In Pakistan, achieving high agricultural growth is considered one
of the key factors in poverty reduction. The reported growth rate of 4.6%
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 is 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 FY1997 and
FY2001.
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% of the poor in Pakistan, but
only about 29% of the country's total population (17.5% in cotton/wheat
Punjab and 11.2% in cotton/wheat Sindh). Barani Punjab has only a littlemore 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 centers that have strong linkages to the services sector.
Third, a significant proportion of the region's labor 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% of the total income in
cotton/wheat Sindh and 64% 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 nonfarm
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.