AGRICULTURE LED ECONOMIC GROWTH: THE CASE OF PAKISTAN

The study attempts to test agriculture led growth theory for Pakistan. Time series data have been used for the period 1980 to 2017. The data series are tested for stationarity and found to be stationary at the first difference (I (1)). As the data contained a mix of I (0) and I (1) variables the ARDL Bounds testing approach is used. The Bounds Testing approach confirms a long run relationship. Error Correction Model is used to obtain coefficients of both short and log run. Analysis of the model shows that except for Terms of Trade all the variables are highly significant with expected signs. The main variable of interest i.e, Agriculture has a significantly positive effect on GDP. A 10% increase in agricultural GDP results in 2.8% increase in the national GDP (real terms). Similarly, 10% increase in the Gross Capital formation results in 5% increase in the GDP. Population has a negative sign for the coefficient. The results show that the agricultural led growth hypothesis carried weight and agricultural value added has the potential to help the national economy. Therefore, Pakistan needs to go for more value added and more efficient agriculture to have a better impact on economic growth of the country in the years to come.