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An Introduction to Economy of Pakistan

Structure of economy

The economy of Pakistan has been historically an agriculture based economy. However, over the years the economy has experienced a structural change. Now agriculture accounts for only 22 percent of the economy while the services sector is the largest sector with a share of 54 percent. The share of industrial sector in the GDP is 24 percent. See the table below for a comparison with recent years.

SECTORAL SHARE IN GDP

Sector

1999-2000

2003-04

2007-08

2009-10 P

Agriculture

25.9

22.9

21.3

21.5

Industrial Sector

23.3

25.5

25.8

25.2

Services Sector

50.7

51.6

52.9

53.3

Total (GDP (FC))

100

100

100

100

P: Provisional

Source: Economic Survey 2009-10

The dwindling share of agriculture must not lead one to believe its proportionately reduced importance in the economy as the sector provides base for the industry (particularly the largest industry of Pakistan-textile industry-depends crucially on agriculture) and services sector.

Agriculture

Agriculture is the most important sector of the Pakistan’s economy. Though its share in the total GDP is 22 percent, it employs 45 percent of the total labour force of Pakistan. It is also important because poverty in Pakistan is primarily a rural phenomenon and 65 percent of the population of Pakistan resides in rural areas where agricultural income is the main source of income.

The structure of the agriculture sector is given in the table below: 

Structure of Agriculture Sector

  Figures in italics are shares in GDP(FC).

  P: Provisional

  Source: Economic Survey 2009-10

As can be seen from the table, the largest contributor to total agriculture production is Livestock which enjoys 53% share in total agricultural value added. This is contrary to the popular perception of crops being the most significant sub-sector. Historically, livestock has received much less attention of policy makers as compared to the crops sub-sector.

Agriculture sector is experiencing a slow-down in growth in recent years. It grew at an average growth rate of 5.1 percent  in 1960’s and then at 5.4 percent in 1970’s but has later slumped to  4.4 percent in 1990’s and 3.2 in 2000’s. This situation is caused by volatile pattern of production in the crops sub-sector and a secular decline in forestry sub-sector. In contrast, livestock has posted good growth rates in recent years.

A brief introduction to each sub-sector is presented below:

Crops

There are four principal crops of Pakistan: wheat, rice, cotton and sugarcane. These currently account for 82.0 percent of the value added in the major crops, or  Of these, rice,  cotton and  sugarcane are “Kharif"  crops while wheat is a “Rabi” crop. “Kharif” and “Rabi” are two principal crop seasons in Pakistan.  The sowing season of “Kharif" begins in April-June and harvesting is done during October-December while "Rabi" crops are sowed in October-December and harvested in April-May.  

Crops sub-sector is often further divided into major and minor crops. Besides above mentioned four  crops, major crops include maize, mong, mash,  bajra  and  jowar  (“Kharif"  crops) and gram,  lentil  (masoor),  tobacco,  rapeseed,  barley  and mustard  ( "Rabi" crops).

The table below shows production of major crops in recent years. The volatile pattern of production can be easily seen.

Forestry

Forests, which are so essential for maintaining ecological balance, are under pressure in Pakistan for supporting fast expanding human and livestock population and are thus rapidly being degraded. This, in turn, is causing environmental imbalances including increasing floods and is reducing soil fertility. Given this, it seems a distant dream that Pakistan will be able to increase  forest  cover  from  existing  5.2  percent  to  the Millennium Development Goals target of 6  percent  by  the  year  2015. 

Livestock

Livestock sub-sector is a star performer in the agriculture sector. Demand for livestock and livestock products in Pakistan is rapidly increasing due to the population growth combined with increase in per capita income.

The production of major products of livestock, i.e. milk and meat, for last three years is given in the table below.

Production of Milk and Meat

Fishing

Fishing is a small sub-sector (1.6 % of total value-added in agriculture) but nevertheless is very important for livelihood of fisherman and other people in the fisheries business. It is also a source of export earnings. In 2008‐09,  export of 134,000  metric tons  of  fish  and  fishery  products  earned  US$  236  million.

Industrial Sector