In the absence of harmonised inter-sectoral development, the services sector has grown rapidly — close to 55pc of the GDP — while the combined share of industry and agriculture in national income has declined disproportionately over time.

In the process fundamentals of the economy’s real sector have weakened.

A research paper written by N. Gemmel, T.A. Lloyd and M. Mathew, published by the Journal of Agricultural Economics in 2000 says: “Service output growth seems to have been inimical to agricultural growth both in the short- and long-run while causality testing supports the case of spillover rather than common causes.”

At the point in time that the study was published, Pakistan was strongly focused on banking, financial reforms and capital market development while China was emerging as the world’s factory.

The various incentives and subsidies by the federal and provincial governments are reversing the negative growth trend in agriculture this fiscal year

The study on ‘agricultural growth and inter-sectoral linkages in a developing economy’ suggests that ‘expansion of manufacturing output is associated with reduced farm output in the short-run but is associated with agricultural expansion in the long-run.

Evidence also suggests that benefits of higher productivity in manufacturing lead to spill over in agriculture, encouraging productivity convergence. So far, this has not happened effectively in Pakistan.

Helped by ground realities, farmers have now acquired a more effective voice in official decision-making, though the conflict of interest still tends to disrupt smooth functioning of both industry and agriculture despite the fact that the two have so much convergence of interests.

Agriculture feeds industry with raw materials and provides a market for industrial goods. Industry provides farm inputs thereby boosting production. This includes mechanisation of agriculture.

Agriculture has been in a bad shape for the last four fiscal years, but its growth is likely to pick up during the current fiscal year because of the farmer’s support package. Yet one cannot safely predict that this trend will continue on a sustained basis without reinforced modern cultural farming practices.

The growth rate and the share of the three sectors — agriculture, industry and service — varies from year to year but their contribution to GDP, by and large, remains within a narrow range: close to 55pc for services, less than 25pc for agriculture and just over 20pc for industry.

But over the three successive years, industrial growth has equaled or outstripped expansion in the services sector as well as the GDP growth rate in 2016. To quote the State Bank of Pakistan’s data, industry grew at the same pace as services (4.5pc) in FY14 but exceeded the latter’s rate in FY15 (4.8pc against 4.3pc) and with a much wider margin (6.8pc against 5.7pc) in fiscal year 2016. The industrial expansion at 6.7pc surpassed the real GDP growth rate of 4.7pc last year.

In the first quarter of this fiscal year large scale manufacturing remained subdued with a growth rate of 2.2pc down from 3.9pc in the same period of last year but rebounded in November 2016 with an annualised growth rate of 8pc.

The latest trend is likely to continue because of fiscal stimulus provided in the current year’s federal budget, the recent surge in imports of machinery for balancing and modernisation of existing manufacturing facilities, and improvements in the security situation and energy supply.

The manufacturing sector has also received an impetus from an Rs180bn export package announced earlier this month by Prime Minister Nawaz Sharif.

On the other hand, agricultural growth — which remained stable at 2.5pc in FY2014 and FY2015 — dropped to minus 0.2pc in FY2016, mainly because of the failure of cotton crop in Punjab.

The various incentives and subsidies by the federal and provincial governments are reversing the negative growth trend in agriculture this fiscal year. Under pressure by farmers, the official announcement for discontinuation of cash subsidy to growers last week was annulled within 72 hours.

Official policies are now helping commodity producers gain some lost ground, but producers need to stand on their feet to make bigger strides towards achieving a more balanced inter-sectoral growth and improving economic fundamentals.

Published in Dawn, Business & Finance weekly, January 23rd, 2017