Pakistan’s Agricultural Development since Independence: Intertemporal Trends and Explanations

The main objective of this paper has been to review Pakistan’s historical experience in agricultural development in terms of growth, income distribution, and rural poverty. While the long-term growth rates between 1949-50 and 1994-95 were satisfactory, the variations around the average have been rather too large over the various decades. Beginning with a stagnating sector of the 1950s, agriculture witnessed record growth rates during the Sixties. This was followed by the lowest growth rates of the early Seventies, and acceleration in the second half of the Seventies. The experience since 1979-80 has been mixed, but the growth rates have been rather low through the Eighties and the Nineties. The trends in income distribution and poverty varied directly in relation to the agricultural growth rates, especially when they were in excess of the threshold level of 4.5–5.0 percent per annum. In general, a growth rate of 5.0 percent or higher has induced positive changes in income distribution and poverty. In view of this positive association, the pursuit of a high growth policy in agriculture should guide Pakistan’s future development strategy. The efficiency of resource use, a greater dependence on modern technologies, and a minimisation of government intervention in the market mechanism are the essential pillars of the high growth strategy.

Some Non-price Explanatory Variables in Fertiliser Demand: The Case of Irrigated Pakistan

It follows from the experience of World economies that rising and balanced use of fertilisers is the key factor in agricultural productivity [FAO (1995); SFS and STI (1996); Habib-ur-Rehman (1982) and Pinstrup-Anderson (1976)]. In the case of Pakistan the stepped up fertiliser use has been argued to be incritable to realise existing untapped yield potential of major crops [Johnston and Kilby (1975)] and to induce yield increasing technological change in future [John Mellor Associates and Asianics Agro-Dev. International (1993)]. Although proper malnutrition involves the use of primary, secondary and micro-nutrients, Nitrogen (N), Phosphorus and Potassium (K) or NPK is generally considered to be sufficient to harvest normal crop yields [FAO and IFA (1999)]. Given this situation, this paper looks at various factors that determine fertiliser use in Pakistan. Although price of fertiliser is a critical factor in this respect [Schultz (1965) and Johnston and Cownie (1969)], only non-price factors are considered in this paper due to limitations of data. Apart from this introductory section, the paper comprises of three more sections. The following Section 2 explains the data and the empirical model. Section 3 presents the results. Section 4 summarises the main findings along with their policy implications.

Growth of Livestock Production in Pakistan: An Analysis

Agriculture is the backbone and single largest sector of Pakistan’s economy as its contribution to Gross Domestic Product (GDP) exceeded 25.3 percent during 1997-98. Crops, livestock, fishing and forestry sub-sectors being its main components, only crop and livestock sub-sectors are of critical importance. They accounted for 59.6 and 36.2 percent of the sector’s output respectively. Because of the ongoing process of structural transformation, agriculture’s share in the national economy is shrinking. From 39 percent of GDP in 1969-70 it has fallen to its current levels [Pakistan (1999a)]. The livestock sub-sector however has not followed suit. It has risen from 27.3 percent in 1969-70 to 36.2 percent in 1997-98. This trend in fact would be more pronounced if the national accounts did not underestimate the sub-sector’s components such as farm yard manure, dung cakes for household fuels and animal draft power. Apart from its contributions to national income, the livestock sub-sector is an active employer of thousands of landless poor and subsistence and semi-subsistence small farming families. Being a household activity, women are a special beneficiary of employment in the sub-sector. It is a major source of nourishment like milk, butter oil, eggs and meat and adds immensely to the health, nutrition and well being of rural as well as urban people. While animal fat and butter oil supplies are helpful in containing vegetable oil imports, many products of livestock origin such as wool and wool products, leather and leather made-ups and animal casings are exported and contribute significantly to hard earned foreign exchange [Ahmad, Ahmad and Chaudhry (1996)]. It follows from the above that the livestock sub-sector is likely to maintain its position as the dominant sub-sector of Pakistan’s agricultural sector or even that of the national economy for quite sometime in the future. Despite the rising and critical importance of the sub-sector, there, however, is no corresponding emphasis on analysing its achievements, problems and future prospects and likely policies to brighten these up. In view of this limitation, the present paper makes a limited attempt to study the growth process of the livestock sub-sector.

Theory of Optimal Taxation and Current Tax Policy in Pakistan’s Agriculture

public finance into the mould of classical welfare economics by emphasising minimisation of dead weight losses resulting from the imposition of a tax or faulty tax structure. As such, these modern theories have much in common with the traditional approach in terms of efficiency and equity. In spite of this, however, the differences remain. For example, the former theories adhere strictly to the norms of classical welfare economics which treats individual consumers as utility maximisers where improvements in welfare involve change that makes one individual better-off without making someone else worse-off [Stern (1987)]. In contrast to the emphasis of traditional theories on lump-sum taxes, the optimum tax literature is concerned with the implication of using non-lump-sum taxes which have a wider range and therefore more useful to the policy-maker. The recent work on normative tax theory looks at the impact of taxation on individual decisions and the trade off between raising revenues or redistributing tax burdens and the efficiency losses [Atkinson (1987)]. Finally, the optimal tax literature may be more pragmatic in its approach than traditional works as it realistically deals with government objectives and constraints and combines them into models that are sufficiently rich to allow for differences between people regarding income and expenditure patterns.

The Theory and Practice of Agricultural Income Tax in Pakistan and a Viable Solution

Pakistan has a history of taxing agriculture through the land revenue system. Being income and price inelastic, the replacement of the system with agricultural income tax is considered inevitable for meeting the financial needs of a growing national economy. In fact, under pressures from World Bank and International Monetary Fund (IMF), Pakistan introduced various variants of agricultural income tax in the past and in full during 1993 and 1996 respectively [World Bank (1999)]. However the introduction of agricultural income tax is a highly controversial issue in Pakistan, in government circles as well as among professional researchers and economists. Out of the nine commissions [Pakistan (1959, 1960, 1963, 1964, 1970, 1975, 1986, 1988, 1989 and 1993a)] that studied agricultural taxation only two recommended it. [Pakistan (1960, 1993a)]. The remaining seven favoured the existing land revenue system. The studies of individual economists are no less controversial in this respect. There seems to be a general consensus among such writers as [Hamid (1970); Yaqub (1971); Chowdhury (1971); Khan (1991) and World Bank (1999)] on the repeal of land revenue system in favour of agricultural income or graduated land tax. Against this an equal number of economists, have shown dissatisfaction with agricultural income tax as an effective tool of taxing agriculture [Ahmad and Stern (1989); Bird (1974); Bird and Oldman (1990); Chaudhry and Maan (1993); Gold and Foster (1972) and Newbery (1987)]. While the merits and demerits of agricultural income tax perceived by various writers in theory and practice are a major source of the controversy, the present paper attempts to provide an assessment of introducing the policy in Pakistan in the light of typical characteristics of a good tax policy if only to recommend viable alternatives.

Growth of Output and Productivity in Pakistan’s Agriculture: Trends, Sources, and Policy Implications

The paper aims to review the growth performance of Pakistan’s agriculture from 1950 to 1995. The long-term growth rate of agriculture, although respectable, has exhibited considerable yearly fluctuations even between decades. The period of the fifties and early seventies lacked any growth. Accelerating and high growth rates marked the decade of the sixties but the performance has not been satisfactory since 1979-80 and average growth rates have barely exceeded the population growth rate, with widespread implications for growth of national economy, food security, and social welfare of the masses. Area, modern inputs, and technology have been the major determinants of growth but prices were equally important because of their incentive and disincentive effects. The agriculture price policies adopted during the 1980s are known to have had a negative effect on the development and use of technology in agriculture. In order to boost agricultural productivity, a change in price policy is needed to ensure incentive prices. This could be done by setting agricultural commodity prices at par with corresponding import and export parity prices. A higher investment in research and development can hardly be overemphasised. There is an urgent need to remove the bottlenecks in agricultural input markets since these markets represent the typical monopoly position. To break up the monopoly of registered dealers and to promote competition, free sales in the open market by interested parties and individuals may be allowed.

Demographic Transition and Youth Employment in Pakistan

There is convincing evidence that Pakistan has entered the demographic bonus phase; child dependency is declining and youth share in the total population is rising. This paper has examined youth employment in the context of demographic transition evidenced since the early 1990s. Changes in the level of educational attainment have also been analysed. The study has used the data from Pakistan Demographic Surveys and Labour Force Surveys carried out between 1990 and 2005. Findings of the study show that the benefits of demographic transition in terms of rising share of youth in the total population has partially been translated through development of their human capital and productive absorption in the local labour market. While the pace of human capital formation seems to be satisfactory in urban Pakistan, it is dismal in rural areas, particularly for females. High levels of both female inactivity across the education categories and unemployment for males as well as females urge a strong youth employment policy in Pakistan to reap the benefits of the ongoing demographic transition. Youth are a source of development, and a high priority may be placed on preparing them with the skills needed for their adjustment in the labour market.Demographic Transition, Youth, Employment, Pakistan