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
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