Table II.1
Sectoral Growth of Real GDP
(at constant factor cost of 1980-81)

R: Revised,
P: Provisional,
* Explanation is given in footnote at previous page.
Sources: i) Economic Survey, 1999-2000; ii) Monthly Bulletin , FBS; iii) Ministry of Food, Agriculture and Livestock.

Agriculture
The agriculture sector enjoyed strong growth rate of 7.2 percent against a target of 4.3 percent, and realized growth of 2.0 percent last year. This is a recent upward revision, since the previous estimate of 5.5 percent growth was based on a preliminary production estimate of 19.3 million tonnes for wheat, which has been revised to 21.1 million. This clearly shows the role of this sector as the backbone of Pakistan’s economy.

Other than wheat, growth in agriculture was also higher on account of a bumper cotton crop and substantial increase in the production of rice. These three crops not only exceeded the actual production in FY99, but also surpassed their production targets for the year. Had sugarcane production not declined as significantly as it did, the growth rate of agriculture would have been much higher.

Minor crops and livestock grew at a lower rate compared to FY99, while forestry posted a larger decline. In a nutshell, the impetus for growth in agriculture stemmed almost entirely from cotton, wheat and rice (see Table II.2 and Box II.1). Although this highlights the need to ensure that these specific crops are given due consideration in future policies, it also emphasizes Pakistan’s economic vulnerability to these major crops.

Table II.2:
Value Added Growth And Shares of Agriculture Sector
(at constant factor cost of 1980-81)

R: Revised
P: Provisional
* = Estimates based on the revised data of wheat production for FY00 at 21.1 million tonnes.
Sources: i) Economic Survey , 1999-2000; ii) Ministry of Food, Agriculture and Livestock

Major Crops
Rising domestic prices of cotton in FY99 stimulated greater supply in FY00, despite the lack of a specific support price announcement. Larger credit disbursements by banks (for cotton and rice) during April-June 1999 helped produce the recovery in FY00: the Rs 12.2 billion disbursed in FY99 (April-June 1999) was 28.7 percent higher than the amount disbursed in the corresponding period in the previous year. Favorable weather conditions, fewer pest attacks, better availability of fertilizers and greater use of improved seeds, were key factors in the strong performance of Pakistan’s major crops this year.

Box II.1: The Role of Four Crops in Agriculture
Major crops comprising cotton, sugarcane, rice, wheat, barley, jowar, bajra, maize, gram, rapeseed & mustard, sesamum and tobacco, account for around 42 percent of the value added to agriculture sector. Of these major crops, about 89 percent is contributed by cotton, sugarcane, rice and wheat. Being a major source of income, farmers assign prime importance to these crops. Area under cultivation for these four major crops as a percent of total cropped area, increased from 62.2 percent in FY91 to 64.2 percent in FY99, while area under these crops as percent of total major crops increased from 80.0 percent to 81.9 percent during the same period. Increasing area under these crops is an indication of the farmer’s inclination towards these four major crops. The rate of change of these ratios further indicates that a substitution of land from minor to four major crops is more than substitution within the major crops. In fact, substitution of land is not merely the farmers’ choice but largely depends on ecological constraints, which become more acute in the absence of mechanized cultivation, prevailing weather and market conditions.

Sources: i) Agricultural Statistics of Pakistan FY99, ii) MINFAL

A major upset in one, or any combined movement in these four crops, not only sets the trend in growth of major crops, but also the agriculture sector as a whole, which has a strong impact on GDP growth. Irrespective of growth in other sub-sectors, the agriculture sector posted negative growth in FY93, due mainly to declines in production of rice, sugarcane and cotton. Similarly in FY97, growth in the agriculture sector weakened due to negative growth in three of the four major crops. On the other hand, on account of better performance in the three major crops, agriculture sector posted higher growth rates during FY92, FY95 and FY00.

The 25.0 percent increase in the procurement price of wheat in November 1999 (see Box II.2) induced farmers to make a concerted effort to use existing land more efficiently, and to cultivate wheat on additional tracts of land; area under wheat cultivation increased by 2.8 percent to 8.5 million hectares in FY00. Improved availability of water due to up gradation of watercourses under the supervision of military personnel coupled with good weather, contributed to an improvement in yield per hectare of wheat by 14.9 percent (to 2,493 kilograms per hectare) in FY00. The subsidized tractor purchase scheme (launched by the previous government in FY99) along with easier credit availability, led to higher mechanized cultivation and improved productivity. In response to rising wholesale prices and the 5.3 to 6.1 percent increase in support prices for a range of paddy varieties in FY00, farmers also took a keen interest in the cultivation of rice; over the last five years, there has been an average increase of 14.0 and 12.9 percent per annum in the wholesale price of basmati and irri varieties of rice.

Box II.2: On-time and Effective Revision in Procurement Price of Wheat
A timely increase in the procurement price of wheat by 25 percent emerged as the major factor contributing towards the 18.1 percent increase in the production of wheat during FY00. It has been observed that an increase in the procurement price at sowing time (mid-October to end-December) proves successful in increasing production, while a delayed increase in price is futile in increasing production that year although it does increase production next year.

Source: i) Agricultural Statistics of Pakistan FY99;
ii) MINFAL

Post sowing increases in procurement price made in March 1994, 1996 and April 1997, could not increase production for those years. However, increases in production were recorded in the years following the increase (see attached table). It has also been observed that whenever production has responded to an increase in support price, the rise has come from an increased per hectare yield, with a marginal increase in area under cultivation. This leads to the conclusion that there is potential for intensive cultivation, but this needs to be qualified by two factors:

1. An increase in support price remains attractive for a shorter time, which make it unfeasible for farmers to go for extensive cultivation; the development of new lands is an expensive and time consuming process, and

2. Substitutability of land among crops is limited because of ecological constraints and inflexibility in farmers’ preferences for substitution.

A discouraging development is the fall in production of sugarcane (by 16.1 percent in FY00), following a 12.6 percent reduction in the area cultivated. This occurred against a backdrop of the conflict between sugarcane growers and mill owners over the timing of purchases and payment to farmers. The intentional delay in purchases (and payments) reduced the incentive of growers to increase (or even maintain) area under the crop in FY00. Furthermore, the support price of sugarcane has remained unchanged since FY98. It may be noted, that the 46.4 percent increase in support price of sugarcane in FY98, spurred domestic production by 26.4 percent.

Minor Crops
Production of minor crops increased by 2.7 percent during FY00, compared with a rise of 4.3 percent last year. Onion and potato production posted increases of 42.5 percent and 2.0 percent, respectively, while chilies declined by 15.3 percent. Weak growth in minor crops reduced the share of this sub-sector in total agriculture to 18.3 percent, from 19.1 percent in FY99

Livestock
As the second largest value addition to agriculture after major crops, livestock posted a growth rate of only 2.8 percent during FY00, compared to 3.2 percent last year. This sub-sector consists of cattle, buffalo, sheep, and by-products such as dairy food, white and red meats, and eggs (Table II.3, above). Despite positive growth, livestock’s share in agriculture declined from 36.4 percent to 34.9 percent in FY00 (see Figure II.1). Insufficient attention to this area of Pakistan’s economy needs to be addressed, since its track record shows the capacity to post impressive growth despite not being targeted by past policies.

Table II.3
Selected Livestock Population and Products

* =In million tonnes;
** = In million numbers
Source: Ministry of Food, Agriculture and Livestock

Fisheries and Forestry
The fishing sub-sector registered an increase of 8.5 percent in FY00, compared with 0.6 percent last year. Marine and inland fish production is estimated to have increased by 9.6 percent, from 597.0 thousand tonnes in FY99 to 654.5 thousand tons in FY00. Better prospect for this sub-sector follow the European Commission’s decision to grant the Marine Fisheries Department the status of a verifying and certifying agency for the export of seafood to EU member countries.

Value-added through forestry registered a sizeable decline of 38.2 percent during FY00. The negative growth has been registered for three consecutive years due to a ban on woodcutting in Punjab and NWFP. This conservation of Pakistan’s natural resources should continue.

Food Situation
With bumper rice and wheat crops, and a considerable increase in fishing, the supply position of these food items noticeably improved. Furthermore, improvements in per capita availability of meat and milk during FY00 (see Table II.4), led to lower price increases in domestic food items, which played a pivotal role in reducing inflation rates to their lowest levels in the last three decades. On the other hand, supply constraints on sugar, edible oil, and pulses, were mostly on account of a fall in the production of sugarcane and pulses along with lower imports of edible oil during FY00.

Table II.4:
Per Capita Food Consumption and Availability
(Kgs per annum)

* = This does not include commercial use of the items.
Sources: i) Planning and Development Division, GOP
ii) Agricultural Statistics of Pakistan 1998-99

Agricultural Policy
Amongst the policy measures taken during FY00, timely increases in the procurement price of wheat and cotton emerged as the most effective measures to produce the desired results. Such quick decisions, if adapted for other pending issues (e.g. the procurement facility of edible oil crops, prompt payment to sugarcane growers, etc.) should be able to maintain the impressive growth in the agriculture sector, as long as they do not conflict with international trends in the pricing of primary commodities. Although, price incentives have played a dominant role in Pakistan’s economy, there is a need to create a broader infrastructural improvement that will reduce farmers’ dependency on pricing policies of the Government. Details of the noteworthy policy measures taken during FY00 are given in Appendix IV.

Yield of major crops achieved in our own experimental stations and other countries (Table II.5) suggest that per hectare yield of important crops like, wheat, rice, maize, sugarcane and cotton can be raised to a considerable extent. The immediate need is to provide conducive environment to farmers to mobilize their utmost efforts by announcing supporting policy measures. The policy priorities should primarily be focused upon: i) removing the deficiencies in market mechanism; ii) resorting to commercially viable trade policies for input as well as output markets; iii) ensuring long-term sufficient availability of irrigation water; and iv) removing income inequalities and regional disparities inherited by agriculture sector

Table II.5:
Comparative Yield of Important Crops
(kgs. per hectare)

* = Production level achieved at experimental stations in Pakistan in 1987.
Sources: i) FAO; ii) Report of the National Commission on Agriculture.

Agricultural Inputs
During FY00, the distribution of certified seeds was higher in case of paddy and cotton, rising by 98.5 percent and 37.1 percent, respectively; followed by a 3.6 and 2.1 percent increase in the use of certified seeds for vegetables and wheat during FY00. However, declines were recorded in the distribution of certified seeds of gram (by 44.6 percent) and maize (by 4.4 percent). In effect, greater use of certified seeds translated into higher yields of cotton, paddy and wheat during FY00, while yields of gram and maize declined. Off-take of fertilizers increased by 8.3 percent to 2.8 million nutrient tonnes during FY00 against 2.6 million nutrient tonnes last year.

As stated earlier, the availability of tractors and other allied implements remained impressive during the year under report. Production of tractors increased by 36.5 percent and wheat thrashers by 123.5 percent in FY00. During this year, ADBP financed purchase of 5,744 tractors against 4,735 tractors in FY99. Furthermore, gross credit of Rs 39.7 billion was disbursed amongst farmers as institutional credit, against Rs 42.9 billion last year (see Table II.6). This 7.4 percent decline was attributable to high disbursements in FY99 on account of higher production (working capital) loans, and efforts to get ADBP to improve loan recoveries. Although, the number of loans sanctioned by this specialized bank declined by 8.2 percent (from 451,992 cases in FY99 to 414,844 cases during FY00), while actual disbursements were only made against 90.2 percent of sanctioned loans against 100.0 percent in FY99.

Table II.6
Credit to Agriculture Sector
(Rs million)

Sources: ADBP, Commercial Banks and FBC.

Of total farm credit disbursed during FY00, almost 67.0 percent of loans was directed to farmers with subsistence holdings of land, while 28.2 percent and 4.8 percent were disbursed to farmers with economic and above economic holdings of land. Purpose-wise distribution showed that 76.7 percent of the amount was lent as production loans (working capital) while the balance provided as development (term) loans.

Canal head withdrawal of water in the kharif season increased by 2.1 percent, while it decreased by 16.2 percent in the rabi season of FY00, mainly due to lower water levels in the main rivers. The effect of the shortfall in water supply was offset to a large extent by improvements in watercourses in FY00. A total of 820 watercourses were improved during the year, as against 330 in FY99

Industry
The industrial sector grew by 3.0 percent during FY00 against a target of 5.5 percent, and actual growth of 2.5 percent last year. As the largest component, manufacturing recorded a growth of 1.1 percent (compared with a target of 5.8 percent) and realized growth of 4.2 percent last year. LS manufacturing grew by only 0.04 percent (based on 9-month data) against 3.7 percent last year. However, it declined to – 0.7 percent on account of a larger than projected decline in sugar production. Small-scale manufacturing was estimated to grow by 5.3 percent in FY00, a long overdue revision from an optimistic and constant 8.4 percent growth posted for the last fifteen years by FBS. As this revision is based on a recent survey, the estimate is likely to be more reliable than the previous one (see Table II.7).

Table II.7
Sectoral Growth of Industrial Value Added
(at constant factor cost of 1980-81)

R = Revised, P = Provisional
* = Growth rate based on FBS Quantum Index of large-scale manufacturing