Agri sec­tor

The Pak Banker - - FRONT PAGE -

Agri­cul­tural growth has hit a plateau in the last few years. Its share in the GDP has been go­ing down and down. From 27.08% in FY2000, the share of agri­cul­ture in GDP has gone down to 18.86% in FY18. Pak­istan's agri­cul­ture re­ceived a boost in the 1960s when it posted a growth rate of 5.1%. Im­proved va­ri­eties, steady ac­cess to water due to in­cen­tivi­sa­tion of tube wells and heavy public in­vest­ment in ir­ri­ga­tion canals and stor­ages con­trib­uted to this growth. An ef­fec­tive ex­ten­sion ser­vice made no mean con­tri­bu­tion. All this has changed since, and for the worse. Land dis­tri­bu­tion con­strains the agri­cul­tural growth more than ever be­fore. His­tor­i­cally, as economies progress to­wards greater in­dus­tri­al­i­sa­tion, the share of agri­cul­ture be­comes smaller and smaller. In­dus­try pro­duces rapid growth and its share in GDP keeps on ris­ing. In­dus­trial growth rate is above agri­cul­ture, but it does not mean agri­cul­ture stag­nates. In a healthy econ­omy, agri­cul­ture be­comes more in­ten­sive and pro­duces larger amounts of out­put due to greater pro­duc­tiv­ity.

The fall in the share of agri­cul­ture since 1999-2000 was 8.22 per­cent­age points. How­ever, the in­crease in the share of in­dus­try from 19.31 % to 20.91% im­plied an in­crease of only 1.6 per­cent­age points. This means that the ma­jor share of the de­cline in the share of agri­cul­ture was gained by the ser­vices sec­tor, as it rose by 6.62 per­cent­age points from 53.61 to 60.23%. So the clas­si­cal path of agri­cul­ture giv­ing way to in­dus­tri­al­i­sa­tion turns on its head. In this pe­riod, in­dus­trial growth was 5.03% per an­num, but the agri­cul­tural growth was close be­hind at 4.87%. At 5.18%, the ser­vices sec­tor recorded the high­est an­nual av­er­age growth. Over­all GDP growth was 4.49%.

This is where the first part of the prob­lem lies. In­dus­try was sup­posed to take Pak­istan into the high growth league of Asian Tigers. It has been the dar­ling of the pol­i­cy­mak­ers. Im­port tar­iffs, taxes, sub­si­dies, public spend­ing, reg­u­la­tory frame­work and credit poli­cies have all been geared to nur­ture the in­dus­trial class. What we have, how­ever, is a Statu­tory Reg­u­la­tory Order class, tak­ing rent seek­ing to ever greater heights, yet grum­bling all the time that the gov­ern­ment is not do­ing enough.What this class is do­ing in re­turn is a pa­thetic story told by ev­ery edi­tion of the Labour Force Sur­vey. Ac­cord­ing to the last avail­able edi­tion, the in­dus­trial sec­tor pro­vided 23.5% of the em­ploy­ment in 2014-15, up from 21% in 2001-02. The econ­omy needs a dou­ble-digit growth for a decade to fully ab­sorb the ever-ex­pand­ing army of the un­em­ployed. In­dus­try has failed to demon­strate the po­ten­tial to be the ma­jor con­trib­u­tor to this growth. The sec­ond part of the prob­lem is that what­ever growth this sec­tor achieves, its job cre­ation ca­pa­bil­ity, mea­sured by the so­called em­ploy­ment elas­tic­ity, is the low­est.

Ser­vices, the largest sec­tor, have a low elas­tic­ity of em­ploy­ment. While the share of the sec­tor in­creased from 54.96 to 58.61% be­tween 2001-02 and 2014-15, the share in em­ploy­ment de­clined from 38 to 34 %. Agri­cul­ture re­mained the largest em­ployer, with its share in­creas­ing from 41.4 to 42.47 %, de­spite a low av­er­age an­nual growth of 2.63%. Agri­cul­tural growth has been stunted by rel­e­ga­tion of the sec­tor to a resid­ual in of­fi­cial pol­icy. As a re­sult, Pak­istan has be­come a net im­porter of food as well as agri­cul­tural prod­ucts. More than the in­dus­trial zones, the growth po­ten­tial of the CPEC con­nec­tiv­ity is likely to be max­imised by the recog­ni­tion of agri­cul­ture as the lead in­dus­try. Indi­ca­tions of a food and agri­cul­ture deficit are writ large on the face of the re­gion. The sit­u­a­tion needs to be cor­rect for bal­anced eco­nomic growth.

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