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Chapter: 11th 12th std standard Indian Economy Economic status Higher secondary school College

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Role of Agriculture in Economic Development

Agriculture occupies a very important place in the economic life our country. It is the backbone of our economic system. Agriculture has been the major source of livelihood in the Indian economy.

Role of Agriculture in Economic Development

 

Agriculture occupies a very important place in the economic life our country. It is the backbone of our economic system. Agriculture has been the major source of livelihood in the Indian economy. India is primarily an agricultural country. The fortunes of the economy are, even now, dependent on the course of agricultural production. The importance of agriculture in the national economy can be best explained by considering the role of agriculture under the following heads.

 

1. Contribution to National Income

 

Agriculture contributes even now a major share of the national income in India. The distribution of national income by industrial origin for the period 1950-51 to 1979-80 shows that the share of various agricultural commodities, animal husbandry and ancillary activities has always been more than 40 percent. As a matter of fact, during the fifties, it contributed around half of the national output. During eighties and nineties, a further fall in this proportion took place. During 2002-03, it stood at about 25 percent.

 

2. Major source of Livelihood

 

The main source of livelihood is agriculture. Six out of every ten persons in India depend upon agriculture. In industrially advanced countries like U.K., U.S.A., etc, the number of people dependent on agriculture is very low as compared to India. Over the years 1921-2001, the size of labour force dependent on agriculture had more than doubled. The sector is plagued by evils such as underemployment, disguised unemployment and low productivity employment.


3. Provider of Employment

 

Agriculture provides employment and work to an overwhelming majority of the Indian masses. In villages, about seventy per cent of the people earn their livelihood from cultivation and allied agro-industries. In absolute terms, agriculture provided employment to 97 million persons in 1995; the number of people working on land (cultivators and agricultural labourers) increased to 235 million.

 

4. Industrial development

 

Agriculture provides raw materials to the industries. Cotton and Jute textile industries, sugar, vanaspathi and plantations - all these depend on agriculture. Many of our small scale and cottage industries like handloom weavings, rice husking, coir, khadi etc., depend upon agriculture for their raw materials. There are many other industries, which depend on agriculture in an indirect manner.

 

5. International Trade

 

Indian agriculture plays an important role in the country's international trade. The main exported agricultural commodities are tea, oil cakes, fruits and vegetables, spices, tobacco, cotton, coffee, sugar, raw wool and vegetable oils. Agriculture contributes to a sizeable part of exports and it is an important segment of imports of the economy. The agricultural sector is a net earner of foreign exchange.

 

6. Capital Formation and Investment

 

The major part of production assets of the country is in the form of agricultural assets like land, irrigation facilities, tractors, agriculture implements, ploughs, pump sets and storages. Since agriculture contributes about 25 percent of the national income, this sector is the primary source of savings and hence capital formation for the economy.

 

7. Food and Fodder

 

In India, agriculture meets almost the entire food requirements of the people. Agriculture also provides fodder to sustain livestock whose number runs to several crores.


8. Economic Planning

 

Agriculture is the backbone of the Indian economy and prosperity of agriculture can also largely stand for the prosperity of the Indian economy. Importance of agriculture in the national economy is indicated by many facts. For example, agriculture is the main support for India's transport system, since railways and roadways secure bulk of their business from the movement of goods. Internal trade is mostly in agricultural products. Agricultural growth has direct impact on poverty eradication.

 

9. International Ranking

 

At the global level, Indian agriculture has ranked in certain commodities. In the case of groundnuts, India stands first in the world, for rice production it ranks second and in the case of tobacco it occupies third rank in the world.

 

The significance of India arises also from the fact that the development in agriculture is an essential condition for the development of the national economy. According to Ragnar Nurkse, surplus population in agriculture should be removed and used in newly started industries and public works in rural areas. By doing so, agricultural productivity will be increased on the one hand and on the other, new industrial units would be set up with the use of surplus labour. Agriculture is not only the largest and most important sector of the Indian economy, but also the most backward one. The growth of agriculture, therefore, is of vital importance for the growth of the entire economy.

 

Contribution of Agriculture to Economic Growth

 

Simon Kuznets identifies four possible types of contribution that the agricultural sector is capable of making for overall economic development. These are:

 

1.Product contribution i.e., making available food and raw materials.


2.Market contribution i.e., providing the market for producer goods and consumer goods produced in the non-agricultural sector.


3.Factor contribution i.e., making available labour and capital to the non-agricultural sector and

 

4.Foreign Exchange contribution.


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