The beginning of the new millennium signifies a watershed
in Pakistan's economic history. As overall GDP growth has slowed down,
and unemployment and poverty increased, the underlying factors rooted
in the institutional structure of Pakistan's economy, have become manifest.
Nowhere is this more evident than in the rural sector. In this article
we will examine the crisis in agriculture and its relationship with institutional
decay. We will indicate policy actions which can be undertaken to deal
with the crisis.
The overall economic performance of Pakistan in the
past and in the foreseeable future continues to depend on agriculture
growth. This sector fulfills most of the country's food requirements,
contributes 26% of GDP and employs 54% of the labour force. Agriculture
is also a source of raw materials for major domestic industries particularly
cotton products which account for 80% of the value of exports.
What is the nature of the crisis in agriculture? My
earlier research for the ILO showed that there is a slow down in output
growth of the major crops and this has been associated with declining
factor productivity as well as increased instability of output growth.
The moment of decline in growth of yields per acre of major crops gives
cause for concern. It has come at a time when the extensive margin in
the crop sector has been reached, and further growth will have to depend
on increasing the efficiency of input use. Yet the available evidence
suggests that the yield response to input use in Pakistan's agriculture
This crisis is indicated by the fact that the average
annual growth rate of major crops declined from 3.34% during the 1980s
to 2.38% during the 1990s. At the same time, the frequency of negative
growth in some of the major crops during the last 17 years has been significantly
higher than in the preceding two decades. These trends are more sharply
illustrated in the case of wheat which is by far the largest of the major
crops (it contributes over 30% of value added in major crops). The average
annual growth rate of wheat output fell from a high point of 7.42% in
the 1960s to only 2.33% in the 1990s. Underlying the decline in the growth
of wheat output is a steady decline in the growth of yield per hectare:
from 4.38% in the decade of 1960s to 1.81% in the 1990s. The frequency
of years in which an absolute decline in wheat yield per hectare occurred
was as high as 7 in the period 1980 to 1997, compared to 5 in the preceding
This pattern of slow and unstable growth in agriculture
has a direct adverse effect on the poorest farmers. Under conditions of
declining input productivity, when higher input use per acre is required
to maintain yields, small farmers with fewer resources are likely to suffer
a relatively greater decline in yields than large farmers. At the same
time, due to lack of savings to fall back on, they are relatively more
vulnerable to bad harvests under conditions of unstable growth.
Consequently, slower and more unstable growth is likely
to be accompanied by growing inequality in rural income distribution,
poverty and unemployment. This is why it is important to initiate policies
on an urgent basis to counteract these tendencies in both the farm and
off-farm sectors of agriculture.
Underlying the phenomenon of slow and unstable growth
in agriculture is the emergence of three major institutional constraints:
1. Reduced Water availability due to deterioration
in the Canal Irrigation System
Delivery efficiency (from the canal head to the root
zone of crops) is now as low as 35% to 40%. The deterioration in the canal
irrigation system is worrisome in view of the fact that the extensive
margin on agriculture has been reached and future growth will have to
rely on improving yield per acre. This is indicated by the fact that since
the 1980s, both total cultivated area as well the irrigated acreage has
remained virtually constant. Opportunities of expanding use of ground
water are also limited. Therefore, overcoming the crisis of irrigation
efficiency has become a crucial policy challenge for sustainable agricultural
growth in the 21st century.
The poor maintenance and operation of the canal irrigation
system is associated with not only a decline in the efficiency of the
irrigation department but also a serious shortage of budgetary funds.
For example, in the early 1990s the shortfall between the required and
actually available funds for operations and maintenance has averaged at
25%. Given the lack of management capability, and adequate funding, an
institutional strengthening of the irrigation department may be necessary.
2. Seeds and Agriculture Research
It is now well known that high yielding varieties
of seeds gradually lose their potency through reuse, and changing micro
structure of soils. At the moment, there is no organized seed industry
in Pakistan to meet the needs of farmers for the supply of vigorous varieties
of seeds for even the major crops. Consequently the average age of seed
is high and the potency low. For example, in wheat, the average age of
seed varieties is 11 years compared to 7 years for all developing countries.
The existing institutional framework for agriculture
research suffers from a proliferation of research institutes, which are
inadequately funded, often lack professional expertise, proper equipment
and the research environment necessary to produce significant results.
It can therefore be argued that Pakistan's lower factor productivity growth
compared to India can be attributed to the poorer level of research and
extension in Pakistan compared to India. It may therefore be necessary
to restructure the existing institutional framework for agriculture research
to: (a) bring greater professionalism and (b) improve monitoring and evaluation
of research work.
3. Soils and Agricultural Practices
One of the most important constraints to growth of
the crop sector is the degradation of soils, resulting from improper agricultural
practices such as: (a) lack of crop rotation and the resultant loss of
humus in the top soil, (b) stripping of top soil associated with over-grazing,
(c) water erosion along hillsides and river banks.
Degradation of soils may be an important factor in
low and declining growth in yields per acre in Pakistan. For example,
average annual yield increase per acre of wheat during the 1990s in Pakistan
has been 1.8% compared to 2.9% in the Indian Punjab, and 2.7% for all
developing countries. Recent study suggests that the observed declining
yield response to input use in Pakistan's agriculture is indicative of
increasing soil degradation.
It is clear that in order to create a sustainable
basis for accelerating agricultural growth in Pakistan it would be necessary
to establish improved extension services with an outreach to the farm
level in order to induce agricultural practices through which the organic
material in the soil can be replenished and maintained.
If the crisis in agriculture is to be overcome the
institutional framework for irrigation, seed development, and extension
services would have to be restructured. It is therefore not just a question
of allocating more finances but equally important it is a question of
improving the management capability of the institutions that can enable
a high and stable agricultural growth in future.