Sustainable Productivity in South Asia: Analyzing the Impact of Ecological Footprint, Fertilizer Consumption, GDP, and FDI on Agricultural Value Added

Abstract

This paper studies the determinants of Agricultural Value Added (AVA) in Pakistan, India, Bangladesh, Sri Lanka, and Nepal for the period 2000-2024. More specifically, this paper studies the effects of ecological footprint (ECF), fertilizer consumption (FC), gross domestic product (GDP), and foreign direct investments (FDI) on agricultural value added as a proportion of GDP. Using various panel econometric methods, such as panel unit root test via ADF Fisher and Phillips-Perron, panel Pedroni residual cointegration tests, and pooled mean group (PMG) approach of panel autoregressive distributed lag (ARDL) model, it shows that the variables used are of different order of integrations, but exist in a long-run equilibrium relationship. According to the PMG model estimates, ecological footprint and fertilizer consumption affect agricultural value added negatively and significantly. GDP positively and significantly affects agricultural value added. Foreign Direct Investment does not show any significance in its effect on agricultural value added in this panel setting. The error correction term shows negative significance indicating the tendency of convergence to long-run equilibrium at an estimated speed of 12.4 percent per period. The findings are consistent with Panel FMOLS and DOLS models. The paper concludes that for ensuring sustainability and productivity of agriculture in South Asia, it is necessary to avoid ecological degradation, moderate fertilizer consumption, and grow economic activities through investment in agriculture.