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16 - 22 June , 2012
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ECONOMIC REVIEW
Agriculture for Boosting GDP Growth Rate
by SHABBIR H. KAZMI


Policy planners and economic managers are of the unanimous view that GDP growth rate achieved in post 2008 era is not only disappointingly low but more and more people are being pushed below the poverty line. While some experts say that the country should focus on boosting industrial growth, the Agriculture for Boosting GDP Growth Rategrowing consensus is focusing on how agriculture can help in achieving higher growth rate. Higher production of food and cash crops can help not only in boosting exports and containing imports but also in poverty alleviation.
Pakistan produces four major crops namely wheat, rice, sugarcane and cotton. The first two fall under staple food and the remaining two provide basic raw material for the agro-based industries. Pakistan has been exporting rice for considerably long time and also joined the club of wheat exporting countries lately. Cotton has remained the mainstay but sugarcane production has remained far from satisfactory. Despite the country having an installed capacity to produce 9 million/annum, the production has remained below 4 million tons.
Experts are of the view that production of these four major crops can be doubled without bringing additional area under cultivation. The recipe is simple and requires cultivation of high yielding varieties, application of balanced dose of fertilisers, judicious use of irrigation water and adequate availability of credit for the farmers to make timely purchase of various inputs. It is on record that the central bank in collaboration with commercial banks, is trying to improve lending to farmers. However, financial Agriculture for Boosting GDP Growth Rateinstitutions are shy in lending in the absence of appropriate crop insurance scheme. As the message for achieving food security is becoming louder the government aims at allocating more funds for the agriculture sector.
Total agriculture credit requirements have been estimated at Rs 750 billion for the current financial year, out of which Rs 650 billion would be required for farm sector and Rs108 billion for non-farm sector. Keeping in view the available capacity and past performance the Agricultural Credit Advisory Committee (ACAC) has fixed target of Rs 285 billion for the current financial year ending June 30, 2012 as compared to Rs 270 billion, 5.6 per cent higher than the target of 2010-11 and 8.4 per cent higher from actual disbursement of Rs 263 billion.
Agricultural credit disbursement by banks surged by 17 per cent on year-to-year basis to Rs 197.4 billion in the first nine months (July-March) of the current fiscal year 2011-12. In absolute terms, disbursement of credit to the agriculture sector increased by over Rs 28.7 billion in July-March, 2012 as compared to total disbursement of Rs 168.7 billion in the same period of the last fiscal year. All financial institutions involved in the agriculture loaning are actively pursuing the SBP priority for agriculture sector supported by various SBP initiatives.
Keeping in view the performance of nine months it appears that the fixed target will certainly be surpassed in year 2011-12. Regarding rescheduling and restructuring of loans of affected borrowers in addition to provision of fresh credits for rehabilitation and revival of economic activities in affected areas, SBP has launched a Refinance Scheme at discounted rates of 8% coupled with Credit Guarantee Scheme for loss sharing of banks up to 40% Crop Loan Insurance scheme is already in place and doing well. Deliberations are going on to introduce National Agriculture Insurance Scheme in Pakistan.
Cognizant of the fact that the cultivable land in Pakistan is deficient in nutrient contents; the government Agriculture for Boosting GDP Growth Ratepolicies have been encouraging for the fertiliser manufacturers. However, lately government has been suspending gas supply of fertiliser plants and diverting it to power sector. That has turned the table as the country having capacity to produce 1.2 million tons exportable surplus urea has been forced to import around the same quantity. On one hand this eroded country's foreign exchange reserves by US$600 million and on the hand forced the government to pay around nearly Rs4.8 billion as subsidy on imported urea. Had the government not curtailed gas supply of fertiliser units the country have earned US$600 million and also saved payment of the subsidy.
As stated earlier the country suffers from acute shortage of sugarcane. If sugar industry operates at optimum capacity utilisation the country could export sugar and molasses and baggase could be used in power plants attached to sugar mills, capable of delivering up 3,000MW electricity to the national grid. Most of the mills have attached distilleries capable of producing alcohol for blending with motor gasoline. It is necessary to point out at present monthly import of motor gasoline has swelled to 250,000 tons as compared to import of 80,000 tons in 2007. The beauty of E-10 (gasoline blended with alcohol is it does not require installation of any additional gadgetry i.e. CNG of LPG kit and the blended fuel can be dispensed from existing outlets.
It is also on record that over one third of the agricultural produce becomes unfit for human consumption because of improper logistic and storage facilities. If the quantities are saved from going stale, not only growers would benefit but country can also earn foreign exchange from exporting these products. Once appropriate storage facilities are established higher value addition can be achieved. To prove the point it is necessary to point out that Pakistan is among the top five producers of milk. However, less than 5% of the total quantity is being preserved by using tetra packs. By producing/export dairy products country can also earn huge foreign exchange.
This is only the tip of the iceberg as focusing on agriculture and export of horticultural and livestock can boost Pakistan's export significantly, bridge current account deficit and help in building foreign exchange reserves, contrary to erosion due to import of these products.


 
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