Agriculture

1. Agriculture • Understanding Agriculture • It comprises five subsectors • Major crops • Minor crops • Live stocks • Fisheries • Forestry

2. Agriculture • Share of agriculture’s contribution to GDP (%) 1980/12002/3 • Major crop 51.87 40.64 • Minor crops 17.22 15.90 • Livestock 26.36 38.85 • Fisheries 3.53 3.48 • Forestry 1.02 1.13

3. Agriculture • Rabi (winter) crops • Wheat, barley, gram, tobacco, rapeseed, mustard • Kharif (summer) crops • Cotton, rice, sugar, cane, bajra, maize, sesame. • Food crops • Wheat, rice, bajra, jawar, maize, barley, gram • Cash crops • Cotton, sugar cane, tobacco, rapeseed, mustard, sesame.

4. Agriculture Debates in Economic Development: Agriculture Vs Industry • Early debates • According to central argument of Adam Smith, when market is expanded as a result of population growth and territorial expansion of British Empire then demand would increase and production would grow as a result of that. • David Ricardo: he was the first one to elaborate on the Adam Smith’s political economy, especially on Land-rent, distribution and the theory of comparative advantage.

5. Agriculture • Ricardo further argued that continued population growth and the corresponding increase in the demand for food would result in the conclusion of all land for agricultural production, even the marginal land with low productivity. • Hence, the utilization of poor and poorest land would cause the land value/rent to go up, mainly due to the farmer’s competition for the better and more profitable land. • According to David Ricardo, this process would result in a redistribution of national income to the benefit of landed aristocracy and to the detriment of industrialists.

6. Agriculture • Simon Kuznets (1901-1985) • But the comprehensive relationship was suggested by another economist Kuznets in his model where agriculture and industry interact and function in interdependent way.

7. Agriculture • Kuznets models of Agriculture and Industry relationship and this relationship, according Kuznets is positive sum, not zero sum as envisioned by David Ricardo who considered agriculture as main hindrance to the process industrialization. • Based on this model, we briefly describe variety of role that agriculture can play in the aggregate growth and development process. • Economic extraction from agriculture to industry through unequal exchange and economists call it transfer of value.

8. Agricultural Sector Industrial Sector Taxes Investment Taxes Investment The state Savings Loans Savings Loans Credit system Raw material, consumer goods Import of consumer goods Intermediate, capital goods, etc Exports from industry Exports from industry Asimplified model of the interrelations between agricultural and industrial sectors by Kuznets

9. Agriculture • Breton Woods and beyond • This debate continued up to the formation of Breton Woods System in 1944, and modernization theory, put forwarded Walt W. Rostow, especially focused on the issues in the in the process of economic development, pertaining to the developing countries. • According to this diagnosis, underdevelopment of agriculture was considered to be the major barrier to the process of industrialization and was attributed to the existence of old and traditional structures of the society where people were less willing to change.

10. Agriculture • Importance of Agriculture: • It is a major source of foreign exchange • Provides raw material for industry • Provide labor • Provides food stuff for the population • One of the main features of the policy from 1950 to 1960 was that the states in the Third World should do every thing in their power to extract the greatest possible economic surplus from agriculture and use it for industrial development. • But this notion was rejected by some economist.

11. Agriculture • According to the research of B.F Johnston and John Miller that agriculture should not only provide resources for industrialization but should al be developed with the aim of increasing the supplies of foodstuffs and raw material for industry (1977). • They warned that if this did not happen then whole national development will come to halt.

12. Agriculture • Peasant rationality: Shultz • Shultz was one of the scholars who dispelled the traditional conceptions about the peasants that they are lazy, lethargic and irrational and do not exploit the opportunities available to them for increasing their production and incomes. • According to this conception, the subsistence farmers, in particular, are regarded as irrational, because they continued to produce only for their own households. • The reason for this attitude is attributed to risk avoidance and risk minimizing behavior for the sake profit maximization that involves considerable risk-taking. • Shultz argued that peasants are poor but efficient, they can bring about productivity increases and improvements provided they are given access to modern technology. • To him peasant are rational actors would react to changes and apply new technologies, if they have the opportunity to do.

13. Agriculture • Urban bias: Lipton • According to him, the most important class-conflict or interest in the Third World is not between labour and capital, nor is it between national and foreign interests. It is between the rural classes and urban classes – between city and countryside (Lipton 1977). • According to him, in this conflict, it is generally the urban classes which dominate because political power is concentrated in the cities. • While supporting his argument, he says average rural incomes are typically around one-third of urban incomes.

14. Agriculture • At the same time public and private services are much more extensive in the cities and towns than in the rural areas. • In addition state and market mechanism generally function in favour of the cities by extracting surplus from agriculture from industry. • Concentration only on urban development and neglect of agriculture ....would serious distortion in the process of development • He therefore suggests that the only sensible and rational strategy is to concentrate far more resources in agriculture. • Main reason of Lipton’s dissatisfaction with industrial is that it has only absorbed the fraction of labour force.

15. Agriculture • Lack and availability of the capital is an other reason and he, like Schultz, thinks that peasants are more effective in producing output per additional unit of capital input. • Given the enormous productive potential of agriculture, he stresses that poor countries with large agricultural sectors and large rural population should allocate more resources to agriculture. • By saying that he does belittle the importance of industrial sector but he wants the removal of those biases which stand in the way of transfer of resources from rural to urban. • He further recommends that manufacturing and other urban sectors should not be subsidised with massive resource transfer of resources from rural to urban areas and this practice should be stopped forthwith.

16. Agriculture • He also recommends agriculture-driven growth process. • His theory of urban biases has been subjected to criticism on the ground that in so many countries where agriculture and industry have developed hand in hand and no evidence of such transfers have been found. • According to some studies East Asian and some economies in Latin America are exceptions but in some of the African countries urban biases have been found and maintained.

17. Agriculture • Agriculture in Pakistan • Feudalism and Agriculture-symbiotic relationship • Green revolution and land reforms – Ayub era • Green revolution generated major changes in the economic, social and political structure of the country and transformed agriculture and rural sector irreversibly. • The other feature of Ayub era was the land reforms which were considered as important mechanism for changing ownership and wealth pattern and economic and social relations of production and political relations. • Land reforms usually imply redistribution of land among landless • Green revolution

18. Agriculture • Introduced new technologies which have considerable impact on the agricultural growth. • Agriculture growth 1949-1958 was 1.43 percent • It was allowed to stagnate as ruling elite paid more attention towards industrial development. • According to some studies govt. was more biased against agriculture. Therefore the growth was rather slow. • In 1963, it was 3.7 percent • In 1965, it was 6.3 percent • In 168-9, it was around 9.6, improved considerably.

19. Agriculture • The main cause of the agriculture growth was in the irrigation facilities and introduction of High Yielding Verities (HYV), fertilizer and pesticides. • According to Zaidi, Water was the major reason for such phenomenal increase since HYV were very much dependent on timely availability of water. • From 1960 to 1965, 25 tube wells installed costing each Rs5000 to Rs 12000. • HYV, especially developed in Mexico and Philippine by Rockefeller and Ford Foundation, were introduced. • Because of widespread introduction of HYV, demand for tube wells surged to 34000 to 79000 between 1946-1970 • According to some studies 6 million acres were irrigated which finally contributed significantly towards the overall output of rice and wheat • Wheat and rice production increased by 91 & 141 percent respectively.

20. Agriculture • Issues • According to Zadi, 70 percent of tractors and tube wells were put in by farmers owning over 25 acres of land. • Surge in demand came as a result of subsidies and loans provided by govt. through ADBP. • 58 percent of mechanization was concentrated in Lahore, Multan and Bahawalpur Divisions. • The top-down natures of the management of the green revolution regional income disparities were created and it tremendously showed the concentration of vast swathe of land in the hands of few. • According to Prof. HamzaAlavi, quoted by Zaidi, Green Revolution has not only intensified already large disparities in income and wealth of the different strata of rural population but, by the same token, it has also widened disparities between different regions.

21. Agriculture • He further adds that the incomes of the rural elite increase, while the income of small farmers in the districts where the Green Revolution was most successful, and in other poorer regions, have failed to improve or have not improved in the same measure. • According another researcher, MoazzamMahmood, installation of tube well, availability of tractors and access to credit were inaccessible to poor farmers and hence, the poor farmers did not share in the fruits of the Green Revolution, causing increase in relative poverty. • MahmoodHasan Khan is of the opinion that since the fertilizers and new seeds were water-dependant, the lack of water caused ‘serious interregional and intra farm disputes’. • According to him NWFP and southern Sindh had inadequate water. • According to Shahid Javed Burki, a renowned economist , it was the farmer who owned between 50 and 100 acres, almost all of them in Punjab, produced Pakistan’s Green Revolution.

22. Agriculture • Green Revolution: elite farmer strategy (Akmal Hussain) • Only 5 percent of rural elite were the beneficiaries. • Green Revolution, BD and emergence of new political class • According to Burki, Ayub through Green Revolution took away the political power from the traditional big landlords and gave it to the middle-class land owners, owning land between 50-100 acres of land. • This rural middle class was considered a new powerful and independent factor in the political system which had been released from the political and rural control of the landed aristocracy and emerged as the traditional ‘profit maximize’. • This view of Burki was not shared by HamzaAlavi and Akmal Hussain, who believed that it was the large landlord and not the middle class which was at the vanguard of this revolution. • They argued that farmers who had land over 100 acres were dominant in the adoption of the new technology and in reaping the fruits of the Green Revolution.

23. Agriculture • According to Alavi, that the new mechanized methods did not bring into existence a new class of capitalist farmers but that it was mainly the big landowners who ….made the greatest progress in the direction of farm mechanization. • Green Revolution was confined to Punjab and Sindh which constitutes 80 percent of the cultivated crop area, with 75 percent of the population.

24. Agriculture • Land Reforms 1959 • First land reforms undertaken by military regime of Ayub who was considered to be modern and progressive ruler would bring essential changes in the economy by carrying out land reforms. • It was highly skewed in favor of few large landlords who controlled large tracts of land. • Approximately 6,000 owners owned more than the ceiling of 500 acres permitted in 1959. • They constituted 0.1 percent of the owners but owned 7.5 millions acres or 15.5 percent of the total land. • Only small amount of land handed over, that too uncultivated consisting of uncultivated hills and deserts – the terrain which was not fit for cultivation.

25. Agriculture • Since central feature of the 1959 land reforms was that owners were to be paid compensation for their lands, many benefited by handing over poor quality land to the government. • Other main feature of the 1959 was that resumed land was to be sold to landless tenants. • By 1967 only 50 percent of the resumed land has been sold • Only 20 percent of the resumed land sold to landless tenants • The remainder was auctioned to rich farmers and civil and military official. • According to one estimate, only 67,000 landless tenants and small owners could have bought the resumed land sold to them.

26. Agriculture • The land was sold at the rate of Rs per PIU (produce index unit), payable in fifty half yearly installments with a 4 percent annual interact rate on the outstanding balance. • Due to abolition of jagirs in 1959, 0.9 million acres were declared as jagirland, or which one-third were resumed by the government. • The purpose of the abolition of revenue free lands (jagirs) was to transform them into revenue paying tracts. • In 1960, the government realized about Rs 3 million from this provision. • Criticism of Land Reforms • According to some studies, land reforms were just eye wash yet they retained power in the hands of feudal. • Reforms could not reduced the feudal power. • Generous ceiling left the concentration of land in the hands of landlords

27. Agriculture • The Bhutto Reforms 1972. • 1972 land reforms were different • They were based on the social democratic leanings of the PPP • In 1972 Bhutto gave speech in which he said that his land reforms would effectively break up the iniquitous concentration of landed wealth, reduce income disparities, increase production, reduce unemployment, and streamline the administration of land revenue and agricultural taxation and truly lay down the foundation of a relationship of honor and mutual benefit between the landowner and tenant. • The manifest of PPP promised that the ‘the break up of the large estates to destroy the feudal landowners is a national necessity that will have to be carried through by practical measures.

28. Agriculture • Important features of the 1972 reforms. • Ceiling had been lowered • Land resumed from landowners was distributed free to landless tenants. • Those who acquired land under 1959 land reforms had dues outstanding were written off and were not required to make any further payment. • Due to 1972 land reforms, 42 percent land was resumed in Punjab and 59 in Sindh.

29. Agriculture • Criticism. • According Mahmood Hasan Khan, the most serious problems of defining the ceiling in PIU was that their values had remained unchanged. • The result was that with 12000 PIU one could get away with 400 acres in the Punjab and 480 acres in Sindh. • Moreover, with other exemptions for tube wells and tractors, a family could have retained up to 932 irrigated acres in the Punjab and 1,120 in Sindh.

30. Agriculture • Critical issues in agriculture • Agriculture pricing. • Govt. can play critical role in determining what and how much to produce through its pricing policy • It can also determine the right types of seeds, water, fertilizer and other inputs. • 1988, National Commission of Agriculture (NCA) was formed. It recommended a range of recommendation (refer to S.AkbarZaidi’s book , chapter 5) • Agriculture credit (refer to S.AkbarZaidi’s book , chapter 5) • Formal and informal sources of credit. • Agriculture income tax • Water crisis.

31. Agriculture Conclusion