Pakistan Institute of Development Economics



Recent Movements In Agriculture’S Terms Of Trade In Pakistan (Notes & Comments)

The purpose of this study is to add five years’ data to a study undertaken some years ago by S. Mushtaq Hussain and myself [4]. The original study developed a fairly complete set of price weights and price indices for manufactured and agricultural commodities in Pakistan from 1951/52 to 1963/64, and analyzed the movements in the net barter terms of trade of the domestic, agricultural and manufacturing sectors. The results showed that the terms of trade had been turned against agriculture by the trade-restricting policies of the government in the early 1950’s and that the subsequent relatively slow growth of agriculture and rapid growth of manufacturing had resulted in a movement of domestic relative prices more favourable to agriculture over the late 1950’s and early 1960’s. The earlier movement against agriculture and the later improvement in agriculture’s terms of trade were more pronounced in East than in West Pakistan. A subsequent study [3] compared the terms of trade agriculture received in Pakistan and the terms of trade it might have received had the agricultural sector been able to trade directly with the rest of the world without going through the government’s exchange-control mechanism. From the latter study, it was clear that even though there had been an improvement in agriculture’s terms of trade from the mid-1950’s to the early 1960’s, agriculture in both provinces was being “squeezed” relative to the terms of trade it might have received in the rest of the world. East-Pakistan farmers received 55 to 60 cents in manufactured goods per dollar of marketed commodities, while West-Pakistan farmers received

Jr., Stephen R. Lewis

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