Official estimates put the contribution of agriculture sector at no more than one-fifth of Pakistan’s GDP. Yet, commentators have often noted that the sector’s primacy to Pakistan’s economy is grossly understated, attributed to a lack of appreciation for its strong backward linkages with industrial and services sector.
Take for example Dr. Hafiz Pasha’s latest volume on Agenda for Reforms, which notes that 59 percent of the value-added in the manufacturing sector is by agro-based industries. Further illustrating the sectoral linkages with the tertiary sector, it puts share of agri-based in wholesale and retail trade segment at 53 percent; transport and communications at 48 percent; with lowest for banking and insurance, at 15 percent.
It is no wonder then that SBP’s latest State of the Economy report notes on at least different occasions that a slowdown in the commodity producing sector in the ongoing fiscal year may strongly moderate the performance of wholesale segment, the largest sector of economy at 60 percent share in GDP.
While the still semi-fresh government in Islamabad has spoken of “Agricultural Emergency” - much like many such initiatives by other regimes in the past – its finance czar had precious little to share in terms of details in an interaction with journalists last week. It is unfortunate because much was made of the ruling parties’ business acumen prior to election, yet its top farm-man seems to have been kept distracted by political bickering in Punjab.
Yet, at a time of macroeconomic stabilization when the folks at Q block are fixated on shrinking fiscal footprint, it will be foolish to expect the government to make farming sector a priority. For one, the ruling party’s appeal and staunch support base is strongly concentrated in the urban demographic. Second and more importantly, the agricultural segment has for too long been (wrongly) vilified for its feudal dominance to qualify for public sympathy in times of austerity.
Therefore, if the agricultural segment, which at 2.3 percent is witnessing its slowest growth in decades since independence, is to show any signs of recovery, it must come on the back of support from manufacturing sector.
While it is true that the farming economy is more closely integrated with the service sector through wholesale markets, the latter have largely remained unorganized as faceless middlemen. After all, there are no ‘arthi associations’ to negotiate with on the price and terms of credit received by small farmers.
In contrast, from potato chips to beverages, Pakistan’s manufacturing base is just as much, and if one goes by Dr. Pasha’s estimates, the largest beneficiary of farming output. Yet, it remains removed and insulated from the agricultural value chain, the exception of dairy companies notwithstanding.
The sector faces long term challenges such as poor efficiencies, low water availability, restricted access to credit, small average land size and declining cultivable land availability among myriad of others, which the poorly educated rural demographic under funded in research, is weakly equipped to address on its own.
The segment requires large scale sustained interventions by the private sector along the lines of contract farming undertaken by Pepsico, which guarantees provisions of subsidized inputs and production services; access to credit; technology and skill transfer; and most of all, guaranteed purchase of final produce at predetermined prices.
If agriculture is to sustain as economic backbone, large scale private sector will have to step up. Pakistan’s farming economy needs stakeholders not buyers.
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