Forecasting Trade Behaviour of Major Food Crops in Four Leading Saarc Countries

• Author: MUHAMMAD IQBAL ZAKIR HUSSAIN and TAHIR MAHMOOD

Abstract. Poverty alleviation is going to become the hot stack in the world. Many of the researchers and policy makers are engaged to over- come this problem. South Asian Association for Regional Cooperation (SAARC) consists of a rich topographic climatic endowments and varia- tions. The region is blessed with cereals fruits ornamental medicinal and staple foods of diverse varieties. SAARC countries have a capacity to produce a quantum of foreign exchange by its agriculture export programmes. This sector has the potential to uplift income alleviate hunger poverty and thus to cut down socio-economic constraints of the region. The study under consideration is an outcome of decomposition method to check the future state of economic and trade affairs in four major countries (Bangladesh India Pakistan and Sri Lanka) of SAARC for different commodities (Cotton lint Rice milled and Sugar refined).

Data used in this study is taken from Food and Agriculture Organization (FAO) during 1970 to 2010 while for Bangladesh the period has been considered from 1972 to 2010. The results reveal that India will enjoy optimum level in the export of cotton sugar and rice while Pakistan will achieve second level and future export of Bangladesh and Sri Lanka will remain at low level in all the commodities.

Keywords: SAARC Agriculture Cotton lint Rice milled Sugar refined Forecasting

1. INTRODUCTION

   South Asian Association for Regional Cooperation (SAARC) comprising of Nepal India Bangladesh Pakistan Sri Lanka Maldives Afghanistan and Bhutan was established in 1985 having its secretariat in Kathmandu Nepal. South Asia is one of the most densely populated regions in the world and livelihood of millions of people of this area depends mainly on agriculture (Noorka et al. 2013a). SAARC area consists of diverse climatic rich topo- graphic and variant range of agricultural crops from cereals to vegetables. During recent past there has been a handsome increase in the export earnings from agricultural sectors among SAARC countries. This sector has high potential to uplift farm income and to alleviate poverty hunger as well as to cut down the socio-economic issues prevailing in the region. Due to burgeoning population in South Asia and to address the food issue and to maintain demand and supply position of food and feed the

   Governments have to take strict action and top priority agenda so that nobody should go to bed hungry. The Green Revolution has set a clear milestone and brought a significant change in farm productivity to ensure food security in SAARC as well as rest of the world (Noorka et al. 2013b).

   The area covered by South Asian region is 4482388 square kilometres which is holding population of 1596000000. The regional organization SAARC comprises of 4637469 square kilometres. The population of SAARC countries is 1626000000. South Asia is the poorest region in the world after Sub-Saharan Africa. The nominal GDP of Pakistan was $ 230.525 billion and GDP per capita was $ 1182. Pakistan has the fifth highest GDP per capita in the region. But at the same time it has the low human development index which is 0.51 in 2012 (The World Bank 2012).

   However India has comparative advantage due to its largest cultivated area and largest economy in the region (US $ 1.97 trillion) and makes up almost 82 percent of the South Asian economy. The nominal GDP of India was $ 1.947 trillion and GDP per capita was $ 1592 in 2011. India has the medium human development index which is 0.554 in 2012 (The World Bank 2012). According to the World Bank (2012) Sri Lanka has the highest GDP per capita in the region. The nominal GDP of Sri Lanka was $ 64.914 billion and GDP per capita was $ 3139 in 2011. Sri Lanka has the highest human development index of 0.715 as in 2012 in the region. Bangladesh has the second highest GDP per capita in the region. The nominal GDP of Bangladesh was $ 122.72 billion which made the per capita GDP as $ 817.95 in 2011. Bangladesh has the low human development index which is 0.515 in 2012 in the region (The World Bank 2012). It is true that the agricultural trade is not favourable in the SAARC countries due to heavily subsidized OECD America and European countries as well as both tariff and non-tariff barriers. Hence it is imperative to study the relative comparative advantage of agriculture trade among these SAARC countries. Earlier studies had depicted that the future state of important food crops is very encouraging within SAARC countries. Earlier researchers conducted different studies like Azhar et al. (1973) who suggested three suitable models for forecasting about wheat while Masood and Javed (2004) developed the models for sugarcane area of Pakistan and concluded one yield model was developed to measure fertilizers consumption and total water availability. Sahu (2010) studied the major SAARC countries (Bangladesh India Nepal and Pakistan) to examine the behaviour of the production productivity actual availability and waste of food crops in cereals and vegetables.

   The study used Box-Jenkins method to conclude that higher values of vegetables yield were shown by India and Nepal. Similarly Mehmood (2012) tried to forecast the exports of Pakistan to SAARC countries during the years 1975 to 2010. By using different model selection criteria like RMSE MAPE MSE MAE AIC BIC the ARIMA (1 1 4) model was found most appropriate for forecasting. In Bangladesh Rahman et al. (2013) examined differential variable in grass pea and mung bean pulse...