Role of AGRICULTURE

in Indian economy

Vishal Prakash Singh

M.B.A.
Ist sem
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)
4.
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
Backbone for country’s
economic development
It contribute to economic development


in atleast four ways:

1)Product contribution
2)Market contribution
3)Factor contribution
4)Foreign exchange contribution
Source of livelihood
Working population of more than
70%.

Agriculture in international
trade
The 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 factors
Rural consumption is three times
that of urban consumption
As 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
surplus
Agriculture produces as surplus in
relation to its internal needs
In 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 exists
Agriculture is a surplus supplier
Yet ‘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 problems
On 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 action
 If 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 credit

5. Irrigation

6. Dry land farming

7. Revitalising research



Thank you
