Agriculture forms the backbone of Pakistan's economy. Despite the fact that the share of agriculture in the GDP has declined over the years, the sector continues to play an important role in the socio-economic structure of the country. About 60 percent of the population lives in rural areas of Pakistan, the majority of which is dependent on agricultural activities for their livelihood. Yield growth for most crops and livestock products in Pakistan has stagnated and become more variable in recent years. Furthermore, sizable gaps persist between achievable and realized productivity in most crops, and diversification and a move to higher value-added agricultural commodities has been limited, predominantly in the crops sector.

This volume in the 'Distortions to Agricultural Incentives' series focus on distortions to agricultural incentives from a global perspective.

The Essays In This Volume Explore The Various Dimensions Of The Crises Since The Latter Part Of 1993 When The Caretaker Government In Pakistan Was Headed By Mr. Moeen Qureshi.

Pakistan army has ruled the country for the better part of its history. As a result, several scholars have contemplated its role in the economic under-development of the country. However, a better approach to understand the true influence of the army on the economic development would be the one that Bardhan has used to understand the distortions within the Indian economy. According to this approach, in post-colonial states, certain dominant proprietary classes compete for their share in the benefits the economy. As a result, the policy makers fail to pursue policies that challenge the status quo even though they are vital for the development of the economy. The case of the Pakistan economy is no different from that of India in this regard. Despite being the group in control, the army has failed to deter other dominant proprietary classes from their rent-seeking behaviour. In fact, the army actively encouraged the rent-seeking behaviour of certain classes in order to prolong its rule over the country. As a result, certain distortions emerged within the economy that hindered its growth and are directly responsible for its present poor state.

This report focuses on growth in Pakistan, and on key aspects of its proximate determinants: productivity, capital, and talent accumulation. Productivity is crucial in accounting for differences in standards of living across countries and time. In addition, and particularly at the level of development of Pakistan, factor accumulation, investment, and human capital, also matters. Specific and policy relevant questions around these broad themes are this report's center of attention. The underlying framework of analysis and orientation of public policy recommendations is what is known as the 'ABC' of growth. This 'ABC' implies improving allocative efficiency of resources and talent, encouraging business-to-business connections and spillovers, and strengthening firms' capabilities. Public policies oriented to create an enabling environment around these three pillars will be powerful in boosting sustainable growth. However, the efficient allocation of talent and resources, and the business-to business interactions leading to spillovers and the conditions to upgrade capabilities, are limited by economic distortions (or market failures) that inhibit the growth process, sometimes making it as difficult as swimming in sand.