MACROECONOMICS

MAJOR FACTORS AFFECTING AGRICULTURAL

PRODUCTIVITY IN PAKISTAN FERTILIZER
CONSUMPTION, WATER AVAILABILITY

SUBMITTED TO:
MUHAMMAD AMIN HASAN
 Macroeconomics

ACKNOWLEDGMENT

“First of all we thanks to our Almighty ALLAH who provide us knowledge, energy and skills to
avail the opportunities and increase our knowledge and experience. As we have taken efforts in
this project. However, it would not have been possible without the kind support and help of our
instructor SIR. Muhammad Amin Hasan .who gave us a golden opportunity to do this wonderful
project, which also help us in doing a lot of research and we came to know about so many new
things we are really thankful to him.
In the last our thanks and appreciations also ago to our colleagues in developing the project and
people who have willingly helped us with their abilities to finalizing our project within the
limited time frame.”

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Contents
CAPITAL MARKETS & CORPORATE SECTOR.................................................................................................4
CAPITAL MARKET:...................................................................................................................................4
CORPORATE SECTOR:..................................................................................................................................4
CAPITAL MARKET AND CORPORATE SECTOR:............................................................................................4
Corporate sector of Pakistan:.....................................................................................................................4
CAPITAL MARKET OF PAKISTAN:................................................................................................................4
FERTILIZER...................................................................................................................................................5
PAKISTAN FERTILIZER INDUSTRY............................................................................................................5
WATER ACCESSIBILITY.................................................................................................................................5
FERTILIZER CONSUMPTIONS.......................................................................................................................6
CROP PRODUCTION....................................................................................................................................7
FINDINGS.................................................................................................................................................8
MATERIALS AND METHODS........................................................................................................................8
RESULTS AND DISCUSSION.........................................................................................................................8
RESULTS OF THE JOHANSEN CO-INTEGRATION APPROACH.......................................................................8
REGRESSION ANALYSIS...............................................................................................................................9
CONCLUSION AND RECOMMENDATIONS...................................................................................................9

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ABSTRACT

Agriculture is an important sector of Pakistan’s economy, accounting for approximately 26 percent of

the country’s gross domestic product (GDP). The aim of this study was to use an econometric analysis to
investigate the relationship between agricultural gross domestic product (AGDP) and variables such as
cropped area, fertilizer consumption, credit distribution and water availability in Pakistan Data were
explored from 1978-2015; we used time series data collected from secondary sources, including the
Pakistan Bureau of Statistics, Statistical Year Books and the Economic Survey of Pakistan. Data were
analyzed by using the Phillips-Perron (P-P) and Augmented Dickey Fuller (ADF) test, and results were
interpreted by using the Johansen co-integration test. The Cobb-Douglas Production Function was used
to examine the impact of these major factors on agricultural productivity in Pakistan. We found that
fertilizer consumption, improved seed distribution, and credit distribution had a positive and significant
influence on AGDP, whereas water availability had a negative but insignificant influence on AGDP. Based
on our results, we suggest that the Government of Pakistan should formulate policies and funding
schemes for the development and improvement of water availability including irrigation systems.

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CAPITAL MARKETS & CORPORATE SECTOR

MAJOR FACTORS AFFECTING AGRICULTURAL PRODUCTIVITY IN

PAKISTAN

FERTILIZER CONSUMPTION, WATER AVAILABILITY

INTRODUCTION
CAPITAL MARKET:
The part of a financial system concerned with raising capital by dealing in shares, bonds, and other long-
term investments.

CORPORATE SECTOR:
A corporate sector is a section of society consisting of companies / indu- stries/business houses. They
are the industrial development side of our society. They contribute to national income generation,
infrastructural growth and development of the economy. They represent the producer side of economy
and we represent the consumer side of economy, we consume what they produce (services included).
They generate income; we help them generate the same. The yfoster regional- national- societal growth,
we enable them to achieve

CAPITAL MARKET AND CORPORATE SECTOR:

Business units and corporate are the borrowers in the capital market. Capital market involves various
instruments which can be used for financial transactions. Capital market provides long term debt and
equity finance for the government and the corporate sector.

Corporate sector of Pakistan:

The corporate sector of Pakistan (otherwise attributed as the corporatization; or/ simply referred to as
the Pakistan Inc.) Is an elite business sector expanded in financial cities of Pakistan, and a policy measure
programmer in the economic period of Pakistan.

CAPITAL MARKET OF PAKISTAN:

Capital market institutions in pakistan. The capital market structure in pakistan consists of the apex
regulator of the markets, the securities and exchange commission pakistan (secp), three stock
exchanges, mercantile exchanges, central depository company (cdc) and a clearing and settlement
company

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FERTILIZER
fertilizer is a substance added to soil to improve plants' growth and yield. ... Modern synthetic fertilizers
are composed mainly of nitrogen, phosphorous, and potassium compounds with secondary nutrients
added.

PAKISTAN FERTILIZER INDUSTRY

Currently, in Pakistan, there are major producers of fertilizers which include Fuji fertilizer, Engro fertilizer
company, Dawood Hercules, and Fatima fertilizers.

Fertilizer companies listed in stock exchange

• Arif Habib Corporation limited.

• Dawood hercules corporation limited.
• Engro Corporation limited.
• Engro fertilizers limited.
• Fatima Fertilizer Company limited.
• Fauji fertilizer bin qasim limited.
• Fauji Fertilizer Company limited.

LITERATURE REVIEW

WATER ACCESSIBILITY:
Around 70 % to 80% of the zone in pakistan is watered through the channel framework. Late
information show that about 93% of freshwater assets in the nation are utilized in horticulture division
proof proposes that presence surface water asset is missing, and unbalance in existence. This
adjustment in surface water overflow has prompted the extension of a huge scale groundwater water
system framework in the indus bowl in pakistan. The sensational increment in groundwater use over the
past 50 years has developed into a "peaceful upset ", by the a large number of agriculturists who utilize
groundwater as a solid water system water supply. Since 1960, the offer of aggregate flooded
groundwater has increment by more than 50 % . In spite of the fact that groundwater assets assume an
indispensable job in horticulture profitability, these assets are at present in rare in pakistan (shah et
al.,2000)

Internationally, horticulture devours roughly 70 % of all freshwater extricated . Because of the

expanding rivalry and request of freshwater, and the expanded supply of freshwater for higher financial
esteem uses to fulfill urban and modern need, the utilization of wastewater is progressively turning into
a standard and solid means for water system all inclusive, especially in semi - parched and areas .
Uncovered that almost 90% of the universes watered land is utilizing moderately useless surface water
system techniques. Along these lines around 20 million hectares of flooded land worldwide are
extremely harmed by salt, and it is assessed that salt influenced soil region will flood by about 0.25 to
0.5 million hectares for every year. The water accessibility from 1960-2015 is appear in fig.1

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FERTILIZER CONSUMPTIONS
Compost are the primary data sources used to accomplish high and quick rates of agribusiness return.
For example, one kilogram of supplement compost creates around 8 kg of grain. In Pakistan, all the dirt
is insufficient in nitrogen, about 80% to 90% is inadequate in phosphorus and 30% in potassium.
Adjusted treatment is characterized as the ideal yield of compost important for ideal utilization of
manures and different contributions for the fundamental supplements. Utilized information from 1972
to 2007 and apply the cob Douglas generation work (cdpf) to elucidate the adjustment in farming
included esteem. Their demonstrate that horticulture included esteem depends the dimension of
farming and exchange the work constrain occupied with agribusiness, capital stock, middle of the road
contributions of horticulture innovation, and human asset improvement. Halfway information sources
incorporate composts, seeds, pesticides, and other high return assortment crops. The state has built up
the significance of manures in expanding horticulture creation as a creating nation. Compost are
ordinarily accepted to as imperative and contribute up to half of the development in yield. An
examination of the crucial way's horticulture efficiency can be enhanced, particularly in sub-Saharan
Africa, and to build the profitability of farming using interests, including seeds, composts, pesticides and
the use of present day agribusiness innovation is pressing (wanyama et al., 2009). The impacts of yields,
instruction, cultivate size and compost value levels deeply affect trim generation. Ranchers utilize
composts for harvest generation, while sex, age and family estimate are not demonstrate that steady
treatment prompts enhanced product yields, and horticulture pay. Moreover, insufficiencies in soil
supplements fill in as a cure and help to keep up the fruitfulness of soil. It has been seen without
manure utilization, trim yields can never again be expanded. As indicated business manure use in
Pakistan was started in 1952, and 1000 tons of supplements composts containing composts was utilized.
Potash composts began being generally utilized in 1966, with a limit of around 120 supplement tones.
Compost utilization from 1960-2015 is appeared in fig.2.

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CROP PRODUCTION
The Pakistan agricultural sector directly supports the country's population and accounts for 26% of
gdp.main crops include sugarcane, rice, wheat, cotton, fruit and vegetables. There is therefore a crucial
and urgent need to improve agricultural production in order to make the use of resources such as water
and land more effective.in Pakistan, however, the irrigation system is mainly controlled by landowners
who have about 40 percent of the arable land and make reforms difficult. Major crops, including cotton,
rice, wheat and sugarcane, comprise Pakistan’s most important commodities due to their high export
value on the international trade market. Cotton, which is a major cash crop, accounts for about 6.9
percent of the agricultural value added and contributes 1.4 percent to the gdp of the country Pakistan is
the fourth largest producer of cotton in 2011–12, accounting for 9.8% of the global market share. During
the same period, yarn and associated apparel exports accounted for approximately 26 percent,
representing 14 percent of the global market. Cotton exports account for 46% of total national exports
and account for 35% of the total industrial workforce.

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FINDINGS
These findings are consistent with the findings of other studies including Hussain (2012); Sial et al., 2011;
Faridi et al., 2015; Chandio et al., 2016 which show that there is a positive and significant impact of
fertilizer consumption, improved seed distribution and credit distribution on agricultural productivity

MATERIALS AND METHODS

This study examined the impact of major factors on pakistan's agricultural productivity between 1978
and 2015. The pakistan bureau of statistics, the statistical year books and the pakistan economic survey
(different statistical supplements) collected annual time series data.the variables used in this study
were: agricultural gross domestic product (agdp) (million rupees), crop area (million hectares), water
supply (million acre feet), fertilizer off-take (million tons of nutrients), improved seed distribution
(million tons) and credit distribution (million rs). Specification of the cobb-douglas production function
model the relationship between agricultural gross domestic product (agdp), cropped area, fertilizer
consumption, credit distribution and water availability in pakistan should be investigated.

This empirical study is based on the 1978–2015 yearly time series data. To check the stationary of the
series, augmented dickey fuller (adf) and phillips-perron (p-p) unit root tests, including trend and
intercept, were first applied. In addition, the johansen co integration test was used to examine the long -
term relationship between agricultural productivity as the dependent variable and the five explanatory
independent variables after checking the stationary of the variables. Finally, the cobbdouglas production
function was used to investigate the effects of the main factors on agricultural productivity in pakistan.

RESULTS AND DISCUSSION

RESULTS OF THE JOHANSEN CO-INTEGRATION APPROACH
This study examines the long term relationship between dependent variables like agricultural
productivity, and 5 independent variables together with cropped area, water availability, fertilizer
consumption, improved seed distribution and credit distribution respectively, over time of 1978–2015.
The johansen cointegration test is predicated on 2 checks, that is, trace statistics and maximum
eigenvalue. The values of the trace data point (240.3840) and also the max-eigen statistic (93.66502) are
larger than their essential values (95.75366 and 40.07757 respectively); this implies that there exists a
long-term relationship between dependent and 5 independent variables. Thus, we have a tendency to
reject the null hypothesis of no co-integration. In addition, trace data point and max-eigen data point
tests indicate that the four co-integrating equation is at the five hundred level.

REGRESSION ANALYSIS
the present study examines the impact of key factors on agricultural productivity in islamic republic of
pakistan over the amount of 1978–2015. An political economy technique called the normal least sq. (ols)
methodology has been used. The general significance of the model might be seen from the worth of the
constant of multiple determination, that is, the r-square. The worth of the r-square is 0.924 that is high,
showing that concerning ninety two of the whole change in agricultural productivity may be explained
by the 5 explanatory variables chosen during this study. The calculated worth of the statistic is 77.99601,

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that is very important. This means that the instructive variables enclosed within the model considerably
influenced agricultural productivity. Our results show that fertilizer consumption, improved seed
distribution and credit distribution are positive and considerably influence crop production. Exploitation
fertilizer off-take because the main input indicates that its constant is a pair of.174827; this means that a
1% increase within the use of fertilizers ends up in associate degree accumulated agricultural
productivity of two.17%. Similarly, mistreatment improved seed distribution as associate input shows
that its constant is 0.722112; this means a tenth increase in improved seed distribution can enhance the
agricultural productivity nearly by 0.72%. Additionally agricultural credit may be a key issue, showing a
positive impact on agricultural productivity. The constant of agricultural credit is 0.350132, which
suggests that a tenth increase in agricultural credit distribution can increase the agricultural productivity
by concerning 0.35%.

CONCLUSION AND RECOMMENDATIONS

The agricultural sector of Pakistan remains the main economic sector, and contributes to concerning
sixtieth of the country’s gross domestic product. Production in the agricultural sector is that the main
revenue source for the overall economy in Pakistan. With time, the share of the agricultural sector
declined considerably because of technical developments. To highlight the performance of agricultural
production, and the output of cropped area, fertilizer consumption, and credit distribution, statistic
information were used from 1978-2015. These data were collected from the Pakistan bureau of
statistics, the statistical year books and also the economic survey of Pakistan (various statistical
supplements). Information were analyzed by mistreatment the adf and p-p tests, and results were
understood by mistreatment the Johannes co-integration take a look at. Finally, the cdpf was
accustomed examine the impact of key factors on agricultural productivity in Asian nation. We found
that output fertilizer consumption, improved seed distribution, and credit distribution had a positive and
important relationship with agdp, whereas the output of water handiness had a negative impact,
however no important relationship with agdp in Pakistan. Therefore, suggest} and recommend that the
government of Pakistan ought to introduce new policies and funding schemes for the development of
water availability through irrigation systems.