Vishal Prakash SinghM.B.A.Ist sem

Role of AGRICULTURE in Indian economy

Economy is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek for oikos ("house") and nomos ("custom" or "law"), hence "rules of the house(hold)".

Three major theoretical approaches explain the role of agriculture in

economic growth

1. The theories that stress the passive role of agriculture as supplier of resources to the economy (Lewis, Fei-Ranis, Jorgenson; 1950-60)

2. The theories that stress the active role of agriculture as a sector that is able to promote economic growth due to specific actions and behaviour (Mellor; 1970-90)

3. The theories that stress the active role of agriculture as a sector that is able to promote sustainable economic growth (FAO, 2000)

FAO (2000) stresses two major categories of roles of agriculture

Economic roles underestimated by the market◦Income generation◦Poverty reduction◦Food security

Non-economic roles neglected by the market◦Management and conservation of

natural resources◦Social cohesion and stability◦Preservation of culture

Contribution of Agriculture

1980-81 1990-91 1994-95 1996-97 2007-08

3831 29

2419.9

2630 30 31

19.4

36 39 41 44

60.7

Chart Title

agriculture industry service

Backbone for country’s economic development

It contribute to economic development in atleast four ways:

1) Product contribution2) Market contribution3) Factor contribution4) Foreign exchange contribution

Source of livelihoodWorking population of more than

70%.

primarysecondary

tertiary1981

1991

rescent

69.4

16.5 17.7

67.3

14.5 20.5

70

20

3

Chart Title

1981 1991 rescent

Agriculture in international tradeThe main commodities are tea oil

cakes, fruits and vegetables, spices , tobacco, animal hair and vegetable oils.

Its export is now expected to $95.7billion a 10.3% increase from the last year.

Other factorsRural consumption is three times

that of urban consumptionAs per the J.K.Galberth, the most

significant development that took place in our economy during the past four decades relates to farm sector.

Agriculture produces a surplus that needs to be transferred to

the economy•Food and primary goods•Labour-force•Capital and foreign exchange

Need of extraction of surplusAgriculture produces as surplus in

relation to its internal needsIn agriculture there exists non-

productive labour-force (non necessary to the sector) that is free to move among sectors

Peasants are in condition to save, then they can supply savings to the economy

Agriculture produces goods that are internationally tradable

The extraction of agricultural surplus has created many problems

It has reduced the incentives to farmers

It has increased the pace of the decline of agriculture with serious consequences on environment and society

It has increased rural poverty and food insecurity

Also a ‘weak’ version of the approach existsAgriculture is a surplus supplierYet ‘traditional’ agriculture might not

be able to produce surpluses and then might not be able to transfer them to the economy

It follows that surpluses need to be produced first in order to be transferred

Only a ‘modern’ agriculture can produce surpluses

The ‘modernisation’ of agriculture implies a transfer of resources from the economy to agriculture

The aims are◦To increase resource productivity◦To introduce technical change◦To orient production to market

‘Modern’ agriculture is in condition to produce surpluses in order to enhance economic growth

J. Mellor (1976) introduces his theory of growth linkages taking as an example the case of the Green Revolution in India

The public intervention to ‘modernise’ agriculture increases farmers’ incomes

Farmers increase their consumption, both of production means and consumption goods

The increased demand leads to the emergence of local firms producing the newly demanded goods

The final result is that, due to the initial intervention in agriculture, the rural economy develops in a balanced manner

The growth of rural industry is a major factor for a balanced growth It increases non-farm employment providing work

opportunities for the labour-force that leaves the primary sector or is underemployed in it

It reduces the pressure on towns and metropolises, keeping under control the level of pollution

It exploits ‘traditional skills’ that are typical to each area

It exploit the competitive advantages of rural areas in terms of costs (labour-force and infrastructures)

Agricultural modernisation has raised some problemsOn environment◦ Industrial pollution◦Misuse of natural resources

On society◦Pressure on families and communities◦Migration from rural to urban areas

On the economy◦Food insecurity◦Food dependency

Agenda for actionIf agriculture is to record abundance; if

poverty is to be abolished quickly and if the chasm between rural – urban divide is to be curtailed, agriculture must grow at a good rate. This needs action on the following lines:

1. Building institutions for People’s participation

Continued…

2. Freeing up agricultural markets

3. Carving an investment policy

4. Restructuring rural credit5. Irrigation6. Dry land farming7. Revitalising research

QUERY

Thank you