Agriculture is the largest income and employment-generating sector of Pakistan’s economy.

About two third population of the country resides in rural areas and directly or indirectly
depend on agriculture for their livelihood. The sector provides raw materials to the industrial
sector and is an important source of demand for its products. The past experience shows that
periods of high/low agricultural growth have generally coincided with periods of
robust/poor performance of the national economy [Ali 2000]. The share of agriculture in
GDP of the country has though declined overtime as a result of ongoing process of structural
adjustment, its performance still have a major impact on the overall performance of the
economy because of its linkages with the rest of the economy. Therefore, a higher and
sustained growth in agricultural production is imperative for a rapid development of the
economy and poverty reduction in the country. A number of researchers including Naqvi et.
al. (1992, 1994) and Mellor (1988) believe that agriculture must maintain a growth rate of
more than five percent in order to ensure a rapid growth of national income, attaining
macroeconomic stability, effective employment of growing labor force, securing
improvement in distributive justice and a reduction in rural poverty in Pakistan.

The important factors that may contribute to a higher agricultural growth include expansion
in cultivated area, enhanced use of water and other agricultural inputs, increase in cropping
intensity, technological change, and technical efficiency. Various studies show a positive
growth in total factor productivity for agriculture in Pakistan. However, the estimates differ
widely and range from 0.37 [Kemal et. al (2002)] over the period
1964-2001 to 2.3 [Ali (2000)] for the period 1960-1995. Chaudhry et al (1996) estimated a
total factor productivity growth of 0.48 for crop sub-sector over the period 1950-1995; the
growth in aggregated inputs accounted for about 80 percent of the total increase in crop
output growth and the rest was contributed by improvement in agricultural technology.

It is widely maintained that the potential for allocating more land and water resources to
agricultural production and/or scope of further increase in cropping intensity is limited in
Pakistan. Moreover, use of inputs like fertilizers and pesticides cannot be increased beyond
certain limits and also because of national health and environmental concerns. Therefore,
the country would have to depend more heavily on technological change and improvement
of technical efficiency for the desired rapid agricultural growth.

Technological change is the result of research and development (R&D) efforts, while
technical efficiency with which new technology is adopted and used more rationally is
affected by the flow of information, better infrastructure, availability of funds and quality
inputs, and farmers’ managerial capabilities. Empirical evidence shows that R&D through
its influence on productivity has been an important source of growth in agricultural
production in many of the developed as well as developing countries.

Notwithstanding its declining share in GDP, agriculture is still the single largest sector,
contributing 21 percent to GDP and employing 44 percent of the workforce. More than two-
third’s of Pakistan’s population lives in rural areas and their livelihood continues to revolve
around agriculture and allied activities. Like in other developing countries, poverty in Pakistan
is largely a rural phenomenon; therefore, development of agriculture w illbe a principal vehicle
for alleviating rural poverty. Empirical evidence suggests that higher growth in agriculture on a
sustained basis had a lasting impact on poverty reduction in Asia in the 1970s and the
1980’s. In later decades the impact of agriculture on poverty reduction became weaker as
the Asian countries in general, and South Asia in particular, began to witness
productivity gains stagnating on account of structural issues, including limited
investment in research and extension services. The recent global food crises, while
creating difficulties for net food importing countries, is equally providing opportunities
for developing countries like Pakistan to get their acts together and benefit from the
current situation by giving more serious attention to agriculture.