Fertilizer consumption, water availability and credit distribution: Major factors affecting agricultural productivity in Pakistan

Abstract

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 analysed 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.