective of the pricing policy of 1960-65
was to provide low cost food to urban population, to provide cheap raw
material for agri production, to keep the wages of agri workers low.
First step govt took to encourage agri output was to subsidize agri inputs
which cover seeds, fertilizers, tube wells, plant protection and agri machinery.
Concept of min price support program was introduced to protect farmers from
fluctuations in international prices
Agri Income Tax
There are arguments on whether agri income should be taxed or not.
NCA is against this argument and says that agri holdings are too small to
generate taxable income.
Agri sector pays the largest percentage of indirect taxes i.e 42% of all
indirect taxes, so it should not be taxed more.
Agri Income Tax
On the other hand National Taxation Reforms Commission (NTRC) has evaluated
policies of imposing a tax on agriculture.
There is a group of landowners who reside in urban areas and made investment
in real estate with income from their agri business.
Since they pay no tax, so they are questioned by traders and salaried class to pay
tax.
Many traders have purchased agri land with an intent to escape from income tax.
Many large farmers are earning handsome amount of money from agri.
Recommended Books
Ishrat Husain, Pakistan: The economy of an elitist state, Oxford
University Press.