Pakistan’s Agricultural Terms of Trade

Changes in the terms of trade have consequences of great significance for the overall economic performance of a country. In this paper the terms of trade (1991-2003) for Pakistan’s crop sector have been worked out to reveal how the sector has performed over time in terms of profitability. Various indices were worked out to view the profitability from different angles using weights, giving due importance to all the contributing factors. The results revealed that Pakistani farmers’ profitability improved slightly during the study period but at the same time overall purchasing power of the farmers dropped. Pakistani farmers are expected to loose and consumers to gain if free agricultural trade (in selected commodities) opened with the neighboring India. It is suggested that farmer friendly policies and cost effective technologies should be transferred to farmers to make agriculture an attractive investment domestically and competitive internationally