Constraints on Rural Growth

Poverty predominantly resides in rural areas. The relationship between agricultural growth and poverty reduction is well-established. The case for enhancing agricultural productivity is also robust from the gender perspective as a large number of rural women is engaged in agricultural-related activities. Moreover, industrial sector, due to its lackluster performance, is not able to absorb the labor released by the agricultural sector. The agricultural productivity, measured in terms of yield-per-acre, is very low in Pakistan compared to Indian Punjab. Huge gaps exist between the yield of an average agricultural farm and a progressive farm. Major constraints, responsible for low agricultural productivity, include huge post-harvest wastage, limited access to credit, non-availability of facilities for insuring the crops against the vagaries of weather and climate, and low-quality of inputs, etc. Agriculture is one part of the story of rural growth. Non-farm rural economy (RNFE) is the other part. An analysis of data contained in agricultural census shows that the connection between agriculture and the landless people weakened as a result of changes introduced in the wake of the Green Revolution of 1960s. RNFE is a neglected area at the policy level despite its huge potential for growth. The financial institutions are reluctant to enter into rural areas due to the problems of asymmetries of information and moral hazard etc. compelling the small farmers and landless people to get credit from informal lenders at exorbitantly high rates. Markets are either missing from the rural areas or they are not working for the small landholders and the poor. Potent organizations of the small farmers can be encouraged, using their cooperative potential, to make markets work for them.