Crop Diversification Towards High Value Crops And Its Determinants In Pakistan: An Empirical Analysis

Abstract

VII Abstract Abstract Abstract Crop sector is an important sub-sector of the agricultural sector and is considered a vital part of Pakistan's economy. This sub-sector contributed about 39.6 percent in the agricultural sector value added, during 2014-15. All major food crops, vegetables, oilseeds and fruits are produced in Pakistan due to its different ecological regions, climate change, soil types and sufficient water. Trends show a stagnant pattern of crop diversification in crop sector in terms of grains, cash crops, pulses, oilseeds, vegetables, fruits and other minor crops from 1980-81 to 2014-15. The Herfindahl Index (HI) was used to check the level of concentration and diversification in the structure of crops in Pakistan. The Herfindahl index values showed a high level of crop concentration in the country's crop sector and required to be diversified towards high-value crops. The ARIMA (1,1,1) model of Time Series data was used to examine the impact of various factors on Transformed Herfindahl Index of diversity. To determine the impact of demand side factors on the Transformed Herfindahl Index. The regression coefficients of profitability of minor crops, per capita income and urbanization showed positive and significant relationship with diversification of crops. To check the influence of supply side factors; the length of roads was adopted in the model to check the impact of infrastructural development. The regression coefficient of roads showed a positive and significant relationship with the diversification of crops. The technology was determined with the help of fertilizers, the number of tubewells, production of tractors in numbers and Net Area Sown. The regression coefficients of fertilizers, number of tubewells and production of tractors in numbers showed positive and significant influence on the diversification of crops. The regression coefficient of Net Area Sown showed a negative relationship with the diversification of crops, but it was insignificant. The availability of water (MAF) for irrigation purposes showed a positive and significant relationship VIII with the diversification of crops. To determine the impact of climate, the average rainfall regression coefficient showed a negative and very significant impact with diversification of crops. In addition, results concluded that the average income per hectare of minor crops is higher than the average income per hectare of the major crops. This showed that farmers' income increased through the diversification of crops towards high-value crops in Pakistan. To check the impact of various factors on the Index of High Value Crops, the credit availability, local production of oilseed crops, agricultural machinery, number of tubewells and urbanization regression coefficients showed positive and significant relationship with IHVC. The regression coefficient of import of oilseeds showed a negative and very significant impact on the Index of High Value crops in Pakistan. This showed that the huge import of oilseeds cost the public exchequer badly. The ADF unit root tests were used to check Stationarity of variables at levels. It showed that variables adopted in models were non-stationary at levels and turned out to be stationary with the first difference. LM test was used to check for a serial correlation in the errors of the regression model and found no serial correlation up to lag order 1 at the 95% confidence level. The residual of ΔResid01t were checked for the existence of a unit root to check the co-integration. The ADF test statistics showed that the series was stationary at the level and concluded that variables had long run relationship.