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Development Economics Macro and Development of Pakistan

Role of Agricultural Sector in Economic Development


Agriculture occupies a strategic position in every economy. Agriculture is the lifeblood of each economy.

Source of Food:

It produces a variety of food products e.g., food grains, (rice, wheat) pulses, fruit vegetables, meat, eggs, milk, and other products. Food is a basic necessity and self-sufficiency in food ensures security against the food shortage. We export rice but still deficient in wheat.

Raw Material:

Agriculture produces a variety of raw materials for domestic industries and for export. Among these raw materials produced are raw cotton, raw wool, hides, oil tobacco and sugarcane. Some of these are also exported. They earn foreign exchange earned handsome foreign exchange from the export of these items.

Source of Employment:

The majority of the population in developing countries is engaged in and depends upon agriculture for the living. About 67% of the population living in rural areas. Out of which about 80% of the population directly or indirectly depends upon agriculture for their earnings. This shows about 50% of our total employed labour force is engaged in the agriculture sector.

Contribution to Gross National Product:

The contribution of agriculture to the GDP is still quite high although as 30% of our GDP comes from the Agriculture Sector.

Rural Development:

Agriculture is the main occupation of rural areas. The level of poverty is high in rural areas, agriculture to a great extent reduces poverty in these areas. Increasing productivity of agriculture can reduce poverty of rural as the Agriculture sector is conducive for the utilization of the savings of rural areas.

Economic Development:

Agriculture is the source of economic development in two ways besides foreign exchange and the largest contributor to GDP. Firstly, the Government levies the tax on the incomes of the farmers. The government buys wheat and other agricultural produces at a low price and earns a profit. Secondly, agricultural products increase market activities.

Important Source of National Income:

In the 1950s, the share of the agricultural sector in the total national income was 60%, in 1959-60 share of agriculture in the total national income decreased from 60% to 51.3% and in 1979-80 it further decreased to 29.4% and now share of agriculture in national income was 21%.

Foreign Exchange Earnings:

About 40% to 50%  of the total exports consist of raw and processed agriculture produced 64% are based on agricultural raw materials. Agriculture is still the major source of foreign exchange earning. The main primary commodities available for export are raw cotton, rice, fish, hides and skins, raw wool, molasses, and tobacco.

Industrial development:

The secret of Industrial development in Pakistan is also agriculture because the increase in the income of agriculturists will raise the demand for industrial goods e.g. harvesting machines, tractors, tube wells, improved seeds, and consumer goods etc.

Extension of Market:

An increase in agriculture produce not only develop agriculture markets but also extends the market for non-agricultural produces.

Supply of Labour Force:

The labour force for manufacturing and other expanding sectors of the economy is drawn from agriculture sector. It may be difficult to obtain labour force for rapidly expanding industrial sector. At the earlier stages of economic development bulk of labour for the expanding sector is drawn form agriculture.

Capital Formation:

Since there is a scope for raising productivity in agriculture with moderate investment, it is possible for the agricultural sector to make a net contribution to the capital requirements for infrastructure and for industrial expansion without reducing the already low level of consumption of the population.

Demand for Industrial Commodities:

Raising net cash incomes of the farm population may be important as a stimulus industrial expansion. Nurkse has been especially emphasized in stressing the importance of opportunities for profitable investment as a strategic factor influencing the rate of capital formation.

Government Revenue:

A high proportion of revenue to the Federal and provincial governments derived from the tax on land and agricultural products.

Provides Investment:

As a matter of fact, the agriculture sector has been providing investment to all sectors of the economy. It is the oldest profession. The present state of economy in which we have all the sectors, the industry, transport, power etc is the blessing of agriculture sector.

Per-capita Food:

The calories which a resident of a developing country is getting in a day are 2300 as compared to advanced countries developing countries per capita food level is low, yet, it meets the required criteria of nutrition status. To increase nutrition status the agriculture sector is very important.

Cultural Aspects:

We are an agriculture-oriented society. Fairs in the country are usually celebrated near harvesting seasons. Tent pegging, and competitions of livestock all are the parts of our culture. All these cultural activities of rural areas are related to agriculture.

Country’s International Recognition:

Because most of our exports are based on agriculture. Therefore, it introduces the country in the world. Our cotton, mango, rice etc are worldly popular. Agriculture sector helpful to the country in increasing her international relations.

Balance of Payment:

Agriculture can also improve the BOP position by saving imports with import methods of production, processing, and marketing. A large part of these supplies could produce at home.

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