Agriculture is the backbone of Pakistan's economy, contributing 21% to GDP. The majority of the population depends directly or indirectly on agriculture. It is the largest employment sector, accounting for half of employed labor. Agriculture provides food for the population and raw materials to industry. It is also a major source of foreign exchange through exports. Agricultural economics applies economic principles to understand problems in agriculture production, distribution, and government policies regarding the agricultural sector.

1. UNIT – 1
NATURE AND IMPORTANCE OF
AGRICULTURE

2. INTRODUCTION
 Agriculture is the science or practice of farming, including cultivation of the
soil for the growing of crops and the rearing of animals to provide food, wool,
and other products.
 Agriculture is the backbone of Pakistani economy. Agriculture is the most
important occupation for most of the Pakistani families.
 In Pakistan, Agriculture constitutes the largest sector of our economy.
Majority of the population, directly or indirectly, dependent on this sector. It
contributes about 21 percent of Gross Domestic Product (GDP) and accounts
for half of employed labour force and is the largest source of foreign
exchange earnings. It feeds whole rural and urban population..

3. Definition of Agriculture Economics
 Agriculture Economics can also be defined as the knowledge and art Of
cultivating the soil of the land"
 According to Goodwin, "Agriculture Economies is the study of the
allocation of scarce resources among those competing and alternative
uses found in the production, processing, distribution, and consumption
of agricultural commodities.

4. Nature of Agriculture Economics
 The nature of agricultural economics is such that it obtains most of the
principles from general economics, thus there is no basic difference
between general and agricultural economics. Thus the need to separate
these two is that agricultural economics does not imply direct
application of the principles but before application they are modified so
that their postulates totally tally with the situations. These modifications
are so large and varied that there is a complete justification for studying
it as a separate branch of knowledge.

5. Nature of Agriculture Economics
 Terminology
Microeconomics
Macroeconomics
Static economics
Dynamic economics
Resources
Wants
Profit
Utility
Consumption economics

6. Nature of Agriculture Economics
 production economics
Production function
Marginal product
Total product
Average product
Elasticity of production

7. Nature of Agriculture Economics
 Nature of agricultural economics:
Micro as well as Macro
When the subject of study is individual farmer then it is micro-
economics and when we study agricultural economy as a whole then it
is called macro-economics
 Static as well as Dynamic
The basic difference between the two is that in former , time variable is
not taken into account while the latter analysis deals with a period of
time. In the present day dynamic concept is gaining momentum.

8. Nature of Agriculture Economics
 Applied science or Pure science
Agriculturist economics such as Frosten and Leoger have classified it as
an applied science as it is concerned with the identification, description
and classification of economic problems of agriculture. Thus,
agricultural economics is concerned with the evolving of appropriate
principles that govern the amount of land, labour, and capital that the
farmer should use to maximize his profit and using the factors
efficiently.

9. Nature of Agriculture Economics
 Science or Art
Agriculture is the science and art of cultivation of crops and raising the
livestock and is not only a mode of livelihood but also a way of life.
Agricultural production economics is a science because it relies on the
principles and verifications of the data. It is an art because it deals with
the various ways of application of the principles and to suit the
conditions.

10. Scope of Agriculture economics
•Agriculture sector is the most important in Pakistani scenario. The scope
of agricultural production economics includes production, distribution,
consumption and government activities in relation to agriculture and farm
enterprises. To be more specific, the scope of agricultural economics can
also be analyzed on the political aspect. Self sufficiency in food produce
can reduce foreign dependence fro food supply and raw materials ,
specially in times of crisis. There is a large scope of agri. economics in
various factors of production also viz. land, labour, capital, organization
etc.
The scope of agricultural production economics as quoted by Taylor “
Agricultural economics deals with the principles which underline the
farmers’ problems of what to produce and how to produce what to sell and
how to sell in order to secure the largest net profit for himself consistent
with the best interest of the society as a whole. ”

11. Principles applied in Agricultural Production
Economics
1. Law of equi -marginal return
2. Law of diminishing return
3. Law of opportunity cost
4. Law of substitution
5. Law of comparative advantage
6. Principle of combining enterprises
7. Cost concepts and principles

12. Importance of Agriculture Economics
•agricultural economics finds to seek relevance between cause and effect
in agriculture.
•It uses theoretical concepts of economics to provide answers to the
problems of agriculture and agribusiness.
•Agricultural economists here have to play a major role in understanding
the complication involved in the foundation systems.

13. Importance of Agricultural Economics
1- Increases in Per Capita Income
2- Major Source of Employment
3- Reduction in Poverty
4- Supply Of Food
5- Supply of Surplus Labour
7- Source Of National Income
8- Supply of Raw Material
9- Development of Industrial Sector

14. Role of Agricultural Economics
The important crops contribute 22.49 percent to value addition in agriculture
sector and 4.32 percent to GDP. Other crops account for 11.69 percent in value
addition of agriculture sector and 2.24 percent in GDP.
Pakistan is one of the world's largest producers and suppliers of food and
crops according to the different sources.
Chickpea (3rd)
Apricot (6th)
Cotton (4th)
Milk (4th)
Date Palm (5th)
Sugarcane (5th)
Onion (7th)
Kinnow, mandarin oranges, clementine (6th)
Mango (4th)
Wheat (7th)
Rice (11th)

15. SOURCE OF EMPLOYMENT
In Pakistan, agriculture is the main source of employmentPakistan's GDP and employs about 42.3%
of the labour force. In Pakistan, the most agricultural province is Punjab where wheat and cotton are
the most grown. Mango orchards are mostly found in Sindh and Punjab provinces that make Pakistan
the world's 4th largest producer of mangoes.
Production
Pakistan produced in 2018:
67.1 million tons of sugarcane (5th largest producer in the world, behind Brazil, India, China and
Thailand);
25.0 million tons of wheat (7th largest producer in the world);
10.8 million tons of rice (10th largest producer in the world);
6.3 million tons of maize (20th largest producer in the world);
4.8 million tons of cotton (5th largest producer in the world);
4.6 million tonnes of potato (18th largest producer in the world);
2.3 million tonnes of mango (including mangosteen and guava) (5th largest producer in the world,
only behind India, China, Thailand and Indonesia);
2.1 million tons of onion (6th largest producer in the world);
1.6 million tons of orange (12th largest producer in the world);
593 thousand tons of tangerine;
1,601 thousand tons of tomatoes;
545 thousand tons of apple;
540 thousand tons of watermelon;
501 thousand tons of carrot;
471 thousand tons of date (6th largest producer in the world);
In addition to smaller productions of other agricultural products.[9]

16. SIGNIFICANCE FOR TRADE &
TRANSPORT
Various means of transport like roadways & railways get bulk
of their business from the movement of agriculture
commodities & raw materials

17. SOURCE OF REVENUE FOR THE
GOVERNMENT
Through the direct contribution of agricultural taxes to the central &
state government is not significant, they get a significant part of their
total revenue in terms of land revenue, irrigation charges, taxes
imposed on the commodities purchased by the cultivators etc.
central government also earns revenue from export duties.

18. EARNER OF FOREIGN EXCHANGE
 Through exports of agricultural commodities like tea,
cotton, coffee, jute, fruits, vegetables, spices, sugar, oil, etc.
in the past, export of agricultural products for the export
earnings of the country.

19. SUPPLY OF RAW MATERIALS TO
INDUSTRIAL SECTOR
 Many industries like cotton industry, sugar industries, jute
industries etc,. depends on agriculture for their raw material
requirements.
 Moreover, workers engaged in various industries depend on
agriculture for their food requirement.

20. MARKET FOR INDUSTRIAL PRODUCT
 Agriculture provides markets for large number of industrial
products. Since about two thirds of Pakistanis lives in rural areas,
there is a large rural purchasing power which has created a large
demand for all type of industrial products.
 Green revolution has considerably increased the purchasing
power of the large farmers in the recent years.