Intra-sectoral and Intersectoral Parity Issues in Pricing of Agricultural Crops: A Preliminary Analysis

Sarfraz K. Qureshi


Intersectoral terms of trade play a cruc1al role in
determining the sectoral distribution of income and resource allocation
in the developing countries. The significance of intra-sectoral terms of
trade for the allocation of resources within the agricultural sector is
also widely accepted by research scholars and policy-makers. In the
context of planned development, the government specifies production
targets for the agricultural sector and for different crops. The
intervention of government in the field of price determination has
important implications for the achievement of planned targets. In
Pakistan, there is a feeling among many groups including farmers and
politicians with a rural background that prices of agricultural crops
have not kept their parities intact over time and that prices generally
do not cover the costs of production. The feeling that production
incentives for agriculture have been eroded is especially strong for the
period since the early 1970s. It is argued that strong inflationary
pressures supported by a policy of withdrawal of government subsidies on
agricultural inputs have resulted in rapid increases in the prices paid
by agriculturists and that increases in the prices received by farmers
were not enough to compensate them for the rising prices of agricultural
inputs and consumption goods.

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