Agricultural growth and rural poverty: a review of evidence

This report examines the apparent paradox that emerged over the 1990s of relatively good reported agricultural growth accompanied by increasing levels of poverty. In order to do so it explores the reasons why the benefits of agricultural growth in the 1990s could not be translated into poverty reduction.Main observations of the study are:with respect to the agricultural growth and poverty nexus, the estimates of agricultural growth reported by the Pakistan Economic Surveys during the 1990s were highly overstatedthe incorrect accounting of livestock, fishing and forestry value-added in some years has contributed to the high reported rate of 4.6% per annum during the 1990sa major portion of agricultural growth is dependant on the production of cotton and wheat, Pakistan's two major crops cotton production is concentrated in a few districts of the country where land distribution is highly unequal: expanding the production of this crop would theoretically benefit large farmersmore than half the total farms are smaller than 5 acres in size and excessive land fragmentation and the sub-division of landholdings from generation to generation are causing a persistent decline in farm size, and, therefore, in agricultural productivitysmaller farms tend to be less diversified and so more vulnerable to povertygiven the large variability in the production of cotton and wheat, the growth in value added from these two crops over the 1990s is only 1.3% per annum, implying a negative per capita growth in value-addedfor the small farmer in particular, the reliance on cotton with few avenues for diversification means increased povertyagricultural production in Pakistan is highly erratic: one good year may be preceded or followed by a bad year(s)mechanisation in agriculture has increased considerably, reducing the use of on-farm hired labour. Agricultural workers' real wages show a decline and this, too, has contributed significantly to the rise in poverty.Recommendations made by the study are:agricultural growth without specific interventions targeting small farmers and rural non-farm households may not alleviate poverty for much of the poor in rural Pakistanin view of the relatively high incidence of poverty in the cotton/wheat zones of Punjab and Sindh, a poverty reduction strategy focusing on education, skills development, job creation, and health care needs to be designed for these areastransitory poverty can be reduced if policy interventions aim at levelling out income fluctuations and a reduction in chronic poverty is possible through large and sustained growth in household incomes. For the former, the availability of micro-credit would be an effective tool, while for the latter, targeted public works programs could help reduce chronic poverty greater efforts need to be directed towards the conservation of natural resources, and one measure in this regard would be to educate and encourage farmers through incentives to move to more sustainable practices such as diversified crop rotation and the cultivation of legumes.