Importance of agriculture in pakistan

 

Introduction

“Agriculture is the of process of cultivation of land or soil for production purpose”. Agriculture plays a very vital role for economy of Pakistan and its development. 48% of labour force is engaged directly with agriculture. So it is the main source of living or income of the major part of economy population. About 70% of population is relates to agriculture directly or indirectly. Agriculture is the major source of food of huge population of Pakistan. Agriculture is also the major source of provision of raw martial to industrial sector of Pakistan. Its contribution towards GDP is about 25% which is higher than contribution of any other sector.

Main points of importance of agriculture for Pakistan economy

Source of employment:

Pakistan as developing economy the employment on consistent level has much importance. In this behalf agriculture has much importance because it provides employment directly or indirectly to the public. Employment directly affects the GSP of economy as well as the per capita income. With the increase in per capita income living standard increases, higher hygiene facilities & better education facilities are also increases. All these signs are the factors of economic development. So we can say that agriculture has a great contribution toward economic development by providing the employment.

Food requirement:

Population growth rate of Pakistan is increasing rapidly. According to UNDP human development report population growth rate of Pakistan is 2% per year. So with the rapidly increasing population the food requirement is also increasing rapidly. In this behalf agriculture is the only the major sector which is the meeting the increasing requirement of food. It also reduces the import of food from other economies. So we can say that agriculture sector is playing very vital role in development of Pakistan by providing the food for massive population as well as supporting the economic growth.

Contribution in exports:

Major exports or cash crops of Pakistan are wheat, rice and cotton. 9.8 billion Bales of cotton are produced per year. Rice crop is produced 4.3 million ton per year. These agricultural commodities are exported to various countries against foreign exchange. This foreign exchange is utilized for the import of industrial or technological equipments such as machinery or automobiles. Further this foreign exchange is utilized to improve the infrastructure of economy or for improving the other sector of economy like education, health and investments.

Raw material for industries:

Industries have great importance for the development of any country specially for developing economies like Pakistan. Industries need raw material to produce finish goods. In Pakistan agriculture provides raw material to industries. Cotton is very important agricultural production which is also major export of Pakistan. It is used as raw material in textile industries. The production of these textile industries is exported to various countries against foreign exchange. Live stock is also an agricultural sector. It also plays very important role to export goods by providing the raw material to various industries like sports goods industries and leather industries. So in this way agriculture helps to Pakistan economy and its growth toward development.

Infrastructural development:

Infrastructure plays very important role to development of any economy. It is fuel to the economy development. Well organised infrastructure is a key to development because of quick means of transportation of agricultural goods or commodities (raw material or finish goods) and communication. On distribution purpose of agricultural products good and quick means of transportation are required this intends to improve the infrastructure rapidly. So agriculture play important role to the development of transportation for the purpose of distribution of goods.

Increase in GDP level:

Agriculture has huge contribution toward GDP of Pakistan economy. it contributes about 25% of total GDP, which is larger than other sectors of Pakistan. Increase in GDP shows the developing progress of the economy. It has played very important role since independence toward GDP of Pakistan. Now agriculture is the 3rd largest sector of contributing to GDP. Live stock and fisheries are the huge sector of agriculture in order to providing the employment. Employment contribute to GDP, it is as with the increase in employment the per capita income will increase which results to increase in GDP rate of the economy.

Decreasing in rural poverty:

Agriculture sector has played very important role in order to reduction of rural poverty. Since 1975 to 2000 the GDP growth rate of agriculture was about 4.1% per year. Green revolution technology in irrigation, improved seeds and fertilizers played very vital role to increase the agricultural production which results in increase in GDP. Through this technology farmers with land gain the opportunity to increase their production. So in this way arable lands became cultivated lands and farmers got the market of agricultural products against some return.

Development of banking sector:

Agriculture has also contributed a great role toward the development of banking sector. As the government realized the importance of agriculture, it takes steps to improve the productivity of crops by providing the credit facilities to the farmers at low interest rates. With utilizing these credits farmers can produce more and more crops. For this purpose government established the ZTBL and other financial institutes for the provision of credit facilities. So in this way development of banking sector takes place.

Farm mechanization:

Introduction of farm mechanization in agricultural sector had played very effective role in the development of economy. With the use of modern machinery in agricultural lands causes more and high quality production of crops. So the provision of raw material to the industries increases. Due to increase in productivity level the export rate of major export crops is increased which causes foreign exchange and economic development.

Use of Nanotechnology:

In agricultural sector use of modern technology like nanotechnology has played very vital role in the development of economy. This technology is used for producing the high yielding variety with high quality products. High quality products results into high rate of return to the farmers and the per capita income of farmer increases. Increase in per capita income shows the growth of economy toward development.

Role of dairy farming:

Dairy farming from agricultural sector has also played a great role in economic development. Livestock or dairy farming has huge contribution toward economic growth. The annual protein per capita is 18 kg of meat and 155 litters of milk. This is the highest rate in South Asia. Milk and meat and their by products have a good market. Farmers can receive a good return by producing and providing these products to the market. This process results into increase in per capita income as well as increase in national income of the economy.

Role of textile industries:

In economic development textile industries plays very important role. These industries totally depend on agriculture production in raw form. Cotton is the major crop which is used as raw material for these industries for production purpose. Further these products are exported to many economies against foreign exchange. So cotton as raw material from agriculture side contributes toward increase in NI (National Income). Textile industries also provide employment level which increases the per capita income of the person. So we can say that contribution of textile industries in the development of economy has much importance.

Role of sugar industries:

Sugar industry is also one of the major sectors of economy which has great importance according to development of economy. This is totally agricultural based industry. Sugar cane is produced on very large scale in many areas of Pakistan. This further supplies to sugar industries for the production of sugar and other by products which has great market. As large scale industries these also helps to provide employment level to the public. This results into increase in per capita income as well as improves living standards

. EXPERIENCE WITH IMPLEMENTING THE AGREEMENT ON AGRICULTURE

2.1 Market Access

In the UR, Pakistan committed itself to bind more than 90 percent of the agricultural tariff lines. Products for which tariffs have not been bound include alcoholic beverages, swine, pig meat etc., for religious reasons. As in many other developing countries, tariffs were bound at relatively high levels - at 100 percent for virtually all products. For ten tariff lines however, the binding was 150 percent and for ten others it was understood that these high levels of binding were adopted in order to safeguard import-competing agricultural sectors in the short run from possible disruption as non-tariff barriers (NTBs) were removed. As Pakistan offered "ceiling bindings", no commitment was required to reduce the tariffs during the UR implementation period.

The structure of border protection has undergone significant change over time towards greater trade liberalization, involving both the dismantling of various NTBs and the reduction of ordinary tariffs. The NTBs included outright import bans, special dispensation and licensing, quotas, negative lists and parastatal monopolies. Import surcharges were removed in 1992/93. Licence fees and the eqra surcharge were abolished as from 1994/95. Import quotas have been progressively eliminated since 1987, and by 1995 few remained. The number of items included in negative and restrictive lists has also fallen considerably. In the meantime, the maximum applied rate of ordinary tariffs has been reduced substantially in phases. From as high as 225 percent in 1987/88, it was brought down to 65 percent in 1996 and over the following two years to 35 percent (since end-March 1999) - see Table 1. The number of tariff slabs was also reduced, to 11 in 1996 and to only four at the end of March 1999. As a result, in 1999, applied rates varied from 0 to 35 percent.

Table 1: WTO tariff bindings and applied rates for selected major products (percentage, ad valorem)

Product	Bound rate	Range of applied rates
		1995	1996	1997	1998	1999
Cereals Oilseeds Vegetable oils 2 Live animals Meat Dairy products Sugar Coffee and tea 3 Simple average 4	100-150 1 100 100 100 100 100 100 100-150 100.5	0-65 10-70 25-70 15-65 35-70 25-70 35-70 15-70 -	0-65 10-65 25-65 15-65 35-65 25-65 35-65 15-65 -	0-25 0-65 25-65 15-65 15-65 25-65 45-65 0-65 -	0-25 0-45 15-45 10-45 15-45 25-45 25-45 15-45 -	0-15 0-35 10-35 10-35 10-35 25-35 25-35 0-35 -
1 100% for rice and wheat flour and 150% for wheat. 2 There were also specific rates of duty for some oils during 1995-97. 3 Bound rate for coffee 100% and tea 150%. Applied rates are also typically high for tea. 4 Average of roughly 670 tariff lines. Sources: Bound rates: Pakistan's WTO Schedule; applied rates: compiled from various official sources.

During 1995-99, applied tariffs were even lower than these statutory maximum rates, even on foodstuffs that are produced locally. In fact, the Government often waives tariffs completely, for food security reasons, on products such as wheat and sugar. Pakistan had a long tradition of subsidizing the import of wheat and maintaining low prices also through a domestic food distribution programme. There are many other cases where occasionally duty-free imports, or imports at very low tariffs, are decreed. For example, tariffs on a large number of high-value products, e.g. cereals preparations and fruit and vegetable products, were reduced in 1999 to levels much below the statutory maximum of 35 percent.

This observation is confirmed by estimates of the rate of protection as measured by the nominal protection coefficient (NPC), i.e. the ratio of the domestic to the world market price (import parity price). Although the NPCs fluctuate from year to year with changes in world market prices (since domestic prices are typically more stable), they were generally lower than unity, e.g. for wheat 0.77 during 1990/91-94/95, 0.63 in 1997/98 and 0.85 in 1998/99.

A key policy challenge has been setting "optimum" applied tariffs that address different policy objectives, notably those of safeguarding the interest of import-competing domestic sectors, maintaining full capacity of domestic processing industries, raising the value-added content of output and assuring the food security of the large urban population and the rural poor. These difficulties were most evident in the case of vegetable oils. At nearly US$800 million, the cost of edible oil imports is second only to those of petroleum and projections point to a rise in the import bill. The Government has undertaken measures to raise the degree of self-sufficiency in edible oils, e.g. the introduction of canola production and minimum support prices for other oilseeds. Border policies need to be supportive of these measures. A related concern has been ensuring capacity utilization of edible oil industries and thus adding to domestic value. In support of these objectives, the Government often allows duty-free imports of oilseeds, e.g. in 1998 and also in 1999, at the same time raising tariffs on vegetable oils. However, by the same token, the incentive for domestic producers to increase production is undermined.

In sum, the overall picture that emerges is that the import regime has been fairly liberal in recent years with applied tariffs mostly much below the WTO-bound rates, which in turn were largely determined unilaterally by the Government. However, implementing these reforms has not been smooth. In some cases tariffs had to be lowered substantially for food security reasons, even though that undermined incentives to domestic producers and to longer-term growth of the sector. In many other cases, tariff rates had to be varied, often in response to swings in world market prices, in order to stabilize domestic markets. Tariff changes often have economy-wide consequences, and there is no easy solution to setting appropriate tariff rates. This is obviously an area where in-depth policy analysis should generate handsome payoffs