The finance ministry’s monthly economic outlook report for April 2021 notes that “the downside risk of cotton production will be mitigated by better performance of all other crops. Thus, agriculture sector is expected to perform better”. Last month, the PM was also quoted in the press emphasizing that “the agriculture sector has benefitted the most under PTI’s ongoing tenure”. Then how come Pakistan has stumbled from one crop shortage to another during the last three years?
It is true that some crops have done tremendously well as output for crops such as maize has grown by 2.5 times since FY06, or a 6 percent CAGR over 15 years. But phenomenal growth in select group of agricultural products masks sector-wide systemic challenges. During FY21, Pakistan may very well manage to post an agriculture growth of over three percent, but that growth will very well be a culmination of several years of low-base effect at play, and not the resolution of agriculture sector’s productivity crisis.
For one, 65 percent of Pakistan’s agricultural GDP output is contributed by livestock, fishing, and forestry segments, where output growth is based on statistical gimmickry. According to the Economic Survey, these figures are calculated by applying “statistical parameters to the projected population of respective years based on the inter census growth rates” of Livestock Census 1996 & 2006, and Agricultural Census of 2003 and 2010.
That’s two-thirds of sectoral GDP largely unaccounted for. So, does it mean that the largest contributor to agri-GDP - livestock - is in poor shape and health? The only proof that Pakistan is not at the cusp of a livestock crisis – ala wheat or sugar – is that nominal increases in prices of livestock products such as meat, milk, or farm eggs – hasn’t outpaced the increase in long term national CPI.
But what about the other sub sectors that are not only routinely over-discussed in the press, but are also the subject of much intervention by officialdom? Turns out that – barring maize – annual CAGR for all other crops has averaged below 5 percent during the past 15 years. Scratch further, and one discovers that the oft-touted tremendous successes of rice and sugarcane grew fastest during FY06 to FY16, as the output growth has slowed down considerably – to under four percent - over the past 5 years.
And what about wheat and cotton that until mid-2000s contributed 75 percent of total “Important Crops” output? To regular readers, it may come as little surprise that national cotton output has fallen to nearly half over the past decade, while growth in wheat output has remained stunted, barely managing to keep the long-term annual growth rate above zero.
That Pakistan’s agricultural policy discourse is heavily tilted in favour of these two crops whose productivity and output has also suffered the most over the past two decades speaks volumes about the efficacy of policymaking. Consider that in FY06, the aggregate contribution to GDP by maize, rice, and sugarcane was less than the total contribution by cotton. BR Research’s estimates for FY21 suggests that the contribution by three crops is now three times that of cotton (simply because the latter’s contribution fell to half!).
While the agricultural policymaking has been largely devolved under the 18th amendment, the sector continues to consume significant fiscal resources not only at the provincial level, but also at the centre. For segments’ such as livestock, the claimed growth is based in sophistry, while others suffer from stilted growth that has clearly failed to keep up with growing consumption, as indicated by routine occurrences of price spirals. The only crop of note – maize – operates under the radar; on auto-pilot thanks to private sector investment in seed-related R&D.
What then, is exactly to celebrate about agricultural GDP, other than mediocrity?