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 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.

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.

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.