ROLE OF AGRICULTURE IN THE ECONOMIC DEVELOPMENT OF

PAKISTAN

Agriculture is of immense importance for Pakistan. At the time of independence Pakistan

was primarily agriculture based country. But as time progressed Pakistan turned into
more diversified country as industrialization took hold. But development of industries
had not eliminated the existence of agriculture in Pakistan although the share of
agriculture had decreased significantly since its birth. The role of agriculture in the
economic development of Pakistan cannot be denied and Pakistan is still characterized as
an agricultural country. In the subsequent assignment I will be discussing the contribution
of agriculture in the economic development of Pakistan.

1. Increasing the GDP of the economy

Agriculture has a great contribution towards the GDP of Pakistan. Economic
development takes place when the GDP of a country increases. At the time of
independence agriculture had the largest contribution towards the GDP of Pakistan. But
with the passage of time service sector became the largest contributor of GDP and now
agriculture has the third largest share in the GDP of Pakistan. According to World Bank
In the year 2007, 20% of the GDP of Pakistan came from the agriculture sector of the
economy. Livestock and fisheries are an important source of employment as well as they
also consist of the exports of the country and help in increasing the GDP of the country.
Livestock accounts for 40 percent of the agricultural sector and 9 percent of the total
GDP. Pakistan ranks fifth in the Muslim World and twentieth worldwide in farm output.
It is the world's fifth largest milk producer. The country is the 5th largest producer of milk
in the world. This implies that agriculture is the back bone of Pakistan’s economy and has
integral role in the economic development of the country.

2. Source of Employment
Agriculture industry is the major source of employment in Pakistan. As more than half of
the population of Pakistan lives in rural areas. In 2007-08 Development Report of UNDP
65% of the total population of Pakistan lived in rural areas in 2005. In rural areas
agriculture is the sole means of their subsistence and employment. According to the
Economic survey of Pakistan agriculture remained to be the dominant source of
employment.43.61% of the total employment is provided by agriculture in the FY 2006-
07. As a developing country consistent employment is of huge importance for the country
and directly and indirectly agriculture is the biggest source of employment in the country.
Employment leads towards increased GDP of Pakistan and higher per capita income of
people. High per capita income results in improved standard of living of the people which
means more access to basic needs, better health facilities, quality education etc, which are
all the signs of economic development. In this way employment as a result of agricultural
activity is adding momentum to the economic development of Pakistan.

3. Increasing the Tax Revenue of the Government

Economic development is one of the prime responsibilities of any government. The
higher the government collects tax revenue, the greater the money it will have to spend
on developmental projects. Agriculture helps the government by increasing its tax
revenue. As agriculture employs 43.61% of the Pakistan’s labor force and has 20%
contribution to towards the GDP of the country this increases the per capita income of the
country and as per capita income increases government’s collection of tax revenue from
individuals also increases. Also as agriculture provides raw material to many of the
important industries of Pakistan, therefore, as agriculture expanded in the country,
industrial activity too took hold. Expansion in industrial sector also lead towards
increased tax revenue for the government from the industrial sector. In this way the
agriculture has a significant role in increasing the tax revenue of the government. The
Government of Pakistan used this tax revenue to bring in structural changes into the
country by investing in its institutions in order to make them more efficient, by
expanding the span of education with in the country and many more.

4. Sustaining the Population

The population of Pakistan is increasing at the rate of almost 2% per year according to
Human Development Report (2007-08) of UNDP. Pakistan is the sixth most populous
country of the world while second most populous country in the Muslim world according
to Food and Agriculture Organization (FAO) of United States. In order to sustain such a
massive population agriculture is playing a key role. Agriculture is providing food to this
ever increasing population. Wheat is the most consumed food item of Pakistan and
fortunately it is the most cultivated crop of Pakistan. Imagine what if Pakistan is not an
agricultural country. Then to sustain a population of almost 158.1 million the country
would have to import all the food items creating a further deficit in its balance of
payments and increasing the country’s debts causing the economic growth of this
developing country to slow down. Thus agriculture is playing a dual role in the
development of Pakistan by providing food to its massive population and supporting
economic growth by reducing imports of food items.

5. Contribution towards Exports

Major exports of Pakistan consist of agriculture items like wheat, rice, cotton. According
to FAO Pakistan exports rice, cotton, fish, fruits, and vegetables. In 2005-06 the major
share of Pakistan exports went to 9 countries, account for 55.9% of total exports. 62.6%
of Pakistan’s total exports are Agriculture Commodities and Textiles Products, 33% of
which are Raw or Low value added products. Agriculture is helping the country to earn
foreign exchange through exports. Foreign exchange, in turn, helps Pakistan to import
those items which either it cannot produce in the domestic market or produces them
expensively than other countries. Through foreign exchange Pakistan imports high-tech
equipments and capital intensive machineries and raw material for its industries like
industrial machinery, computer and computer parts etc. Foreign exchange through export
of agriculture items helps the central bank to stabilize its currency and reducing debt
burden of Pakistan.

6. Raw material for Industrial Sector

Industries are of major importance in the economic development of any country.
Agriculture is helping many industries in Pakistan by providing raw material to these
industries. Cotton is a major crop of Pakistan which is also an important export of
Pakistan and raw material of textile industry. Textile industry is significant and world
famous industry of Pakistan. Likewise sugar industry uses sugar cane as raw material and
sugar cane is also among one of the important crops of Pakistan. Sports goods of Pakistan
are famous world wide. They are major exports of Pakistan. Raw material for these sports
goods is obtained from the skins of live stock which is also a part of agricultural activity.
Livestock is also used in the manufacturing of leather, which is again one of the
important exports of Pakistan. These industries have innumerable benefits to the
economy of Pakistan. They provide employment to the pool of the labor, they add up to
the exports of Pakistan, they bring in new technology with in the country which not only
increases the quantity but also the quality of output and many more benefits. All these
benefits of industrialization are largely derived from agriculture sector of Pakistan which
accelerates the economic development of the country.

7. Development of Rural Sector and Improving the Standard of Living

A prerequisite for development with in the country is the development of rural sector.
Almost 65% of Pakistan’s population lives in the rural sector. The progress of rural areas
is indispensable for the development of Pakistan’s economy. Agriculture had been a
milestone towards the advancement of the rural sector of Pakistan. It is not only the
means of subsistence for the villagers but is also the biggest source of employment for
them. As agriculture expanded in rural areas their development took roots-roads started to
develop and rail tracks were laid down in rural areas to make transportation agricultural
products efficient to the domestic and foreign market and to the industries. Also
electricity became available,. Also as agriculture provided income to the rural people
their expenditure on education and health increased. According to the report, the growth
originating in agriculture is four times more effective in reducing poverty than the growth
coming from non-agriculture sectors. The World Development Report 2008 recommends
that the growth originating in agriculture is four times more effective in reducing poverty
than the growth coming from non-agriculture sectors. It further says that in the emerging
countries, the agricultural agenda should focus on reducing the disparity between rural
and urban incomes and raising the incomes of the rural poor. Thus agriculture helps in
reducing the income inequality between rural and urban areas of Pakistan. All this lead
towards higher standard of living of the villagers, signifying the growth of the rural as
well as that of the whole country.

8. Development of Banking Sector

Agriculture has also contributed largely in the development of banking sector. As the
governments realized the immense importance of agriculture for the economy of
Pakistan, they continually strived to bring in more financial assistance to the farmers for
rapid development in the agricultural sector resulting into expanding banking sector.
Commercial banks opened up their branches in the rural sector to assist farmers by
providing them with loans on feasible terms. Increased significance of agriculture for the
economy had led towards specialization in the banking sector e.g. the creation of
Agriculture Development Bank of Pakistan (ADBP) which is now converted to Zarai
Taraqiati Bank Limited (ZTBL). ZTBL is being established with the aim to uplift the
agriculture and rural sector by raising farm productivity, streamlining the institutional
credit and increasing income generating capacity of the farming community. This
specialization in banking sector assists the development of agriculture sector of Pakistan.
Network of commercial banks indicate the development of any country. They strengthen
the financial system of a country and makes flow of funds convenient in an economy by
taking money from those who have money in excess (depositors) and providing money
(loans) to those who have a shortage of money (borrowers). When banking system
operates efficiently on a large scale potential entrepreneurs can avail money easily for
starting up their business, thus accelerating the economic development. Banking system
is considered to be the back bone for the economy of Pakistan- the largest share in GDP
of 54% in 2007 as per World Bank is made by the service sector which also includes
banking, and agriculture has contributed a lot to the development of banking sector by
attracting large number of banks in rural areas.

9. Infrastructural Development
Infrastructure is a fuel to economic development. Well developed infrastructure assures
quick transportation of goods and services (which may include raw material or finished
goods) and provides facilities like electricity etc for smooth production process. As
agriculture developed in Pakistan and as it starts providing raw material to some
industries and as the demand of agricultural products soared in the domestic market, the
development of infrastructure in those areas took hold. In order to make distribution
system more efficient and to facilitate the high production of agricultural products
infrastructure started to develop more rapidly. Like the province of Punjab is the most
populated province of Pakistan and agriculture is its biggest source of employment. It is
also one of the most industrialized province. Faisalabad, a city of Punjab, is the hub of
textile industry of Pakistan. Because of large scale practice of agriculture in Punjab, it is
one of the most developed provinces in terms of infrastructure. As agriculture expands it
brings with it infrastructural development which helps in the economic prosperity of the
country. The most developed areas of Pakistan are those that have a sound infrastructure.
By initiating infrastructure development agriculture had played a major role in the
economic development of Pakistan.

In these manifold ways agriculture had contributed in the economic development of

Pakistan. In order to further increase the development of the economy the government
should introduce policies which increase the efficiency of agriculture. E.g. government
should introduce modern means of production through the initiation of technology in the
agriculture sector. The government should also revise land reforms as small lands are not
as productive as the large ones and should also increase the ownership of land to farmers
and must take steps to eliminate feudalism. Effective measures for agriculture will
definitely add up to the development of the weak economy of Pakistan.