Can agriculture be a leading sector?

Agriculture is usually the stepchild of the development process. As countries grow, its importance shrinks while that of the manufacturing and services sectors expand. However, Pakistan has failed to make this transition. It has failed to build up an efficient competitive manufacturing or services sector; it has failed to develop its exports of high value goods and services; and it has failed to keep up with neighbouring countries in terms of high and sustained growth.

There is no doubt that over the medium to long term, Pakistan has to develop an efficient and export-oriented manufacturing and services sector. However, this will require overcoming a plethora of structural constraints. These include poor infrastructure, unreliable energy supplies, a lack of skilled and educated manpower, a heavy dependence on imported inputs, and limited access to global value chains. Even if appropriate policies and programme are set in place, overcoming these constraints will take time.

In the interim, could agriculture play a greater role? Currently, Pakistan has a bloated and inefficient agriculture sector. It employs about 40% of the labour force but produces only a quarter of GDP. The vast majority of farmers cultivate small plots which become increasingly uneconomic with each passing generation. The lack of capacity of small farmers to earn and invest in machinery, land improvement and training is a major bottleneck to growth.

Deprived of investment, skilled labour and entrepreneurship, inefficiencies abound. Yields on major agriculture products are well below their potential and critical resources such as land, water and energy are utilised inefficiently. The result is a consistently anemic growth of between 2% and 3% - barely above population growth.

There are several reasons for prioritising agriculture in the current economic environment. First, higher agriculture growth would generate many positive effects: it would reduce our dependence on imported food and on cotton - an essential raw material for our textile industry; it would help enhance exports of high value fruits, vegetable and livestock products; and, most importantly it would raise incomes and nutrition level among the rural poor - a large and particularly vulnerable group in our society.

Second, agriculture growth would improve our foreign exchange situation. Agriculture does need some imports such as machinery and chemicals but the main inputs - land, water and labor - are domestic...