Towards a more Sustainable Growth of Pakistan

Nice work Usama!!

Regards,

Farrukh Malik

A recent news item below corroborates my article quite beautifully. Just goes on to show how significant agriculture can be for countries like India and Pakistan.


India unlikely to hit 8pc 5-year growth target (June 28, 2005, The News)

NEW DELHI: India’s prime minister said on Monday the government still aimed for 7-8 per cent economic growth in the next two years, but a five-year goal of 8 per cent was now unlikely in part due to weakening agricultural output.

While farming’s share of India’s $600 billion economy has shrunk over the past few years to one-fifth, it still supports two-thirds of the billion-plus population and is a key focus in the government’s economic policy.

So agriculture can still weigh down the pace of growth in Asia’s fourth-largest economy, and analysts say 8 per cent is the growth rate needed for a sustainable reduction in poverty.

Prime Minister Manmohan Singh told a meeting of state premiers expansion had averaged 6.5 per cent in the first three years of the country’s 2002-2007 economic plan, known as the 10th plan, and he forecast 7-8 per cent growth for this year and next.

``Even if we achieve this acceleration, we cannot achieve the original 10th plan target of 8 per cent growth over the plan period as a whole,`` he said.

``The cornerstone of the 10th plan strategy was a reversal of the declining trend in the growth rate of agriculture and with the target for agricultural growth at 4 per cent,`` he said.

``Unfortunately, actual performance of agriculture appears to have deteriorated even further and will possibly not exceed 1.5 per cent per annum during the first three years of the plan.``

The Congress party-led coalition came to power last year in a surprise victory stemming in part from rural voters’ discontent at not sharing the benefits of India’s economic boom.

About 80 million people are unable to afford food providing more than 2,000 calories a day, according to government figures.

While agriculture forms a smaller part of gross domestic product than it did in 1980, when it generated 38 per cent, analysts say it both supports some of India’s poorest people and has untapped commercial potential, which is why the government has made it a priority.

``The current consumption base in India, for several products, is very low. Just imagine if you have access to rural markets — it’s a huge untapped base,`` said Shuchita Mehta, chief economist India at Standard Chartered in Bombay.

``The scope for improvement both in terms of productivity and incomes has to be a priority area.``

Singh said India had to increase investment in agriculture, as well as credit access, crop diversification, infrastructure and post-harvest management to improve agricultural productivity.

Due to poor irrigation, farm output is still vulnerable to the vagaries of the June-September monsoon rains, and the worst monsoon in 15 years dragged economic growth down to 4 per cent in the fiscal year ended March 2003.

hahahahaahahahahahahahha


This article is hilarious!


hahahhahaahhahahaha

I`m not even going to comment on the rather childish observations of the writer.

Re: # 17
lets just call it the Institute of Better Alternatives!!

:)..cheers...

Re: # 8
You are mixing up some fundamental economics ideas with voodoo economics. The only way you can promote the agriculture is by mechanizing or industrializing it.

lol, and what Usama is trying to say is that its not necessary to slam a pollution vomiting plant in middle of the fertile land. We have fertile land and barren too... Yes mechanizing the agriculture is good and really really profitable, but thats not what Usama ment, when he said `industrializing before agriculture.` Itna toa aik engineering ka student be samajh gaya :P ;)

Riding-High aka Usama, where have u been attending classes, i want to go there too...

Re: # 15
Sifzal...Valuable inputs those. I wish somebody from the govt. was taking down notes on the discussions here.

Dear friends
Though I am not in touch with current situation, back in 1995-96, I did some research on behalf of an international organization and the leading management univetrsity in Lahore. The agriculture sector from production perspective was not doing bad at all. However, it was infrastructure that was the problem. If I remember correctly the figures were that about 30 percent of the produce during some seasons are wasted because they are not transported to storage places in time and rain and wind damages the harvest.

Secondly, I also had the opportunity to attend Germany`s consultant report to the than Punjab minister in 1989, which stated that Pakistan had potential to generate US2.00 billion alone from mango and mango plup export. Pakistani mangoes were rated as the best in the world with over 100 varities.

I, therefore would suggest that warehouses be constructed at critical junctions so that the existing produce be safe guarded and at the same time fruit market be developed. These are neither capital or technological intensive industries, thus would not only help in basic employment rather would save nearly 30 percent of the produce and earn good foreign exzchange as well.

Further, if you observe Malaysian GDP trend (I worked on it too!) over the last 3 decades, you will note that agricultural contribution has been on decline and that of services and industrial sector on the rise; the faster in the services sector.

Meanwhile, Thanks Usama for the opportunity to express my views in this regard.

Best of wishes

Re: # 8
my dear HP...while i respect your opinion, i just hope that you would come out of the shell of traditional thinking. Since grade 1, we are systemetically brainwashed into believing certain concepts and facts...that are very difficult to let go. hence...i dont blame u. i just wish our academic institutes would encourage `alternative` thinking...(as in the western institutes) to challenge the status-quo and the conventional thinking process.

Re: # 11
cayenne....u are right. nobody can neglect the role of agriculture in the economies of India and Pak.

Re: # 9

Netizen...well put forth. i dream of the day when our respective leaders would work on policies that make economic sense.

Re: # 1

“Agriculture has been the ‘leading’ sector to have accelerated growth in countries like China and India.”


Such bitterness!!.The above is quite accurate.The Indira Gandhi canal in Rajasthan state has irrigated hundreds of acres and active tracing of rains/monsoon by the Meteorological dept./farm subsidies and communication with farmers by local officials is ongoing in India which has resulted in better yields.Proof:Inflation is currently 4.22 % in India, 9.5% or more in Pakistan.Pakistan is currently importing vegetables from india to bring down prices and control spiralling inflation.

#4 by riding-high
“Can democaracy work in Pakistan? If your answer is no, then you would know what I am trying to stress here.”

In fact, my answer would be a resounding yes! Democracy would work in Pakistan and if any one believes otherwise, he is not a friend of Pakistan.

Based on the comparative advantage theory, why do you think Pakistanis are most efficient in agriculture? In my opinion, agriculture is the most inefficient sector of the Pak economy and it will remain so until it is fully mechanized.

Re: # 7

``that there is not enough investment currently in agriculture, for it to be productive. ``

I don` think the gov of india/pak has either revenue or will power to invest billions in this sector. I don`t know of any strategy followed by any party. All I hear is land ceiling and distribution to the poor/unpossessed. Recently some gov are providing insurance as a safety net. but there are many areas that need investment: water supply, electricity, insecticide/fertiliser, transportation, communication, storage facilities.
so the question should be who is going to invest and why?
currently india needs 150 billion dollars over a decade to build the badly needed infrastructure. It is at pains to generate it. Once built it would help agri business too. To generate additional funds for agriculture will be a uphill task.
I think that investment would only come through private players, mostly big agriculture companies. With that major acquisitions will happen. Smaller/medium farmers will have to sell their lands as consolidation will be the first step big companies would do. They will invest hundreds of millions (if not billions) only when large tract of farming land is available to them.

``Let me reiterate that ignoring this sector is like neglecting a nation`s strengths and failing to capitalize on them. The unproductive government spending on failed industries (eg. heavy subsidies given to the lossmaking state giants like PIA, WAPDA, refineries etc) is not going to yield progress. On the other hand, investments on farming inputs , for eg., would yield a more sustainable livelihood for all. ``

I don`t know much about PIA, WAPDA etc. but think that they are unproductive because of lack of accountability. Same is seen in india too, the state industries are mostly sick industries. These white elephants are not to be productive and generate wealth but to provide employment through tax payers money. I am quite confident they will do far better if put in the hands of a professional teams.

But the question still stays, how can agri. be made more productive?


`` investments on farming inputs , for eg., would yield a more sustainable livelihood for all. ``

Well if the gov is able to provide water, electricity and better transportation/communication links a beginning can be made. But it is a huge task.
THe other ways are encouraging R & D with emphasis on productivity/quality. But this is better done by private players than the state bodies. Universtities can help but their dismal state in the sub-continent will be a stumbling block.

``It just advocates greater good governance with respect to the handling of public sector expenditure, and a need for strategic planning for the allocation of funds.``

In countries like ours its easier said than done, unfortunately.

#3 by bbabu

Weighing environments costs and calling industrial development “harmful” are two entirely approaches. While all countries should be prudent in weighing the environment costs, the industrial development should not be harmful for any society.

#4 by riding-high

“Because agriculture, wherein lies 50% of the population`s livelihood, just isnt getting the reaps of the so-called reforms.”

You are mixing up some fundamental economics ideas with voodoo economics. The only way you can promote the agriculture is by mechanizing or industrializing it. Can you rely on the current tools that are available to the farmer to promote agriculture? Now here is your dilemma, if you begin to mechanize the agriculture, the first consequence would be a wide spread unemployment in the rural areas. To accommodate those unemployed and unskilled millions, you will need to start putting industries in the areas these unemployed hordes would move to. With your economics, the planners would be perpetually discussing chicken VS the Egg theory of what comes first.

Then you need to weigh in the benefits of promoting agriculture before the industrial development. How much agriculture contributes to the exchequer and what kind of investments in agriculture would be prudent? Would the agriculture bring enough revenues to run the country or even pay for all the imports? The best part of putting in factories is that you begin to reap the benefits faster. You provide employments, use agriculture products, and meet the FE requirements and that all in very short period of time.

This is all elementary. There is no precedent in the world where agriculture put the any country on the path of prosperity or helped the country make progress and it is not going to work in Pakistan either. Agriculture’s role is to support the industrial development so that industry absorbs and employs most of the population thus allowing for a rapid economic development.
I am by no means suggesting that agriculture should be entirely ignored but what I am saying is that it cannot or should not be the priority.

Concerning number of people in agriculture, 50% or 70% has no value, that number will not prosper, and they can only make progress if they are removed from the agriculture.

As I said above, you will first need to create an industrial base to draw people out of the agriculture and that is the only way to help them come out of poverty. With the scarce resources that Pakistan has, the first investment dollar should always go to industrialization and if there is any leftover, it may be used to help the agriculture. The population that lives on agriculture will have to endure poverty for another couple of generations and no amount of charity and handouts or undue sympathy can help them. Sometime a country or the people just have to face the facts on the ground.

Netizen:

In your assertions, you have infact conveyed my article`s key messages:

a) that there is not enough investment currently in agriculture, for it to be productive.

b) the welfare of the masses` survival in Pakistan (and to a large extent -India) lies in the more effective strategic planning and investment in the agricultural sector.

Let me reiterate that ignoring this sector is like neglecting a nation`s strengths and failing to capitalize on them. The unproductive government spending on failed industries (eg. heavy subsidies given to the lossmaking state giants like PIA, WAPDA, refineries etc) is not going to yield progress. On the other hand, investments on farming inputs , for eg., would yield a more sustainable livelihood for all.

My article is not anti-industrialization. It just advocates greater good governance with respect to the handling of public sector expenditure, and a need for strategic planning for the allocation of funds.

Re: # 4 riding high

``Why do u think despite all the positive economic indicators being boasted of by the government...poverty remains a perennial problem that just wont recede. Because agriculture, wherein lies 50% of the population`s livelihood, just isnt getting the reaps of the so-called reforms. My article calls for a change in focus. ``

My 2 cents:

the developed world has gone through a transition phase where agriculture was replaced by manufacturing, services, tourism as the country industralized. the % of people dependent on agriculture has dropped significantly from early 20th century.

Hence, india/pak//BD should diversify too. Into new sectors of economy. If some sector is unproductive how long are you going to subsidy it? Large land/farm holdings, state-of-art technology, current research is increasing the productivity of farms in western world. Do you think an average desi farmer with a tractor and an average land holding is going to be more productive?
2-3% of u.s (6-9 million) produce more or less the same amount of foodgrains that atleast 200-300 million indians do. and the u.s. farmers are also surviving on gov. doles. just imagine what a desis farmer is against.
THe present gov. in india came to power promising the moon to the farmer. All it has done so far is exempt tax on a tractor. What else the gov. can do or has done? Does it have billions to invest in canals, storage facilities ...? 2-3 years of drought and the farmer is driven to suicide. is there any long-term strategy?

Hence i am wary about the ``reforms`` in the farm sector. these words are just good for politicians during election campaigning and after the elections who the hell cares if one farmer dies, there are hundreds of millions of them around.

Bbabu.....agreed that a nation`s well being should not come at the cost of its future generations. point well taken.

This is Usama...and here`s a response to some of your comments.

Thank you..ShoreSahib & HP...for validating some of my points.

HP... before i answer your concerns...try to answer one of my questions: Can democaracy work in Pakistan? If your answer is no, then you would know what I am trying to stress here. The much hackneyed recipe for economic progress....industrialization (and other sectors being a distant second)....just isnt a one-stop solution for all the countries of the world. Its like saying democracy can work anywhere in the world.

The principles of the theory of comparative advantage state that all nations are better off as a whole if they continue to produce and trade in the areas of business that they are most efficient in. If Pakistan`s agriculture can produce XX number of cotton more cheaply than ..say...Brazil...then Pakistan should focus on producing cotton in return for getting cocoa from Brazil.

Why do u think despite all the positive economic indicators being boasted of by the government...poverty remains a perennial problem that just wont recede. Because agriculture, wherein lies 50% of the population`s livelihood, just isnt getting the reaps of the so-called reforms. My article calls for a change in focus.

Finally, I just hope and wish that the kind of text books on economics/business that I have gone thru in my academic life wont preach a solution that works only for certain countries...and not for all. That is why...HP....I give you the benefit of doubt for your comments, because I know exactly where you are coming from.

Cheers..:)

HP #1

“Finally, industrial growth is harmful for sustainable development as it causes widespread environmental deterioration.”

`` Are you really kidding or this is serious stuff from you?

So industrial growth is harmful for “sustainable development”. You really like 7th century Arabian peninsula don’t you. ``

I do not want to live in the 7th century. But societies like India and Pakistan have to weigh in environmental costs as they industrialize. It does not make sense to locate a Intel semiconductor factory in the middle of a desert. Semiconductor plants require a lot of water.

Editorial Dawn Pakistan
Curbing inflation



PRIME Minister Shaukat Aziz has once again acknowledged inflation being one of the major challenges facing his government. While speaking after the minister of state for finance, Omar Ayub Khan, had wound up the budget debate in the National Assembly on Tuesday, the prime minister briefly explained the reasons for the sudden and steep jump in the price level in the last 12 months and assured the house that his government was making serious and sustained efforts to tackle the problem of inflation. Prices do heat up when the economy grows at a fast pace. Over the last three years Pakistan’s economy has experienced very high growth rates after having remained almost stagnant in the previous three years when the government was following a tight-fisted economic policy under instructions from the IMF. According to official documents released before the announcement of the budget for 2005-06, the phenomenal rise in aggregate demand of the economy, on the one hand, was compounded by supply shocks, on the other.

Besides, the documents claimed, adverse external developments, had an impact on the price level during the current fiscal year, included a surge in international oil prices coupled with an unprecedented rise in world prices of commodities as a result of massive demand from China. The government has claimed that it responded to the developing situation by adopting a strategy of regular monitoring of domestic stocks of key commodities and their prices. The government also did not pass the entire increase in the international price of oil to general consumers. And to ease the demand pressure generated by the rising level of economic activity, the State Bank of Pakistan began to tighten its monetary policy rather aggressively. The government believes that by improving the supply situation of food items either through raising their production or through imports and applying timely and prudent monetary policies, it will be able to bring down the general price level in the coming months. One hopes that this strategy will effectively slow down the hike, especially, in relation to prices of food and other essential items that make up the basket of livelihood of people living below the poverty line.

The recent decision of the government to liberalize food imports from India over land route is a welcome step. One hopes that in due course of time all the necessary arrangements would be made for immediate import of food items in short supply in the country through the Wagah border. Also, a more rational method should be adopted for calculating the impact of house rent on the overall price level while, at the same time, steps should be taken to bring down the prices of construction material by encouraging their increased production. When prices of essentials go up, it is the poorer sections of society which suffer most as the purchasing power of whatever little they have in their pockets gets drastically reduced. As it is, under the current system of distribution, when the economy grows by one rupee, 40 paisa go to the richest 20 per cent of the population while the poorest 20 per cent get only seven paisa. So, the poorest sections of society need to be protected when prices of food items start soaring and an element of justice needs to be introduced in the distribution system so as to ensure equity while the economy grows at an accelerated pace.

“The first burst of growth has to be broad based and affect a large number of the rural population.”
“Agricultural growth not only helps reduce poverty and increase farmers’ incomes…”


Array Bhai Siddiqui sahib kyon hum ghariboon say mazaq kartay ho?

Where did you get this voodoo economics recipe for disaster? You are pointing to agriculture for prime economic activity. Which Economics book you read in kindergarten?

“Agriculture has been the ‘leading’ sector to have accelerated growth in countries like China and India.”

Is this statement meant to be a joke? And, how about this:

“Finally, industrial growth is harmful for sustainable development as it causes widespread environmental deterioration.”

Are you really kidding or this is serious stuff from you?

So industrial growth is harmful for “sustainable development”. You really like 7th century Arabian peninsula don’t you.

Couple of more economists like you, and the country would continue to languish in the 17th century.

Bless you for your entertaining article, it is a spoof, isn`t it?