This was stated in a study report " Agricultural Growth and Rural Poverty", which was released by Asian Development Bank, recently.
The study report mentioned that a considerably higher incidence of transitory poverty indicates the vulnerability of households close to the poverty line. A minor shock may push them into poverty while a little assistance (in terms of employment or income) can help them escape it.
According to report, the skewed land distribution is one of the major obstacles hindering the rapid reduction of rural poverty. More than half the total farms are smaller than five acres in size. 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 productivity. Smaller farms tend to be less diversified and so more vulnerable to poverty. In particular, the dependence of small farmers on a highly erratic cotton crop across most of the cotton belt seems to be a major cause of rural poverty. It is necessary to provide small farmers with technology and information to help smooth out the variability in cotton production that they are subject to, and to give them access to technology and markets to enable them to diversify their incomes.
The highly skewed land distribution in rural Pakistan results in sharecropping, which is detrimental to poverty reduction. The incidence of poverty among sharecroppers has been found to be considerably higher than those who cultivate their own land (even small farmers) or cultivate the land of others at a fixed rent. The prevailing tenancy arrangements in different parts of the country lead to the exploitation of sharecroppers.
While various tenancy laws exist, there is no proper mechanism to monitor the implementation of these laws. Finally, 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.
In Pakistan, achieving high agricultural growth is considered one of the key factors in poverty reduction. The reported growth rate of 4.6 percent in the agriculture sector in the 1990s was reasonable. However, estimates of poverty based on a headcount measure show an increase in rural poverty during the 1990s. The present study explores the reasons why the benefits of agricultural growth in the 1990s could not be translated into poverty reduction.
A review of the literature shows that, despite high growth rates in the agriculture sector in the 1960s, poverty increased in rural areas because the initial beneficiaries of agricultural subsidies and new technology emerging during this period were generally large farmers. Hence, the increased agricultural growth was not reflected in reduced levels of poverty. The 1970s witnessed a decrease in the incidence of rural poverty, largely due to private investment in agriculture and the heavy emigration of rural-based workers to the Middle East. The resulting increased foreign remittances are cited as one of the major reasons behind the falling poverty trends witnessed during this period. These trends continued through the 1980s largely due to the sustained inflow of remittances and relatively better performance of the agriculture sector.
Several recent studies concur on a trend of increasing rural poverty since the late 1980s. Certain other studies, which found that rural poverty fluctuated during the 1990s, also indicate that by the fiscal year (FY) 2001, the incidence of poverty was considerably higher than in the early 1990s.
The consensus is that the percentage of rural persons living below the poverty line has increased over time and especially between FY 1997 and FY 2001. This study also examines regional variations in rural poverty.
Despite methodological differences, the results of recent studies consistently indicate the lowest levels of poverty for barani (rain-fed) Punjab in various years, while high poverty levels have generally been observed in the cotton/wheat zones of Sindh and southern Punjab. Together, these two zones account for over 33 percent of the poor in Pakistan, but only about 29 percent of the country's total population (17.5 percent in cotton/wheat Punjab and 11.2 percent in cotton/wheat Sindh). Barani Punjab has only a little more than half its share of poor as compared to its share of the population.
Relatively low poverty levels in the barani areas of northern Punjab are attributed first to certain socio-economic characteristics of barani areas, including the lowest dependency ratio, the highest levels of literacy (particularly female literacy), and the lowest number of unpaid family workers. Second, the rural areas in this region are well integrated with prosperous urban centres that have strong linkages to the services sector.
Third, a significant proportion of the region's labour force is employed in both the armed forces and government sector. Finally, due to the high incidence of domestic and overseas migration, remittances contribute a significantly higher proportion to total household income in the barani areas of Punjab.
One of the major contributions of this study is an analysis of income sources: it identifies five major sources in rural Pakistan, including wages/salaries, transfer income, crop income, rental income, and livestock income. Crop income accounts for 67 percent of the total income in cotton/wheat Sindh and 64 percent of the total income in cotton/wheat Punjab.
These ratios are highest across the two zones, showing that the highest incidence of poverty is in zones that rely most on crop incomes. The incidence of poverty is low in zones where the percentage of incomes from wages and salaries and transfer incomes is high. It appears that poverty is greater in zones where the possibility of diversifying incomes in order to manage risk is limited.
Sources of income vary with poverty status. Crop income is an important source for non-poor households, particularly in irrigated areas of Punjab, while poor households generally rely on wages and salaries. Within the farm sector of the cotton/wheat zone, both non-poor and poor households depend on the cotton crop, although the former diversify crop production by growing sugarcane, particularly in Sindh. The share generated by rice seems to contribute significantly to the income of poor and non-poor households in rice-growing areas of Sindh and Punjab while maize is an important source of income for households located in the North-West Frontier Province (NWFP) and in barani Punjab.
A majority of poor, rural, landless households derive their non-farm income from the construction sector where nearly half the employed persons were found to be under-employed. The services sector, on the other hand, appears to be the most important source of non-farm income for better-off households. Moreover, the wholesale and retail trade, and transport and communications sectors also contribute significantly to the non-farm incomes of non-poor households.
The findings of this study, based on data from the Household Integrated Economic Survey (HIES) for FY 2002, show that income from livestock occupies a small proportion of overall household income (less than 2 percent), and that it increases only marginally across income quintiles. The highest livestock income was reported in the cotton/other zones of Sindh and Balochistan and the lowest in mixed Punjab.
These findings, however, are not consistent with the results of earlier studies, which show a much higher contribution of livestock income to total household income. More importantly, the national accounts show that 40 percent of the value addition to the agriculture sector is from livestock income, and that this contribution is equal to that of crop income. Although it is likely that the HIES does not provide an accurate valuation of livestock produce consumed at home or gifted out, much more in-depth research using all available data is needed on this issue.
The study also examines the dynamics of rural poverty, ie, the movement into and out of poverty. While more rural households have fallen into poverty since the 1990s, many may also have escaped it. The results of the International Food Policy Research Institute (IFPRI) five-year panel show that, although 21 percent to 29 percent of households fall below the poverty line in any given survey year, the probability of entering poverty ranges between 0.15 and 0.24, while that of overcoming poverty varies between 0.43 and 0.51.
The sample entry and exit probabilities for the five pairs of sequential years used in the study indicate an increase in the probability of moving into poverty and a decline in that of escaping it over the survey years. Consequent to external shocks or disasters, the probability of remaining poor is much higher amongst poor households than it is for non-poor households. Chronically poor households remain poor for longer periods than those do that are transitorily poor.
With respect to the agricultural growth and poverty nexus, this study shows that the estimates of agricultural growth reported by the Pakistan Economic Surveys during the 1990s were highly overstated.
"The incorrect accounting of livestock, fishing and forestry value-added in some years has contributed to the high reported rate of 4.6 percent per annum during the 1990s. However, the high growth rates reported for these sectors in this period were not backed by data from the Census of Agriculture or by the disaggregated data in the Pakistan Economic Surveys themselves. After adjusting for these overstated sub-sector growth rates, the growth rate of the agriculture sector over the 1990s declines to only 3.1% per annum".
Assuming a population growth rate of 2.5 percent over this period, this implies a paltry 0.6 percent per annum per capita growth rate. With such low growth per capita, the increase in rural poverty in the 1990s was inevitable.
A major portion of agricultural growth is dependent 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 farmers. Moreover, given 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-added. For the small farmer in particular, the reliance on cotton with few avenues for diversification means increased poverty. Persistent drought and the lack of irrigation in these regions have also resulted in a substantial decline in cotton production, otherwise the mainstay of many households in this region. The rise in poverty in the 1990s seems to be a result of the increase in the number of poor in the cotton/wheat zones of southern Punjab and Sindh.