economic survey 2002-03

8/8/2019 Economic Survey 2002-03

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EconomicSurvey ofPakistan

2002-03

An online publication by


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Chapter 1. Growth and Investment

11.. GGrroowwtthh aanndd IInnvveessttmmeennttThe outgoing fiscal year 2002-03 has

witnessed a sharp recovery in economic growth

accompanied by equally impressive performance

of agriculture and large-scale manufacturing.

Other significant achievements have been the

impressive growth in per capita income, both in

rupee and dollar terms, and national savingsreaching new heights exceeding total

investment and suggesting a large surplus in the

current account balance. When viewed at the

backdrop of inhospitable external environment

and uncertain geo-political situation Pakistan's

growth performance has been impressive in 2002-

03. This year has witnessed major corporate

scandals and bankruptcies in the United States,

resulting in bursting of the equity market bubble;

rising uncertainties in the run up to war in Iraq,causing oil prices to rise sharply, and recent

outbreak of Severe Acute Respiratory Syndrome

(SARS) virus badly affecting business

environment in Asia. There developments on

international economic scene created

uncertainties. The world economic outlook

remained subdued and global trade remained

sluggish during the outgoing fiscal year.

Table 1.1 documents the growthperformance of selected regional economies in

2000-03. The performance of the major growth

poles of the world economy (US, Japan and Euro

Area) are likely to remain subdued with Japan

and Euro Area economies growing by less than

1.0 percent in 2002-03. The United States is

expected to perform better as compared with last

year. Developing countries as a whole is expected

to grow by 4.6 percent. China and Korea in Asian

region are expected to be the star performers with

growth exceeding 6.0 percent. With the exception

of Thailand, the other ASEAN countries are

projected to grow by less than 5.0 percent. Barring

Iran, the other countries in the Middle East are

almost stagnating. In Africa, no country could

achieve 5.0 percent growth in 2002-03. In SouthAsia, Pakistan is the only country which achieved

more than 5.0 percent growth in 2002-03. Two

points need to be noted as far as Pakistan's

growth performance is concerned. Firstly, when

compared with major economies of different parts

of the world, Pakistans growth performance has

been impressive. Secondly, in a subdued global

economic environment, an impressive recovery in

growth simply displays Pakistan's greater

resilience to external shocks.

The real GDP at factor cost was originally

targeted to grow by 4.5 percent in 2002-03, with

agriculture and manufacturing growing by 2.5

percent and 5.8 percent, respectively. The growth

target was largely dependent on recovery in

agriculture, manufacturing, rapid growth in

exports and higher level of investment. All three

major sectors of the economy namely, agriculture,

manufacturing and services responded positivelyto the incentives embodied in economic revival

program and comfortably surpassed the growth

targets. The real GDP at factor cost grew by 5.1

percent and was supported by a 4.2 percent, 7.7

percent and 5.3 percent growth in agriculture,

manufacturing and services, respectively. The real

GDP at market prices recorded an impressive

growth of 5.8 percent as against a growth of 2.9

percent last year.


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Table 1.1

Regional Growth Performance

Real GDP Growth (%)

Region/Country 2000-01 2001-02 2002-03

World GDP 4.7 2.3 3

Euro Area 3.5 1.4 0.8

United States 3.8 0.3 2.4

Japan 2.8 0.4

Germany 2.9 0.6 0.2

Canada 4.5 1.5 3.4

Developing Countries 5.7 3.9 4.6

China 8.0 7.3 8.0

Hong Kong SAR 10.2 0.6 2.3

Korea 9.3 3.0 6.1

Singapore 9.4 -2.4 2.2

ASEAN

Indonesia 4.9 3.4 3.7

Malaysia 8.3 0.4 4.2

Thailand 4.6 1.9 5.2

Philippines 4.4 3.2 4.6

South Asia

India 5.4 4.2 4.4

Bangladesh 5.9 5.3 4.4Sri Lanka 6.0 -1.4 3.7

Pakistan 2.2 3.4 5.1

Middle East

Saudi Arabia 4.9 1.2 2.1

Kuwait 1.4 -1.1 -0.9

Iran 5.2 5.7 6.0

Egypt 5.1 3.5 2.0

Africa

Algeria 2.4 2.1 3.1Morocco 1.0 6.5 4.5

Tunisia 4.7 5.2 1.9

Nigeria 3.9 2.8 0.5

Kenya -0.1 1.2 1.2

South Africa 3.5 2.8 3.0

Source: World Economic Outlook (IMF), April 2003.


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6.15.7

4.9

4.2

4.03.5

2.8

3.8

5.1

8.4

0

1

2

3

4

5

6

7

8

9

10

%Growth

1980's 1990-I 1990-II 2000-02 2002-03

Fig-1: Real GDP/GNP Growth

GDP Growth GNP Growth

The growth in real GNP continued to

decelerate during the 1990s declining from an

average of 5.7 percent in the 1980s to an average

of 4.2 percent in the first half, and 3.5 percent in

the second half of the 1990s. During the first three

years (2000-03) of the new decade, the real GNP

grew at an average of 5.4 percent. Most

importantly, the real GNP registered a handsome

growth of 8.4 percent in 2002-03 as against 5.3

percent last year, mainly on account of 472.2

percent increase in net factor income from abroad,

which, in turn, is the result of a sharp increase in

the inflow of workers remittances and foreign

direct investment in the country [See Fig-1.1].

With population growing by 2.1 percent, the real

per capita GNP at market price increased by 6.6

percent in 2002-03 as against an increase of 2.1

percent last year.

Notwithstanding the strong recovery in

growth to 5.1 percent in 2002-03 from 3.4 percent

last year, the fact remains that Pakistans

economic growth decelerated in the 1990s for a

variety of reasons, including worsening of

macroeconomic environment, serious lapses in

implementation of stabilization policies and

structural reforms, adverse law and order

situation, inconsistent policies, and poor

governance. As against an average growth rate of

6.1 percent in the 1980s, the real GDP growth

slowed to an average of 4.9 percent in the first

half, 4.0 percent in the second half of the 1990s.

Economic growth remained depressed for first

two years (2000-02) of the new decade averaging

2.8 percent. Unprecedented drought and the

events of 9/11 have been responsible for keeping

the growth depressed during 2000-02. Fiscal year

2002-03 exhibits a turnaround in growth [See Fig-

1]. The real challenge would now be to sustain

this growth momentum.

The manufacturing sector grew by an

average annual rate of 8.2 percent in the 1980s,

slowed to an average of 4.7 percent in the first halfand further to 2.4 percent in the second half of the

1990s. However, it performed well during last

three years by growing at annual average rate of

7.0 percent per annum. In fact, over the last

decade, the large-scale manufacturing lost almost

three-fourth of its growth momentum. The

services sector also slowed from an average of 6.6

percent in the 1980s to 5.1 percent in the first half


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and further to 4.0 percent in the second half of the

1990s, losing one-third of its growth momentum

during the 1990s. It started regaining its growth

momentum during last three years by growing at

an average rate of 4.7 percent. [See Table 1.1].

Table 1.1

Growth Performance of Real Sector

Item Unit 1980s 1990-95 1995-00 2000-03 2002-03

A. GDP GROWTH RATE % 6.1 4.9 4.0 3.6 4.9

a. Agriculture % 4.1 4.2 4.9 0.5 4.2b. Manufacturing % 8.2 4.8 3.2 7.0 7.7c. Large-scale Manufacturing % 8.2 4.7 2.4 7.7 8.7

d. Services % 6.6 5.1 4.0 4.7 5.3

B. TOTAL INVESTMENTAs %

of GDP18.7 19.5 17.1 15.2 15.5

a. Fixed Investment 17.0 18.0 15.3 13.4 13.1

b. Public Investment 9.2 8.6 6.4 4.9 4.5

c. Private Investment 7.8 9.4 8.9 8.5 8.6

C. NATIONAL SAVINGAs %

of GDP14.8 14.9 12.7 17.0 19.2

a. Domestic Saving 7.7 13.9 13.8 15.7 14.7

Source: Federal Bureau of Statistics

Persistence of large fiscal and current

account deficits during the 1980s have been the

underlying cause of macroeconomic instability,

which in turn affected investment and impeded

growth during the 1990s. Resultant accumulation

of huge public debt put strain on development

expenditure because of downward rigidity of

current expenditure and structural weaknesses of

tax administration that handicapped extra

resource mobilization. The public sector

investment has significant importance as a growth

stimulus in developing countries like Pakistan.

Under pressure from the resource crunch, the

decline in public investment was inevitable.

Total and fixed investment as percentage

of GDP declined in the 1990s. Total investment

and fixed investment averaged 18.6 percent and

16.8 percent of the GDP, respectively in the 1980s;

declined to 17.1 percent and 15.3 percent

respectively in the second half of the 1990s. The

decline was mainly originated from public sector

investment which averaged 9.1 percent of GDP in

1980s but declined to 6.4 percent of GDP in the

second half of the 1990s. It is well-known that a

stable macroeconomic environment is pre-

requisite to higher investment and growth. For an

investment friendly environment and sustainable

growth, a stable macroeconomic environment is

the key and its core elements include low

inflation, sustainable budget deficit, realistic

exchange rates, appropriate real interest rates, and

consistency in economic policy. These were

exactly the things which were ignored in macro-

economic policy making during the 1990s.

National saving rate also witnessed a

decline from an average of 14.7 percent in the

1980s to 12.7 percent in the second half of the

1990s. Even with low investment rates, the current

account showed large deficits during the 1990s.

There was a shift by the end of the 1990s to

finance investment from domestic sources instead

of foreign resources. [See Table-1.1]. National

savings as percent of GDP witnessed considerable

improvement during the last three years (2000-03)


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and averaged 17.1 percent of GDP. The rise in

national savings owes mainly to the significant

turnaround in the current account balance.

Having discussed the overall growth and

investment scenarios in the backdrop of structural

problems being faced by the economy in the

recent past, it is essential to have an insight of the

growth performance of various components of

gross national product for the outgoing fiscal year

2002-03. The performance of the various

components of national income over the last two

decades along with most recent three years, are

summarized in Table 1.2.

A. Commodity Producing Sector

The commodity-producing sector grew by

4.8 percent in 2002-03 as against 2.7 percent last

year. Although, the improvement has mainly

come from manufacturing sector but agriculture

also contributed positively to this recovery [See

Table 1.2].

Table 1.2

Growth Performance of Components of Gross National Product

(% Growth At Constant Factor Cost)

1980s 1990s 2000-01 2001-02 2002-03Commodity Producing Sector 6.5 4.3 0.2 2.7 4.4

1. Agriculture 5.4 4.5 -2.7 -0.1 4.2- Major Crops 3.4 4.1 -10.3 -1.8 5.8- Minor Crops 4.1 3.9 -0.1 -1.8 0.4- Livestock 5.3 6.3 5.3 3.7 2.9- Fishing 7.3 3.5 -3.7 -12.0 16.6- Forestry 6.4 6.5 9.6 -1.3 8.9

2. Mining & Quarrying 9.5 2.9 4.8 3.7 9.53. Manufacturing 8.2 4.0 8.2 5.0 7.8

- Large Scale 8.2 3.5 9.5 4.9 8.7- Small Scale 8.4 5.3 5.3 5.3 5.3

4. Construction 4.7 2.6 -0.4 4.3 3.45. Electricity & Gas Distribution 10.1 7.7 -17.4 8.5 -3.9

Services Sector 6.6 4.6 4.8 4.1 5.36. Transport, Storage and

Communications 6.2 5.2 2.6 1.1 3.17. Wholesale & Retail Trade 7.2 3.4 5.4 2.3 7.38. Finance & Insurance 6.0 4.9 11.1 8.1 -1.49. Ownership of Dwellings 7.9 5.3 5.3 5.3 5.310.Public Administration & Defence 5.4 3.2 1.1 6.5 5.211.Services 6.5 6.5 6.5 6.5 6.5

12.GDP (Constant Factor Cost) 6.1 4.4 2.2 3.4 5.113.GNP (Constant Factor Cost) 5.5 3.9 2.3 5.3 8.4

Source: Federal Bureau of Statistics and Economic Advisers Wing.

i) Agriculture

The performance of agriculture in the

recent past has remained subdued owing to the

catastrophic drought which engulfed the entire

country for three consecutive years. The travails of

water shortages persisted even during 2002-03;

however the extent of shortage was relatively less

detrimental. Consequently, agriculture grew by 4.2

percent in 2002-03 as against almost flat growth of


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last year and target of 2.5 percent. The improved

growth performance of agriculture is attributable to

impressive recovery in the performance of major

crops.

Major crops accounting for 41 percent of

agriculture value added grew by 5.8 percent as

against a decline in value addition for the last two

consecutive years and a target of fractional

growth of 0.3 percent for 2002-03. Major crops

including wheat, sugarcane, and rice witnessed

increase in production by 5.5 percent, 8.3 percent,

and 15.4 percent, respectively. However, the

production of cotton witnessed a decline of 3.8percent during 2002-03. This is the third year in a

row when the value addition in cotton crops has

declined. [See Chapter-2 for details]

The growth in value addition of Minor

crops which contribute 16 percent of value

addition in agriculture grew marginally by 0.4

percent in 2002-03 as against the growth target of

3.5 percent growth and decline of 1.8 percent last

year. The minor crops include cereals, vegetables,

fruits, condiments, oil seeds, fodder and others.

Within minor crops, the production of all three

major pulses witnessed tremendous growth due

to introduction of new varieties of seeds.

However, increase in production of important

minor crops like chilies, pulses, oil seeds and

onion could not boost the overall growth of minor

crops.

Livestock sub-sector which account for 39

percent of overall value addition in agriculture

has witnessed a modest growth of 2.9 percent in

2002-03 as compared with the target of 4.0 percent

for the year and actual achievement of 3.7 percent

last year. The lower growth owes to decreasing

use of draught power and adjustments for inputs

in the sub-sector. The production of milk, egg and

mutton are estimated to have gone up by 2.9, 2.3

and 2.9 percent, respectively. The fisheries sector

witnessed a growth of 16.6 percent as against a

decline of 12.0 percent last year and yearly target

of 4.0 percent growth. Components of fisheries

such as marine fishing and inland fishing,contributed to overall increase in value added in

the fisheries sub-sector. The value addition in

forestry sub-sector has increased by 8.8 percent as

compared to a decline of 1.3 percent last year. The

production of timber and firewood also went up

by 8.8 percent each.

ii) Mining & Quarrying

The output in the mining and quarrying

sector has surpassed the target of 2.5 percent and

grew by 9.5 percent in 2002-03 as against 3.7 percent

last year. The value added in crude oil increased by

2.8 percent and in natural gas it has risen by 6.5

percent. However, the value addition in coal

decreased by 2.5 percent, inspite of the fact that

cement industry has started using coal as a major

source of energy which has fuelled the domestic

demand of coal. The principal mineral which has

shown enormous growth include barite (33.3

percent), lime stone (20.3 percent), gypsum (33.9

percent), and chromites (50 percent). The minerals

with negative growth include sulphur (7.0 percent),

dolomite (3.0 percent), and magnisite (7.4 percent).

iii) Manufacturing

The overall manufacturing sector grew by

7.7 percent as against the target of 5.8 percent and

last years achievement of 5.0 percent. Large scale

manufacturing sector accounting for 71.2 percent of

overall manufacturing, recorded an impressive and

broad based growth of 8.7 percent, as against the

target of 6.0 percent and last years growth of 4.9

percent. This is the second highest growth rate

recorded during the last 13 years (the first one is 9.5

percent in 2000-01). Improvements in

macroeconomic environment, sharp recovery in

exports, and the availability of consumer financing


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at reasonable interest rates have been responsible

for strong performance of large-scale

manufacturing. Over the last three years (2000-03),

the large-scale manufacturing has registered anaverage growth of 7.7 percent per annum.

Major industries that registered positive

growth include sugar (13.6 percent), cement (20.5

percent), petroleum products (2.2 percent),

cooking oil (6.8 percent), jeeps & cars (51.6

percent), LCVs (57.6 percent), cotton yarn (8.1

percent), paper & board (15.7 percent), soda ash

(12.9 percent), motorcycles (33.5 percent),

nitrogenous fertilizer (4.2 percent) and motortyres (16.0 percent). Ten out of eleven major

industrial groups posted positive growth while

only leather products group registered negative

growth. The individual industries that depicted

negative growth include: sulphuric acid (5.4

percent), phosphatic fertilizer (27.8 percent),

paints & varnishes (63.7 percent), beverages (18.3

percent), cigarettes (7.1 percent), vegetable ghee

(7.0 percent), foot wear (6.2 percent), and cotton

ginned (4.7 percent). Small-scale manufacturing

maintained its historical growth of 5.3 percent in

2002-03.

Construction sector grew by 3.4 percent

as against 4.3 percent last year and yearly target of

4.0 percent. The government has identified

housing and construction sectors as one of the

major drivers of growth and likely to announce

various measures in the Federal Budget 2003-04 to

encourage activities in this sector. Electricity and

gas distribution sectorregistered a decline of 3.9

percent as against an impressive growth of 8.5

percent last year and yearly target of 4.3 percent.

This is the only sub-sector in commodity

producing sector which registered a negative

growth.

B. Services Sector

The Services Sectorhas been growing at a

faster pace than commodity producing sector of

the economy for quite sometime. The trend

remained unchanged even during 2002-03 as the

services sector grew by 5.3 percent as against 4.1percent of last year. Within this sector, the

wholesale & retail trade and transport, storage

and communication sub-sectors grew by 7.3

percent and 3.1 percent, respectively as against 2.3

percent and 1.1 percent of last year.

Finance and insurance sub-sector

remained depressed as far as value addition is

concerned. The sub-sector registered a decline of

1.4 percent in value addition during 2002-03 asagainst the target of 5.0 percent positive growth

and last years actual achievement of 8.1 percent

growth. Public administration and defence has

depicted a growth of 5.2 percent as against 6.5

percent last year. Two minor sectors that is,

ownership of dwellings and social services, have

maintained their estimated growth of 5.3 percent

and 6.5 percent, respectively.

Sectoral Contribution to Real GDP Growth

The greater contribution to real GDP

growth of 5.1 percent came from services sector

(2.7 percentage points). Industrial sector

contributed 1.4 percentage points with major

share coming from manufacturing sector (almost

entire). As evident from Table 1.3, almost 53

percent contribution to growth (2.7 percentage

point out of 5.1 percent of real GDP growth) has

come from services sector followed by industrial

sector (27 percent) and agriculture (20 percent).

Last year, services sector contributed 59 percent

and 41 percent contribution came from industrial

sector. Agricultural contributed negatively to the

last years growth. This suggests a balanced

contribution from all the three sectors to this

years growth. The contribution of each sector to

growth is summarized in Table-1.3:


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Table 1.3Sectoral Contribution to the GDP growth

(Percentage Points)Sector 2000-01 2001-02 2002-03

Agricultue -0.7 -0.02 1.0Industry 0.6 1.4 1.4

Services 2.3 2.0 2.7

Real GDP (Fc) 2.2 3.4 5.1

Source: Federal Bureau of Statistics.

Sectoral Shares in GDP

The composition of the Gross Domestic

Product has remained more or less unchanged

during the decade of the 1990s. However, it has

undergone considerable changes over the last

three decades. The share of commodity-producingsectors declined from 61.6 percent in 1969-70 to

49.3 percent in 2002-03 while the share of services

sector increased from 38.4 percent to 50.7 percent

during the same period. Within commodity-

producing sector, the share of agriculture has

declined substantially from 38.9 percent in 1969-

70 to 23.6 percenta decline of almost 15.3

percentage points in three decades but on the

other hand the share of manufacturing has

remained more or less stagnant in the vicinity of

17 to 18 percent over the last three decades. The

share of manufacturing sector increased from 16.7

percent in 1998-99 to 18.4 percent in 2002-03,

suggesting an increase of 1.7 percentage points in

three years. This implies that the services sector

has gained at the expense of the ground lost by

the agricultural sector. [See Table 1.4] Within

Services sector the pattern has remained more or

less the same for the last three decades with the

exception of changes in the share of transport,storage and communication which expanded

from 6.3 percent in 1969-70 to 9.9 percent in 2002-

03. The details are given in Table 1.4:

Table 1.4

Sectoral Share of Various Sectors in Gross Domestic Product

(At Constant Factor Cost)

(Percent)

1969-70 1998-99 2000-01 2001-02 2002-03(P)

Commodity Producing Sector 61.6 51.1 49.7 49.4 49.31. Agriculture 38.9 25.4 24.7 23.9 23.6- Major Crops 23.4 10.3 10.0 9.5 9.6- Minor Crops 4.2 4.9 4.1 3.9 3.8- Livestock 10.6 9.2 9.3 9.4 9.2- Fishing 0.5 0.9 0.9 0.7 0.8- Forestry 0.1 0.1 0.3 0.3 0.3

2. Mining & Quarrying 0.5 0.5 0.5 0.5 0.53. Manufacturing 16.0 17.1 17.7 17.9 18.4

- Large Scale 12.5 12.1 12.5 12.7 13.1- Small Scale 3.5 5.0 5.2 5.3 5.3

4. Construction 4.2 3.4 3.4 3.4 3.35. Electricity & Gas Distribution 2.0 4.7 3.6 3.7 3.4

Services Sector 38.4 49.1 50.3 50.6 50.7

6. Transport, Storage andCommunication

6.3 10.2 10.3 10.0 9.9

7. Wholesale and Retail Trade 13.8 15.2 15.3 15.2 15.58. Finance and Insurance 1.8 2.5 2.5 2.6 2.49. Ownership of Dwellings 3.4 5.9 6.1 6.2 6.210.Public Administration and Defence 6.4 6.1 6.4 6.6 6.611.Other Services 6.7 9.0 9.7 10.0 10.112.GDP (Constant Factor Cost) 100.0 100.0 100.0 100.0 100.0

P) Stands for provisional. Source: Economic Advisers Wing, Finance Division


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Per Capita Income

The real per capita income grew at an

average rate of 1.4 percent per annum in the 1990s

because of relatively slower growth in real GDP.

Sharp acceleration in real per capita income was

witnessed during the last three years. As against

an annual average rate of 1.4 percent in the 1990s,

the real per capita income grew at an average rate

of 3.1 percent per annum during the last three

years (2000-03) while it grew by 6.6 percent

during 2002-03. At current prices, per capita

income grew by 12.3 percent in 2002-03 as against

6.3 percent last year. Appreciation of exchange

rate further enhanced the growth of per capita

income in dollar terms. The per capita income in

dollar terms increased from $ 419 in 2001-02 to

$492 in 2002-03 an increase of 17.4 percent. The

developments in per capita income are given in

Table 1.5.

1.5

5.6

0.5

-2.7

3.14.2

6.6

17.4

-4-3-2-10123456789

1011121314151617

181920

%Growth

1990-I 1990-II 2002-03 2002-03

Fig-2: PER CAPITA INCOME

Rupee (1980-81 Price)

US $

Table 1.5

Growth in Per capita IncomePer CapitaIncome at

1980-81Prices(Rs)

%Growth

Per CapitaIncome at

currentPrices(Rs)

%Growth

Per CapitaIncome at

current US $%

Growth

1990-91 4639 0.7 9546 14.4 426 9.21991-92 4826 4.0 10853 13.7 439 3.11992-93 4778 -1.0 11674 7.6 453 3.21993-94 4813 0.7 13271 13.7 443 -2.21994-95 4951 2.9 15552 17.2 508 14.71990-I (Avg.) 1.5 13.3 5.6

1995-96 5016 1.3 17059 9.7 513 1.01996-97 4927 -1.8 18983 11.3 493 -3.91997-98 4924 -0.0 20415 7.5 473 -4.11998-99 4992 1.4 21899 7.3 438 -7.41999-2000 5073 1.6 22811 4.2 441 0.71990-II (Avg.) 0.5 8.0 -2.7

2000-01 5089 0.3 24248 6.3 415 -5.92001-02 5214 2.5 25767 6.3 419 1.02002-03 5558 6.6 28933 12.3 492 17.42000-03 (Avg.) 3.1 8.3 4.2Note: The per capita income is based on GNP market prices. Source: 1) Federal Bureau of Statistics

2) Economic Adviser Wing


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Resources and Uses

The total availability of resources in the

economy are estimated at Rs.4041.6 billion atcurrent market prices as against Rs.3578.5 billion

last year, thereby registering an increase of 12.9

percent. The resource availability is comprised of

Rs.4018.1 billion worth of Gross Domestic Product

at market prices and Rs.180.8 billion from net

factor income from abroad, adjusted with Rs.157.1

billion current account surplus. On the uses side

enormous increase of 63.1 percent is witnessed in

changes in stocks component mainly because of

the carry-over stocks of sugar and wheat. Bothfixed and total investment is likely to increase by

10.5 percent and 16.3 percent in the year under

review. The consumption is also likely to go up by

12.4 percent. Resources and uses with break-down

of components are given in Table.1.6:

Table 1.6

Resources and Uses

(Rs. Billion)

Resources and Uses 2001-02 2002-03 % Change

Resources 3578.5 4041.6 12.9

GDP (Current Factor Cost) 3377.1 3709.7 9.8

Net Indirect Taxes 251.6 308.5 22.6

GDP (Market Price) 3628.7 4018.1 10.7

Net Factor Income from Abroad 32.0 180.6 464.4

GNP (Market Price) 3660.7 4198.7 14.7Net External Resource Inflow -82.2 -157.1 91.1

Uses 3578.5 4041.6 12.1

Total Investment 534.1 620.9 16.3

Fixed Investment 476.1 526.3 10.5

Changes in Stocks 58.0 94.6 63.1

Total Consumption 3044.4 3420.7 12.4

Source: Planning & Development Division.

Savings and Investment

Total investment rose substantially to 15.5

percent of GDP in 2002-03 as against 14.7 percent

last year while fixed investment remained

stagnant at 13.1 percent of GDP. In an

environment of unutilized capacity available withdifferent industry, investment by private sector

will rise only gradually. In this year, the capacity

utilization of leading industries has gone up and

there are expectations that investment may start

rising from the next fiscal year.


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Figure-3: Savings-Investment Gap (As % of GDP)

10

11

12

13

14

15

16

17

18

19

20

21

22

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

Total Investment National Savings

Public sector investment marginally

declined to 4.5 percent in 2002-03 from last years

level of 4.8 percent. This was in line withgovernment's conscious policy decision to create

greater space for the private sector. As such, the

private sector investment rose from 8.3 percent in

2001-02 to 8.6 percent in 2002-03. The level and

composition of public sector investment has

changed over the past two decades. The wave of

privatizations has reduced the level and scope of

public sector investment through state

enterprises, and many sectors once thought to benatural monopolies are now been exposed to

competition. Public resources formerly used to

subsidize loss-making SOEs can potentially be

used where the private sector is unlikely to invest

enough. Table-1.7 reflects changing patterns of

saving and investment during the last five years.

Table 1.7

Structure of Savings and Investment

(As Percent of GDP)

Description 1998-99 1999-2000 2000-01 2001-02 2002-03 (P)Total Investment 15.6 16.0 15.5 14.7 15.5Changes in Stock 1.6 1.6 1.6 1.6 2.4Gross Fixed Investment 13.9 14.4 13.9 13.1 13.1- Public Investment 6.0 6.0 5.5 4.8 4.5- Private Investment 7.9 8.4 8.4 8.3 8.6Foreign Savings 3.9 1.9 0.9 -2.3 -3.7National Savings 11.7 14.1 14.6 17.0 19.2Domestic Savings 12.9 15.6 16.1 16.1 14.7

Note: (P) stands for provisional Source: Economic Advisers Wing


13/240


The contribution of national savings to the

domestic investment efforts is indirectly the

mirror image of the extent of foreign savings

required to meet investment demand. Nationalsavings as percent of GDP rose from 17.0 percent

in 2001-02 to 19.2 percent in 2002-03 mainly on

account of a significant improvement in the

current account balance which eliminated the

need for recourse to foreign savings to finance

domestic investment. It is note-worthy that

national saving rate has increased by 7.8

percentage points since 1998-99. National savings,

when adjusted for net income from abroad, gives

us domestic savings which stood at 15.0 percent of

GDP in 2002-03 as against 16.1 percent of GDP lastyear. This is because of massive increase in net

factor income from abroad during current fiscal

year. During the last three years (2000-03)

domestic savings as percent of GDP averaged 15.7

percent as against an average of 13.9 percent in

the 1990s.

____________________


14/240

Chapter 2. Agriculture

2. AgricultureAgriculture sector being the lynchpin of the

countrys economy continues to be the single

largest sector and a dominant driving force for

growth and development of the national economy.

It accounts for 24 percent of the GDP and employs

48.4 percent of the total work force. Agriculture

contributes to growth as a supplier of raw materials

to industry as well as a market for industrialproducts and also contributes substantially to

Pakistans exports earnings. Almost 67.5 percent of

countrys population are living in rural areas and

are directly or indirectly linked with agriculture for

their livelihood. Any improvement in agriculture

will not only help countrys economic growth to

rise at a faster rate but will also benefit a large

segment of the countrys population.

Agriculture sector has grown at an

average rate of 4.5 percent per annum during the

decade of the 1990s (Table-2.1) . The growth,

however, has fluctuated widely rising by as high

as 11.7 percent and declining by 5.3 percent. Over

the last three years in general but the first two years

(2000-01 and 2001-02) of the new millennium in

particular, Pakistan has witnessed cripplingdrought which badly affected its agriculture.

Overall agricultural growth turned negative for

these two years (See Table 2.1). The travails of water

shortage persisted even during 2002-03, however

the extent of shortage was relatively less.

Notwithstanding shortage of water, Agriculture

grew by 4.2 percent in 2002-03 (See Table 2.1).

Table 2.1

Agriculture Growth

(Percent)

Year Agriculture Major Crops Minor Crops

1990-91

1991-92

4.96

9.50

5.69

15.48

3.51

2.37

1992-93

1993-94

1994-95

1995-96

1996-971997-98

1998-99

1999-00

Average of 1990s

2000-01

2001-02

2002-03 (P)

-5.29

5.23

6.57

11.72

0.124.52

1.95

6.09

4.54

-2.64

-0.07

4.15

-15.60

1.24

8.69

5.96

-4.338.27

-0.02

15.42

4.08

-9.79

-1.83

5.80

3.95

12.62

6.91

4.89

0.948.13

4.23

-9.10

3.84

0.11

-1.82

0.41

P= Provisional.


15/240


As stated earlier, water shortages

continued, though with lesser intensity, during

2002-03. The canal head withdrawal in Kharif 2002

and Rabi 2002-03 seasons significantly increased by

14.9 percent and 35.7 percent, respectively over

Kharif 2001 and Rabi 2001-02. Winter rainfall

(January-March, 2003) which was also higher by 4.2

percent against the normal rainfall of same period,

ended the shortage of water for the Rabi Crop 2002-

03. Moreover, heavy snowfall on the mountains

during winter, 2003 would help fill the countrys

water reservoirs and alleviate water shortages to a

greater extent for the Kharif Crops 2003. On the

whole, the water situation in the current fiscal year

appears better than last year but remains in short

supply compared with the normal supplies. [More

on this issue can be found under sub-section

irrigation].

The relatively better availability ofirrigation water has had positive impact on overall

agricultural production this year and the

agriculture growth is estimated at 4.2 percent as

compared with negative 0.1 percent during 2001-02.

Major crops, accounting for 41 percent of

agriculture value added, registered a sharp

recovery and grew by 5.8 percent against the

decline of 1.8 percent last year. Minor crops,

contributing 16 percent to agricultural value added,

depicted positive growth of 0.4 percent against a

negative growth of 1.8 percent last year. Livestock

the second largest contributor to overall agriculture

value added (contributing 39 percent), grew by 2.9

percent in 2002-03 as against 3.7 percent in 2001-02.

Fisheries has shown a remarkable growth of 16.6

percent against the negative growth of 12 percent

last year. On the other hand, forestry also registered

a significant growth of 8.8 percent as against a

negative growth of 1.3 percent last year. The

situation of major crops for the last five years is

presented inTable-2.2.

I. Crop Situation

There are two principal crop seasons in

Pakistan, namely the "Kharif" the sowing season of

which begins in April-June and harvesting during

October-December; and the "Rabi", which begins in

October-December and ends in April-May. Rice,sugarcane, cotton, maize, bajra and jowar are

Kharif" crops while wheat, gram, tobacco,

rapeseed, barley and mustard are "Rabi" crops.

Major crops, such as, wheat, rice, cotton and

sugarcane account for 90 percent of value added in

major crops. The value added in major crops

accounts for 41 percent of value added in overall

agriculture. Thus, the four major crops (wheat, rice,

cotton, and sugarcane), on average, contribute 37

Fig-1: AGRICULTURE GROWTH

-20

-15

-10

-5

0

5

10

15

20

91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 '01-02 '02-03(P)

Agri Major Crops Minor Crops


16/240

Chapter 2. Agriculturepercent to value added in overall agriculture. The

minor crops account for 16 percent of value added

in overall agriculture. The performance of the

"Kharif" and "Rabi" crops is discussed in the

ensuing pages.

Table 2.2

Production of Major Crops(000 Tonnes)

YearCotton

(000 bales)Sugarcane Rice Maize Wheat

1998-99

1999-00

2000-01

2001-02

2002-03 (P)

8790(-4.3)

11240(27.9)

10732(-4.5)

10613(-1.1)

10211(-3.8)

55191(3.9)

46333(-16.0)

43606(-5.9)

48042(10.2)

52049(8.3)

4674(7.9)

5156(10.3)

4803(-6.8)

3882(-19.2)

4478(15.4)

1665(9.8)

1652(-0.8)

1643(-0.5)

1664(1.3)

1758(5.6)

17856(-4.5)

21079(18.0)

19024(-9.7)

18227(-4.2)

19235(5.5)

P: Provisional.(July-March) Source: Ministry of Food, Agriculture and Livestock.

*: Figures in parentheses are growth rates Federal Bureau of Statistics.

a) Major Crops:

i) Cotton:

Cotton is the main cash crop which

contributes substantially to the national income. It

accounts for 11.7 percent of value added in

agriculture and about 2.9 percent of GDP. In

addition to providing raw material to the local

textile industry, the surplus lint cotton is also

exported. Production of cotton is provisionally

estimated at 10211 thousand bales for 2002-03,

which is 3.8 percent lower than last year. The pest

attack and shortage of irrigation water in the earlyKharif season are mainly responsible for lower

production. Cotton was cultivated on the area of

2796 thousand hectares, which was 10.3 percent

lower than last year (3116 thousand hectares). Area,

production and yield of cotton for the last five years

are given in Table 2.3.

Table 2.3

Cotton, Area, Production and Yield

Area Production Yield

Year(000

Hectare)

%Change (000 Bales)

%

Change(Kgs/Hec) %Change

1998-99

1999-002000-01

2001-02

2002-03 (P)

2923

29832927

3116

2796

-1.2

2.0-1.9

6.5

-10.3

8790

1124010732

10613

10211

-4.3

27.9-4.5

-1.1

-3.8

511

641623

579

621

-3.0

25.4-2.8

-7.1

7.2

P=Provisional (July-March). Source: Ministry of Food, Agriculture and LivestockFederal Bureau of Statistics.


17/240


Fig-2: Cotton production (000 bales)

5000

6000

7000

8000

9000

10000

11000

12000

13000

14000

90-91

91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

02-03(P)

ii) Rice:

Rice is an important food cash crop. It isalso one of the main export items of the country. It

accounts for 6.8 percent in value added inagriculture and 1.7 percent in GDP. Production ofrice during 2002-03 is provisionally estimated at4478 thousand tonnes, which is 15.4 percent higherthan last year. Rice was cultivated on an area of2226 thousand hectares, showing an increase of 5.3percent over the last year. The yield per hectare isalso higher by 9.6 percent. The higher production isdue to improved water availability during themonths of May, June and July 2002 which placed agood impact on the growth of rice crop. Area,production and yield of rice for the last five yearsare given in Table 2.4.

Table 2.4

Area, Production and Yield of Rice

Area Production YieldYear

(000Hectare)

%

Change

(000Tonnes)

%

Change(Kgs/Hec) %Changes

1998-99

1999-00

2000-012001-02

2002-03 (P)

2424

2515

23772114

2226

4.6

3.8

-5.5-11.1

5.3

4674

5156

48033882

4478

7.9

10.3

-6.8-19.2

15.3

1928

2050

20211836

2012

3.1

6.3

-1.4-9.1

9.6

P: Provisional (July-March). Source: Ministry of Food, Agriculture and Livestock.

Federal Bureau of Statistics.

Fig-3: Rice production (000 Tonnes)

2000

2500

3000

3500

4000

4500

5000

5500

90-91

91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

'02-03(P)

iii) Sugarcane:

Sugarcane crop is a highly water

intensive and yet an important cash crop. Sugar

production in the country mostly depends on this

crop, though a small quantity of sugar is also

produced from sugarbeet. Its shares in value addedin agriculture and GDP are 6.2 percent and 1.5

percent, respectively. Sugarcane was cultivated on

an area of 1086 thousand hectares during the

current fiscal year, showing an increase of 8.6

percent over the last year. The size of the sugarcane

crop is provisionally estimated at 52049 thousand

tonnes which is higher by 8.3 percent, as compared

with last year. The higher production is the result of

increase in area, judicious application of fertilizer


18/240

Chapter 2. Agricultureand water, improvement in cultural practices and

better management. Timely payment received by

the growers during last year also induced the

farmers to grow more sugarcane. The area,

production and yield per hectare for the last five

years are given in Table 2.5.

Table 2.5

Area, Production and Yield of Sugarcane

Area Production YieldYear(000 Hectare %

Change(000 Tonnes) %

Change(Kgs/Hec.) %

Change1998-991999-002000-012001-022002-03 (P)

11551010

96110001086

9.4-12.6-4.94.18.6

5519146333436064804252049

3.9-16.0-5.910.28.3

4778445874453764804247927

-5.0-3.9-1.15.9-0.2

P: Provisional. (July-March) Source: Ministry of Food, Agriculture and Livestock.

Federal Bureau of Statistics.

Fig-4: Sugarcane production

(000 Tonnes)

30000

35000

40000

45000

50000

55000

60000

90-91

91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

'02

-03(P)

iv) Wheat:

Wheat is the main staple food of the

countrys population and largest grain crop of the

country. It contributes 12.5 percent to the value

added in agriculture and 3.1 percent to GDP. Wheat

was cultivated on an area of 8069 thousandhectares, showing 0.1 percent increase over last

year. The size of the wheat crop is provisionally

estimated at 19235 thousand tonnes which is 5.5

percent higher than last year. The yield per hectare

also increased by 5.4 percent. Wheat production

target was originally fixed at 19.75 million tonnes.

However, as a result of the mid-February 2003

country-wide heavy rain which brought 0.35 MAF

additional water to Tarbella and 1.1 MAF to Mangla

reservoirs, the wheat production target was revised

upward to 20.63 million tonnes. The recentestimates of wheat production is much lower than

the revised target because the crop was affected by

aphid and rust attacks in the wheat growing areas

as well as high temperature stress at grain

formation affected the productivity of the wheat

crop. The area, production and yield for the last five

years are given in Table 2.6.

Table 2.6

Area, Production and Yield of Wheat

Area Production YieldYear (000

hectares)%

Change(000

tonnes)%

Change(Kgs/Hec.) % Changes

1998-99

1999-002000-012001-02

2002-03 (P)

8230

846381818058

8069

-1.5

2.8-3.3-1.5

0.1

17858

210791902418227

19235

-4.5

18.0-9.7-4.2

5.5

2170

249123252262

2384

-3.0

14.8-6.7-2.7

5.4

P= Provisional.(July-March). Source: Ministry of Food, Agriculture and Livestock.Federal Bureau of Statistics


19/240


v) Other Major Crops

Except bajra, jowar and barley all other

major crops have registered increases over the last

years production. The production of bajra, jowar

and barley is provisionally estimated to decrease by

12.5 percent, 9.9 percent and 8.0 percent

respectively. The production of gram, rapeseed &

mustard, maize and tobacco grew by 61 percent, 7.2

percent, 5.6 percent and 0.4 percent, respectively.

The details are given in Table 2.7.

Table 2.7Area and Production of Other Major Kharif and Rabi Crops

2001-02 2002-03(P)

Crops Area

(000 hectares)

Production

(000 tonnes)

Area

(000 hectares)

Production

(000 tonnes)

%Change inproduction

KHARIF:

Maize

Bajra

Jowar

RABI:Gram

Barley

Rapeseed &Mustard

Tobacco

942

417

358

934

111

269

49.3

1664

216

222

362

100

221

94.5

970

313

325

960

103

284

49.5

1758

189

200

582

92

237

94.9

5.6

-12.5

-9.9

61

-8.0

7.2

0.4

P= Provisional (July-March). Source: Ministry of Food, Agriculture and Livestock.Federal Bureau of Statistics.

b) Minor Crops

i) Oilseed:

The major oilseed crops include cottonseed,

rapeseed/mustard, sunflower and canola etc. Total

availability of edible oils in 2001-02 was 2.089

million tonnes. Local production stood at 0.606

million tonnes which accounted for 29 percent of

the total availability while the remaining 71 percent

was made available through imports. During 2002-

03, local production of edible oil is provisionally

estimated at 0.634 million tonnes which is higher by

4.6 percent than last year. During this period, 0.971million tonnes of edible oil was imported and 0.155

million tonnes of edible oil was recovered from

imported oilseeds. Total availability of edible oil

from all sources amounted to 1.76 million tones

during July-March (2002-03). Production of oilseed

crops during 2001-02 and 2002-03 is given in Table

2.8.

120001400016000180002000022000


20/240


Table 2.8

Area and Production of Major Oilseed Crops

2001-02 2002-03 (P)

Area Production Area Production

(000 Acres)

Seed

(000Tonnes)

Oil

(000Tonnes)

(000 Acres)

Seed

(000Tonnes)

Oil

(000Tonnes)

Cottonseed

Rapeseed/

Mustard

Sunflower

Canola

Others

Total Oil

7772

572

281

122

-

3612

188

197

73

-

433

60

79

29

05

606

6669

649

371

223

-

3451

217

260

136

414

69

99

52

-

634

P= Provisional Source: Pakistan Oilseed Development Board.

ii) Other Minor Crops:

The production of all the three major pulses

have increased this year. Production of Mash has

increased by 22.3 percent, followed by Mung (16.5

percent) and Masoor (8.0 percent) during 2002-03.

Production of potato decreased by 1.1 percent

while that of onion estimated to increase by 17.1

percent. The production of chillies is estimated to

have increased by 12 percent in 2002-03 over the

last year . Details are given in Table 2.9.

Table 2.9

Area and Production of Other Minor Crops

2001-02 2002-03(P)

Crops Area

(000 hectares)

Production

(000 tonnes)

Area

(000 hectares)

Production

(000 tonnes)

%Changein

production

Masoor

Mung

Mash

Potato

Onion

Chillies

46.1

219.2

45.7

101.5

105.6

84.5

26.2

115.4

27.8

1721.7

1385.0

93.3

45.8

261.4

58.3

99.7

106.4

47.4

28.3

134.4

34.0

1701.9

1622.0

104.5

8.0

16.5

22.3

-1.1

17.1

12.0

P= Provisional (July-March). Source: Ministry of Food, Agriculture and Livestock.Federal Bureau of Statistics.

II. Farm Inputs

i) Fertilizer:

Fertilizer is the major farm input in

agricultural production. Domestic production of

fertilizer during the first nine months (July-March

2002-03) of the current fiscal year has depicted a

decrease of 1.3 percent. On the other hand, the

import of fertilizer increased by 45.8 percent,

therefore, the total availability of fertilizer is higher

by 9.3 percent in the current year. The off take of

fertilizer was also higher by 4.3 percent. The details

are given in Table 2.10.


21/240


Table 2.10

Production and Off-take of Fertilizer

('000' N/tonnes)

Year Domestic

Production

%

ChangeImport %

ChangeTotal %

ChangeOfftake %

Change

1998-99

1999-00

2000-01

2001-02

2001-02 (P)

2002-03 (P)

1886.0

2263.0

2298.0

2285.6

1716.1

1694.0

9.1

20.0

1.5

-0.5

-

-1.3

860.0

662.8

579.0

626.0

500.0

729.0

20.5

-22.9

-7.0

8.1

-

45.8

2746.0

2925.8

2877.0

2911.6

2216.1

2423.0

12.5

6.5

-1.7

1.2

-

9.3

2583.8

2833.4

2966.0

2929.0

2196.4

2291.0

-1.2

9.7

4.7

-1.2

-

4.3

P= Provisional (July-March). Source: National Fertilizer Development Centre.

ii) Improved Seed:

Quality seed of improved varieties is the

key to enhance agricultural productivity. Seed has

the unique position among the various agricultural

inputs because the effectiveness of all other inputs

mainly depend on the production potential of

seeds. Federal Seed Certification & Registration

Department regulates the quality during flow of

seed from breeder to growers. The Department

performs its functions through seventeen Seed

Testing Laboratories and Field Offices, established

in various ecological zones of the country.

To provide certified crop seeds to the

growers in public sector, Seed Corporation in

Punjab and Sindh, Departments of Agriculture in

Baluchistan and NWFP have been entrusted the

task of seed production, processing and marketing.

In private sector 394 seed companies including five

multinationals have been allowed for certified seed

production, processing and marketing.

With the induction of private sector into

seed business, improved seed availability has

increased by 16.5 percent over the seed

requirement in 2001-02. During (July-March) 2002-

03, 197.5 thousand tones of improved seed was

procured while 147.6 thousand tones of improved

seed was distributed, which was 11.9 percent

higher than the same period of 2001-02.

iii) Mechanization:

Pakistan food security and agriculture

surpluses for export at competitive prices require

efficient development and utilization of agricultural

resources. Cost of production of various crops are

not competitive due to low productivity mainly due

to inefficient farming practices. Farm operations

being time specific, demand precision to optimize

the efficiencies of agriculture inputs for higher

productivity. The future challenges of free market

economy and faster globalisation have further

necessitated modernization of agricultural

machinery through transfer of latest, efficient and

cost effective technology to farming system.

Efficient use of scarce agriculture resources and

accelerated agriculture mechanization is, therefore,

vital and demands for a comprehensive strategic

planning for the future.

In consideration of role of precision in farm

operations, the use of machinery has been

encouraged through provision of credit availability.

No significant increase in prices of locally

manufactured tractors compared with last year has

been noticed as there has been only an increase of

1.8 to 6.4 percent in the sale prices of some tractors.

However, prices of universal tractors Model U-640

and U-530 decreased marginally by 0.5 and 0.9

percent, respectively. Prices of various tractors are

given in Table 2.11.


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Table 2.11

Price of Locally Manufactured Tractors

(In Rupees)

Tractor Model 2001-02 2002-03 % Change

MF-240 (50-H.P)

MF-260 (60 H.P)

MF-375E(75 H.P)

MF-385(85 H.P)

FIAT-480 (55-H.P)

FIAT-640 (75-H.P)

KOREAN LT-400D

UNIVERSAL U-640(65 HP)

UNIVERSAL U-530 (53-H.P)

313,000

375,000

490,000

585,000

320,000

459,000

435,000

439,000

320,000

320,000

399,000

499,000

599,000

320,000

459,000

435,000

436,800

317,000

2.2

6.4

1.8

2.4

-

-

-

-0.5

-0.9

Source: Ministry of Food, Agriculture and Livestock.

iv) Plant Protection:

The plant protection measures help in

increasing the per hectare yield by protecting crops

from damages because, without effective protection

against the attack of pests and diseases, the

beneficial outcome of other inputs may not be

realized either. In this connection, Department of

Plant Protection provides facilities, such as, Locust

Survey and Control, Aerial pest Control, Pesticide

Registration and Testing etc. while private sector

carries plant protection measures including ground

sprays. During July-March 2002-03, 18.6 and 30.4

thousand tonnes of agricultural pesticides were

imported and locally formulated.v) Irrigation:

Efficient irrigation system is pre-requisite

for higher agricultural production. It helps increase

the cropping intensity. Despite the existence of

good irrigation canal net work in the world,

Pakistan still suffers from wastage of a large

amount of water in the irrigation process. Besides,

during the last three year the country had

experienced severe shortage of water.

The total inflow of irrigated water

averaged at 130.92 million acre feet (M.A.F.) during

the last 25 years (1977-78 to 2002-03). Against this

level of average inflow, the flows in major rivers

have declined to 111.66 MAF in 2002-03 or by 14.7

percent. The canal head withdrawals averaged at

98.69 MAF during 1977-78 to 2002-03, but it

declined to 87.84 MAF in 2002-03, thus registering a

decline of 11 percent. During the monsoon season

(July-September), the average rainfall has been

126.4 mm historically but during the monsoon

season of 2002, the rainfall averaged 59.6 mm,

suggesting a decline of 52.8 percent. However,

during winter (January to March 2003), the actual

rainfall received was 69.3 mm while the average

rainfall during this period has been 66.5 mm

indicating an increase of 4.2 percent over average

rainfall. The details are in Table 2.12 (a&b).

Table 2.12 (a)

Irrigation Water Situation

Million Acre Feet

Average1977-78 to 2002-03

2002-03 Shortage % Shortage

InflowCanal withdrawals

130.9298.69

111.6687.84

19.2610.85

-14.7%-11.0%

Source: Indus River System Authority.


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Table 2.12 (b)Rainfall Recorded During 2002-03

(In Millimeter)Monsoon Rainfall

(Jul-September)Winter Rainfall(January-March)

Average 126.4 66.5Actual 59.6 69.3Shortage (-)/excess (+) - 66.8 + 2.8% Shortage (-)/excess (+) - 52.8 + 4.2

Source: Pakistan Meteorological Department

Due to the above normal winter rainfalls of 2003,

the water availability situation both for Rabi 2002-

03 and Kharif 2003 crops have improved. The canal

head withdrawals in kharif 2002 (April-September)has increased by 14.9 percent and stood at 62.83

million acre feet (MAF), as compared to 54.66 MAF

during the same period last year. During the Rabi

season 2002-03 (Oct-March), the canal head

withdrawals increased significantly by 35.7 percent,

as it went up to 25.01 MAF compared to 18.43 MAFduring the same period last year. Province-wise

details are given in Table 2.13.

Table 2.13

Canal Head Withdrawals (Below Rim Station)

(Million Acre Feet (MAF)

Provinces

Kharif

(Apr-Sep)

2001

Kharif

(Apr -Sep)

2002

% Change inKharif 2002

over 2001

Rabi

(Oct-Mar)

2001-02

Rabi

(Oct -Mar)

2002-03

% Change inRabi 2002-03over 2001-02

Punjab

Sindh

Baluchistan

NWFP (CRBC)

Total

27.24

24.47

2.11

0.84

54.66

32.12

27.63

2.20

0.88

62.83

17.9

12.9

4.3

4.8

14.9

9.81

7.10

0.91

0.61

18.43

13.87

9.72

0.93

0.49

25.01

41.4

36.9

2.2

-19.7

35.7

Source: Indus River System Authority.

vi) Agricultural Credit:

Credit requirements of the farming sector

have been increasing over the years with the rise in

the use of fertilizer, pesticides and mechanizationand hike in their prices. In order to cope with the

increasing demand for agricultural credit,

Institutional Credit to the farmers is being provided

through Zarai Taraqiate Bank Limited (ZTBL),

formerly known as Agricultural Development Bank

of Pakistan (ADBP); Commercial Banks,

Cooperatives and Domestic Private Banks. Of these,

the ZTBL provides the lion share of the total credit

disbursement followed by Commercial Banks. The

agricultural loans extended to the farming

community during (July-March), 2002-03, are

discussed below:a) Production and Development Loans

Agricultural loans amounting to Rs.37.6

billion were disbursed during July-March, 2002-03,

as against Rs.35.0 billion during the corresponding

period last year, thereby registering an increase of

7.5 percent. Supply of agricultural credit by various

institutions since 1997-98 to 200203 (July-March) is

given in Table 2.14


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b) Loan to Small Farmers

The Zarai Taraqiate Bank Limited (ZTBL),

disbursed Rs.16.2 billion to small farmers having

upto 25 acres of land during the first nine months ofFY 2002-03. Availability of credit to this category

now constitutes 83.8 percent of total agricultural

credit provided by the bank.

c) Loans for Newly Identified Priority Items

For the financial year 2002-03, Rs.4075.0

million have been allocated for priority items

mainly for enhancement and improvement of

irrigation facilities, various varieties of orchards, on

farm godowns/storages, production loans for

improved seeds, horticulture and Micro Credit etc.

During 2002-03 (July-March), loans of Rs.1480.0

million have been disbursed for these priority items

to play an effective role in the development of

agriculture.

d) Loan UnderOne Window Operations

Since 1997, ZTBL has launched One

Window Operation to provide credit facilities,

particularly to small farmers, to cater for input

requirements at their door step. Thus, during peak

sowing season of both Rabi and Kharif Crops, One

Window Operation is launched with thecollaboration of Provincial Governments, Revenue

Officials and Postal Authorities. Agriculture Pass

Books are issued at spot to the intending borrowers,

their land record is entered and loans are

sanctioned at focal points whereas payments are

released on the very next day from the concerned

branch. During 2002-03 (July-March), loans of

Rs.2565.6 million have been disbursed through One

Window Operation.

e) Revolving Finance Scheme

Under this scheme, an annual loan limit is

sanctioned to a borrower, based on his input credit

requirements for both Rabi and Kharif Crops. This

limit remains operative for a period of 3 years (six

cropping season) without any afresh procedural

requirement and documentation. Under this

scheme Rs.7386.6 million was disbursed during

(July-March) 2002-03. Thus 48% of total production

loan i.e Rs.15374.6 million has been disbursedthrough this scheme.

Table 2.14

Supply of Agricultural Credit by Institutions

(Rs. in million)

TotalYear ZTBL*

Commer-

cial Banks

Coopera-

tives

Domestic

Private

BankRs. Million %Change

1997-98

1998-99

1999-00

2000-01

2001-02

2001-02 (July-

March)

2002-03 (July-

March)

22353.6

30176.0

24423.9

27610.0

29108.0

20161.8

19346.5

6109.7

7236.0

9312.5

12055.0

17486.1

11298.5

14375.9

4928.9

5440.0

5951.2

5124.2

5273.7

3107.3

3217.8

-

-

-

-

578.5

434.6

679.3

33392.2

42852.0

39687.6

44789.2

52446.3

35002.2

37619.5

-

28.3

-7.4

12.8

17.1

-

7.5

* ZTBL formerly ADBP. Source: Ministry of Food, Agriculture and Livestock.

State Bank of Pakistan.


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III. Forestry

Forests are the lungs of any country.

Forests play an important role in land conservation,

regulated flow of water for irrigation and powergeneration, reduction of sedimentation in water

channels and reservoirs and maintenance of

ecological balance. Forest cover in Pakistan consists

of about 4.8 percent of its total land mass. Eighty

five percent of this is public forests which includes

40 percent coniferous and scrub forests on the

northern hills and mountains. The balance is made

up of irrigated plantations and Riverain forests

along major rivers on the Indus plains, mangrove

forests on the Indus delta and trees planted on

farmlands. Total forests area of Punjab, NWFP,

Sindh, Baluchistan, Azad Kashmir and Northern

areas is 0.69, 1.21, 0.92, 0.33, 0.42, and 0.66 million

hectares, respectively. Though the forest resource is

meager, it plays an important role in Pakistans

economy by employing half a million people and

providing one-third of the nations energy needs.

Forests and Rangelands support about 30 million

herds of livestock, which contributes more than

US$ 400 million Pakistans annual export earnings.

During the year 2002-03, forests have contributed298.79 thousand cubic meters of timber and 490.50

thousand cubic meters of firewood as compared to

274.53 thousand cubic meters timber and 450.95

thousand cubic meters firewood in 2001-02.

Forestry Sector Master Plan had been

prepared in 1992-93 for a period of 25 years which

is being updated through Asian Development Bank

assisted project. Forestry data is being updated

through field oriented studies which will be useful

in future strategic planning for the Development offorestry in the country. Tree planting campaigns are

launched every year in the spring and monsoon

season. During spring and monsoon season year

2002, 106.46 million saplings (Spring 66.75 and

Monsoon 39.71 million) were planted.

In order to promote efficient utilization and

assessment to recover the full utilization of goods

and services provided by the forests, Government

of Pakistan has prepared National Forest Policy

2002 which covers all renewable natural resources

i.e. forests, watersheds, rangelands, biodiversity

and their habitats. The policy envisages to eliminate

the fundamental causes of forests depletion throughactive participation of all the stakeholders. The goal

of this national forest policy is to foster sustainable

development of natural resources, rehabilitation of

its environment and enhancement of sustainable

livelihoods of communities.

A mega project in forestry sector named

Rachna Doab Afforestation Project was started in

July 1995 at a cost of Rs.485.4 million. The main

objective of this project is afforestation for the

purpose of camouflage and concealment which is

very important for strategic point of view. During

2002-03, Rs.60.0 million were allocated to conclude

the on-going activities towards achievements of

afforestation targets.

Tarbela Watershed Management Project

sponsored by the Ministry of Environment is an on-

going project at a total cost of Rs.689.0 million, to

which Rs.34.188 million were allocated during FY

2002-03.The main objectives of the project include;soil and water conservation, extension of forests,

appropriate land use, improvement of environment

and uplift of socio-economic conditions of people.

During the fiscal year 2002-03, 14.5 acres of

nurseries have been raised, 2576 acres planted,

7,086 acres afforestation maintained and 27

management/utilization plans have been prepared

with the total expenditure of Rs.23.932 million till

March, 2003.

IV. Livestock and Poultry

a) Livestock

Livestock is an important sector of

agriculture in Pakistan, which accounts for 39

percent of agricultural value added and about 9.4

percent of the GDP. Its net foreign exchange

earnings were to the tune of Rs.51.5 billion in 2001-

02, which is almost 11.4 percent of the overall


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Chapter 2. Agricultureexport earnings of the country. The role of livestock

in rural economy may be realized from the fact that

30-35 million rural population is engaged in

livestock raising, having household holdings of 2-3

cattle/buffalo and 5-6 sheep/goat per family

deriving 30-40 percent of their income from it. The

livestock include: cattle, buffalos, sheep, goats,

camels, horses, asses and mules. Population of

livestock for the last five years is given in Table 2.15.

Table 2.15

Livestock Population (Million Nos.)

Species 1998-99 1999-00 2000-01 2001-02 2002-03(E)

Cattle

Buffalo

Sheep

Goat

Camels

Horses

Asses

21.6

22.0

23.9

45.8

0.8

0.3

3.8

22.0

22.7

24.1

47.4

0.8

0.3

3.8

22.4

23.3

24.2

49.2

0.8

0.3

3.9

22.8

24.0

24.4

50.9

0.8

0.3

3.9

23.3

24.8

24.6

52.8

0.8

0.3

4.1

E: Estimated. Source: Ministry of Food, Agriculture and Livestock (Livestock Wing)

The livestock production includes: milk,

beef, mutton, poultry meat, wool, hair, bones, fats,

blood, eggs, hides and skins. The livestock

production for the last five years are shown in

Table 2.16.

Table 2.16

Livestock Products

Products Units 1998-99 1999-00 2000-01 2001-02 2002-03 (E)Milk

Beef

Mutton

Poultry Meat

Wool

Hair

Bones

Fats

Blood

Eggs

HidesSkins

(000 Tonnes)

"

"

"

"

"

"

"

"

Million Nos.

""

24877.0

963.0

633.0

310.0

38.7

17.3

316.3

117.8

34.4.0

8261.0

7.536.3

25566.0

986.0

649.0

327.1

38.9

17.9

324.0

120.6

40.9

7321.0

7.637.2

26284.0

1010.0

666.0

339.0

39.2

18.6

331.4

123.5

41.8

7505.0

7.838.2

27031.0

1034.0

683.0

355.0

39.4

19.3

339.4

126.5

42.9

7679.0

7.939.2

27811.0

1060.0

702.0

370.0

39.7

19.9

347.6

129.7

44.0

7860.0

8.240.3

E= Estimated Source: Ministry of Food, Agriculture & Livestock (Livestock Wing).

b) Poultry

Poultry production has emerged as a good

substitute of beef and mutton. Its importance can be

judged from the fact that almost every family in

rural areas and every fifth family in urban areas are

associated with poultry production activities in one

way or the other. Government is providing all

possible incentives to develop it at an accelerated

pace. The production of commercial and rural

poultry is given in Table 2.17.


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Table 2.17

Production of Commercial Poultry and Poultry Products

Production Units 2001-02 2002-03 (E)

Day Old Chick

Layers

Broilers

Breeding Stock

Poultry Meat

Eggs

Million No's

"

"

"

(000 Tonnes)

Million No's

334.3

18.4

264.4

6.2

266.8

4423.0

350.5

19.3

227.2

6.5

279.5

4632.0

E: Estimated Source: Ministry of Food, Agriculture & Livestock (Livestock Wing).

The production of rural poultry for 2001-02 and

2002-03 are given in Table 2.18.

Table 2.18

Rural Poultry

(Million Nos.)

Production 2001-02 2002-03 (E)

Day Old Chick

Cocks & Cockribs

Layers

32.0

9.0

32.0

33.5

9.4

33.6

E: Estimated Source: Ministry of Food, Agricul

-ture & Livestock ( Livestock Wing).

For promotion of livestock and poultry, the

government has provided the following incentives

in the agricultural package:

- Imported plant and equipment not

manufactured locally shall be subject to

custom duty of 10 percent, with complete

exemption from sales tax.

- Capital structure of projects in agro-food

industry will be entitled to debt-equity

ratio of 70:30.

- Projects will be entitled for financing by all

banks and development finance

institutions.

- Expatriate personnel of the Units will be

allowed to import food items and other

consumable without any duty/taxes,subject to maximum limit of $2,000 per

person per year.

- Import of breeding stock will be allowed

subject to the import duty of 10 percent.

- Locally manufactured machinery will be

provided credit.

- Parts and Components upto 5 percent of

initial C&F value of imported plant andequipment shall be imported at 10 percent

duty, if imported together with the plant.

The export of livestock & livestock

products has been allowed.

- The imported plant and equipment not

manufactured locally, shall be subject to

custom duty of 10 percent with complete

exemption from sales tax.

Following measures have also been taken

to meet Sanitary and Phytosanitary (SPS)

requirements under WTO for quality assurance and

to improve exports of livestock and livestock

products:

- Establishment of abattoirs are encouraged

in the private sector;


28/240


- The National Veterinary Laboratory is

under construction for drug residue testing

in the livestock products. This will ensure

quality in exported products;

- Steps have been taken to improve sanitary

and hygiene conditions of animal casing

processing units in the country;

- A project titled Strengthening of

Veterinary Services in Pakistan

Rinderpest Eradication Program has been

launched during the fiscal year 2002-03.

V. Fisheries

Fishery plays an important role in

Pakistan's economy and is considered to be an

important source of livelihood for the coastal

inhabitants. Apart from marine fisheries, inland

fisheries (comprising of rivers, lakes, ponds, dams

etc) are also very important source of animal

protein. Fisheries' share in GDP, though very little

contributes substantially to the national income

through export earnings. During the period July-

March 2002-03, 58356 m. tonnes valued at Rs.5.2billion fish and fishery products were estimated to

be exported to Japan, USA, UK, Germany, Middle

East, Sri Lanka, China etc. During the same period,

the total fish production is estimated at 665,850 m.

tonnes. Of which, share of marine sector is 480,000

m. tonnes and inland contribution is 185,850 m.

tonnes.

The Government is taking a number of

steps to improve fisheries sector. A number of

initiatives are also being taken by the Federal and

Provincial Fisheries Departments which, inter-alia,

include strengthening of extension services,

diversification of fishing efforts, development of

value added products, enhancement of per capita

consumption and up-gradation of socio-economic

condition of the fishermen's community. Marine

Fisheries Department is also executing a project,

namely, "Establishment of a Hatchery Complex for

Production of Fish/Shrimp Seeds" which will play

a vital role for the development of fish/ shrimp

farming.

The total number of persons engaged in

fisheries sector during 2002-03 is estimated at

365,000. Out of which, 138,000 persons (37.8

percent) were engaged in marine sector and 227,000

persons (62.2 percent) in inland fisheries, whereas

the persons engaged in fisheries sector in 2001-02were 363,000 persons137,000 (37.7 percent) in

marine and 226,000 (62.3 percent) in inland

fisheries.

_____________________________


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Chapter 3. Manufacturing Mining and Investment Policies

3.Manufacturing,Mining and Investment Policies

Manufacturing sector is the second largest

individual sector of the economy accounting for

18 percent of the Gross Domestic Product (GDP).

The activity in the manufacturing sector is

comprised of large-scale and small & medium

manufacturing sector. The performance of thisvery important sector in general and large-scale

manufacturing in particular, has been lackluster at

best in 1990s owing to host of problems like tariff

reforms and escalating utility prices. In the

backdrop of higher growth of 8.2 percent in the

1980s, the growth rate of 4.0 percent in 1990s was

disappointing. Fiscal year 2002-03 besides 2000-01

has become the best performing year for

manufacturing sector since 1987-88. This year has

seen manufacturing registering a stellar growth of

7.7 percent with major contribution coming fromlarge-scale manufacturing which recorded 8.7

percent growth. The industry seems to have

adjusted itself with the challenges emanated from

trade and tariff rationalization of the 1990s and

increased input cost due to escalating utility tariff.

The large-scale manufacturing was

originally targeted to grow by 6.5 percent in 2002-

03 but the target was surpassed by a wide margin.

Pakistans overall manufacturing sector registered

a growth of 7.7 percent and large-scalemanufacturing grew by 8.7 percent during the

current fiscal year. The improvement in the

domestic demand and better macroeconomic

environment have caused in significant

turnaround in the manufacturing sector.

The turnaround in the large-scale

manufacturing which started in 2000-01 continued

to exhibit a rising trend barring brief interval in

the last fiscal years (October ,November and

February 2001-02). The events of September 11

and their aftermath adversely affected the

performance of this sector during this period.

With the exception of these three months the

growth performance depicted smart recovery

during the last three years. One of the significant

development in the current fiscal year has been

that the growth is broad-based and touched

almost all industrial groups.

The main contributors to this impressive

growth of 8.7 percent in July- March, 2002-2003

over the corresponding period of last year are

automobile group (49.8 percent), food, beverage &

tobacco group( 8.5 percent) textiles & apparel

group (5.2 percent), paper & board (15.7 percent),

metal product, machinery & equipment (18.4

percent), and tyres & tubes (16.2 percent). Ten out

of eleven groups registered positive growth while

leather product is the only group that registered

negative growth [See Table 3.1]. Individual items

that registered positive growth are cotton cloth

(1.5 percent), cotton yarn (8.1 percent) in textiles

group; cooking oil (6.8 percent) and sugar (13.6

percent) in food, beverages and tobacco groups;

nitrogenous fertilizer (4.2 percent) and soda ash

(12.9 percent) in chemical & pharmaceutical

group, cement (20.5 percent) in non-metallicmineral products group and Jeeps & Cars (51.6

percent) and LCVs (57.6 percent) in automobile

group. The individual industries which show

negative growth include vegetable ghee (7.0

percent), cigarettes (7.1 percent), cotton ginned

(4.7 percent), phosphatic fertilizer (27.8 percent)

and footwear (6.2 percent). The production

performance of selected items is given in Table

3.2.


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2

Table 3.2

Production of Selected Industrial Items of Large-scale

(July-March)Item Units

2000-01 2001-02 2001-02 2002-03%

ChangeCotton Yarn 000 tones 1721.0 1794.0 1344.1 1452.3 8.1

Cotton Cloth Mln.Sq. Mtr 490.2 555.6 416.1 422.4 1.5Sugar 000 tones 2955.9 3246.6 2905.2 3263.9 13.6

Nitrogenous Fertilizer 000 N. tones 2004.7 2095.9 1561.7 1627.0 4.2

Phosphatic Fertilizer 000 N tones 292.2 140.5 112.8 81.5 -27.8

Vegetable Ghee 000 tones 834.8 774.4 601.0 559.2 -7.0

Cooking Oil 000 tones 106.5 135.3 95.0 101.5 6.8

Cement 000 tones 9674 9935 7071 8518 20.5

Cigarettes Bln. Nos. 58.2 55.3 39.0 36.2 -7.1

Jeep& Cars Nos. 40032 41171 28166 42691 51.6

Tractors Nos. 32553 24331 15339 17870 16.5L.C.V Nos. 6965 8491 5537 8727 57.6

Motorcycles/Scooters Nos. 117858 133334 94108 125625 33.5Bicycles 000 Nos. 569.6 546.4 393.6 460.2 16.9

Paper & Paper Board 000 tones. 531.1 547.8 240.4 278.2 15.7

T.V Sets 000 Nos. 97.4 77.7 340.0 541.0 59.1

Motor Tyres 000 Nos. 884 911 670 777 16.0Billets 000 tones 414.7 412.0 275.6 314.2 14.0

Refrigerators 000 Nos. 272.3 313.8 195.0 240.0 23.1

Table 3.1Group-Wise Growth Performance

(July-March)

(Percent)

Group 2001-02 2002-03Food, Beverages & Tobacco 6.1 8.5(Sugar) (9.2) (13.6)Textile and Apparel 4.4 5.2Leather Products -3.5 -6.6Paper & Board 2.8 15.7Chemicals, Rubber & Plastics 0.1 3.9Petroleum Group 18.7 2.2Tyres & Tubes 5.9 16.2Non-Metallic Mineral Products 1.2 20.0*Basic Metal Industries -4.7 9.1Metal Products, Machinery & Equipment 3.3 18.4

Automobile 2.8 49.8Overall Growth 4.0 8.7

* Includes cement Source: Economic Adviser Wing, Finance Division


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3

Soda Ash 000 tones 217.9 215.2 187.6 211.8 12.9

Source: Federal Bureau of Statistics

EVALUATION OF SELECTED INDUSTRIES OFLARGE SCALE MANUFACTURING (LSM).

Textile Industry

Textile products are a basic human

requirement next only to food. Inspite of the

governments efforts to diversify export as well as

industrial base, the textile remains the backbone

of industrial activity in the country. Its share in

the economy, in terms of GDP, exports,

employment, foreign exchange earnings,

investment and contribution to the value added in

industry; make it the single largest determinant of

the growth in manufacturing sector with 46

percent share in overall manufacturing activity.

The demand for textiles in the world is around

$18 trillion. Pakistan has emerged as one of the

major cotton textile product supplier in the world

market and its share in world yarn trade is about

30 percent while its share in cotton cloth trade is

about 8 percent. However, overall share of textile

exports from Pakistan is around one percent. The

share of textile in Pakistans exports earnings is 68

percent at its present worth of exports is around $

7 billion. The value addition in the sector account

for 9 percent of GDP and it employ 38 percent of

industrial workers. During the last three years,

Pakistans textile sector is preparing itself to face

the challenges of the post-quota regime in 2005.

Investment Trend in Textile Sector

The year under review witnessed

tremendous inflow of investment in value added

expansion and BMR. The textile vision 2005besides providing a road map to enhance exports

of textile products, also set benchmark investment

requirements for the creation of new capacity and

up-gradation of the existing production base. The

textile vision 2005 maintained that at the initial

phase heavy investment will be needed to create

additional capacity in the apparel industry;

however, the apparel sector only received 36

percent of the targeted investment during last

three years. Bulk of the investment to the extent of

56 percent went to the traditional spinning sector

which is three times higher than envisaged in the

textile vision 2005. The textile sector received $ 1.5

billion worth of investment during the last three

years.

The brighter side of the investment in this

sector is the heavy investment in the air jet

weaving segment where actual disbursement hasalready surpassed the target with a fair margin of

55 percent. Such investment would not only

modernize this sector but would likely to fuel

value addition in the coming years. However,

grey area of the whole investment composition

has been below target inflows in the water jet

weaving sector. The tremendous inflow of

investment in the sector is likely to enable

Pakistan textile industry to face formidable

challenge of lifting the remaining vestiges of

quota restrictions as stipulated in the Agreement

on Textiles and Clothing (ATC) after 2005.

Foreign direct investment (FDI) in the textile

sector doubled to US $23.1 million in Jul-March

2002-03 as against US $ 10.5 million in the


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4

corresponding period of last year.

During the current fiscal year the textile

sector showed greater resilience to lower cottoncrop and performed well as far as production is

concerned. After suffering stagnation for 5 year,

textile exports started improving, especially the

value added product performed well in export

markets. The profiles of various components of

textile industry are given in the Table 3.3 below:-

Table 3.3

Installed Capacity of Textile Industry

July-March2001-02 2002-03

% Change

Number of Mills 348.0 361.0 3.7

Installed Capacity (000 Number)- Spindles 8726.0 9173.0 5.1

- Rotors 145.0 144.0 -0.7- Looms 10.1 10.2 1.0

Working Capacity (000 Numbers)- Spindles 7113.0 7578.0 6.4- Rotors 63.0 66.7 5.9- Looms 4.4 3.4 -22.7

Source: Textile Commissioner Organization

Performance of Ancillary Textile Industry

Textile production is comprised of cotton

ginning, cotton yarn, cotton fabric, fabric

processing (grey-dyed-printed), home textiles,towels, hosiery & knitwear and readymade

garments. The textile industry consists of large-

scale organized sector and unorganized cot

economic survey 2002-03

Documents