Zafar Iqbal
Economic diversification refers to the process of shifting an economy’s focus away from a single income source or sector towards a broader range of economic activities. This can involve developing new industries, expanding existing sectors, and investing in different areas of the economy to reduce reliance on a single sector. The goal of economic diversification is to create a more resilient and balanced economy that is less vulnerable to external shocks and changes in specific industries. By diversifying, economies can reduce risks and create new opportunities for growth and development.
The prevailing notion of Pakistan as an agrarian economy is often buoyed by the agriculture sector’s substantial contribution to the GDP, its standing as the largest exporter, its role as the primary employer, including a substantial female labor force, and its provision of raw materials to the industrial sector. However, this narrative, though emotionally compelling, neglects critical realities. The agriculture sector, while significant, grapples with low productivity, technological obsolescence, and susceptibility to climate change and water scarcity. Additionally, it offers limited value addition and fails to generate high-income jobs essential for economic advancement. In light of these truths and the trajectory of the global economy, it is imperative for Pakistan to pivot towards technology-based sectors and value-added industries, diversifying into areas such as manufacturing, information technology, and services to ensure sustainable growth and economic resilience. These new sectors hold the promise of creating high-income jobs, providing a brighter future for the workforce.
It is crucial to distinguish between the importance of agriculture for food security and its role in achieving and sustaining economic growth. While agriculture is paramount for ensuring food security, it alone cannot underpin a robust economy. These two arguments, often conflated, cater to different needs. While ensuring food security is imperative, building a strong economy necessitates diversification beyond agriculture into sectors with higher growth potential. Several compelling reasons bolster this argument, necessitating a reevaluation of the sustainability of Pakistan’s economic future, which is tied solely to the agriculture sector.
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Although agriculture employs a significant portion of the population, it is often characterized by low wages and underemployment, undercutting the notion that it is the primary employer in the country. As urbanization accelerates, there is a mounting need for robust infrastructure and services. Investing in urban development, construction, and related industries can fuel economic growth and meet the demands of a rapidly urbanizing population. The data reflecting a decline in the agricultural workforce from 46.3 percent in 1991 to 37.4 percent in 2023, with the most significant decrease occurring over the last decade, underscores a shift towards the industrial sector. For instance, in the last decade, the agricultural workforce has decreased by [specific percentage], mirroring historical patterns of economic development.
The sector-dependent model of development also lacks standing given the greater engagement of the labour force in agriculture typically observed in developing nations, particularly across many regions in Africa, as opposed to more economically developed countries. Meeting Pakistan’s continuously expanding population’s demands necessitates the creation of 2 million job opportunities annually, achievable only through sustaining a consistent growth rate of 8 per cent. Relying solely on the agricultural sector, susceptible to weather conditions, cannot enable Pakistan to achieve this pace of growth. Therefore, Pakistan’s future economic growth hinges on investing in human capital, particularly in education, skills, technology, and research. This underscores the need for significant investment in education and skills development to prepare the workforce for the future.
Furthermore, the adverse impact of climate change on Pakistan, as evidenced by its ranking as the 8th most affected country from 2000-2019, and the devastating floods in 2022 severely impacting kharif crops, underscores the inadequacy of efforts to adapt and mitigate the impact of climate change. Consequently, relying solely on agriculture leaves the economy vulnerable to sector-specific shocks, hindering the realization of sustainable economic growth.
Several inherent limitations restrict the agriculture sector’s potential to drive Pakistan’s future economic growth. These include limited value addition and agro-processing, poor infrastructure, low productivity, and dependence on water from the Indus River system, which, coupled with inefficient irrigation methods, poses a threat to sustaining agricultural productivity. Moreover, the sector grapples with trade imbalances, augmented by global price volatility in agricultural markets and extensive reliance on imports, particularly for products such as edible oil.
In conclusion, while agriculture continues to play a vital role in Pakistan’s economy, it cannot singularly drive future economic growth. Reforms are imperative to address the sector’s structural issues, and diversification into high-growth potential sectors, technological innovation, value addition, and better rural-urban industrial integration are crucial for sustainable economic development and enhanced growth potential.
