Setting the development agenda

source: http://dawn.com/2008/04/07/ebr16.htm

The procurement price of wheat has been raised twice this harvesting season , from last year’s Rs425 to an aggregate Rs625 per 40 kg, to enable the government to build strategic stocks, smoothen supply chain and ensure food security.

The procurement price was determined by the surge in market demand and price of wheat. It was revised when the farmers refused to sell to the government agencies at Rs510 per 40kg, fixed by the care-taker government as it was below the market price. A de-regulated and liberalised market is now prompting a paradigm shift in official policies in favour of agriculture.

The adverse terms of trade agriculture has suffered for decades (and not adequately addressed by policymakers), is being corrected by the market forces. Over the past few years, the focus has been on the services sector and industrial consolidation. Agriculture has been largely neglected and its share in GDP has declined from around 25 per cent to just over 20 per cent in recent years, resulting in supply-demand imbalances and soaring imports of food stuff.

The latest State Bank quarterly report says that “prospects of achieving the targeted growth of 4.8 per cent for this fiscal year for agriculture “ remain dim.” Food imports are expected to reach $2.5 billion. The Trading Corporation of Pakistan has floated tenders for 1.25 million tons of wheat, slightly more than one-third of which had been imported up to January .Similarly, cotton imports amounted to $912 million during July-January to feed the textile industry. These imports are emerging a significant factor in widening trade and current account deficits.

Food security has become a major issue which cannot be resolved without placing agriculture at the centre of sustainable economic development, boosting investment in farming and delivering promptly on reforms. Agriculture which is the backbone of the national economy also provides raw materials for traditional industries and the market for industrial goods The two core issues need to be addressed are: removal of adverse terms of trade -- an impediment in rural capital formation and investment — and reduction in the wide gap between incomes of farm and industrial workers.

To quote Mr. Sartaj Aziz , a former finance minister “ the healthy increase in wheat productivity and production in 1990s was largely due to an improvement in terms of trade. That means relationship between the prices that the farmers pay for the inputs and those that they receive for their surplus output. It would be necessary to correct the adverse terms of trade for the agricultural economy by moderating the prices of the agricultural inputs and ensuring more remunerative support prices for the farmers.”

Currently, PML(N)-PPP coalition is expected to accord a high priority to agricultural development.

PPP manifesto says : “As a farmer-friendly party, the PPP will help the farmers boost production and obtain fair prices. The PML(N) is committed to provide at least 50 per cent of the total credit to farmers on the basis of “market value of the land rather than the produce index.”

The share of wheat in the total value-added of major agriculture crops is 40 per cent. Hence the rise in the official procurement price of wheat is expected to set the pace for increase in the price of other crops.

Mr Sartaj Aziz is the Chairman of the Policy Planning Committee of the PML(N) and has also served as chairman of its Manifesto Committee. The view of the two major political parties on priority for agricultural development is supported by the Planning Commission and the World Bank. There is a consensus that it is time to focus on agriculture.

The World Development Report 2008, quoted by the State Bank :”describes agriculture as the source of growth of the national economy and a provider of investment opportunities in the private sector. In addition, agricultural productivity acts as prime driver for stimulating growth in other parts of the economy and determines the price of food, which in turn, determines wage cost and competitiveness of the tradable sectors “

In fact the economy cannot be put on a sustainable path of growth without investment in modernisation and commercialisation of agriculture.—Jawaid Bokhari