Agriculture and economic development
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This article is written by Prateek Singh from Institute of Law, Nirma University, Ahmedabad. It talks about the important role that agriculture plays in the economic development of a country.


Agricultural sector plays a vital part in a country’s economic growth cycle. This has already made a major contribution to advanced countries’ economic growth, and its position in less-developed countries’ economic development is vitally important. 3/4th of the population in India is based on agriculture, making it the largest source of livelihood for the entire nation. The dependency on agriculture has been the same since the time being. Even though the rapid growth in modern-day developments has given birth to a significant number of growth factors, agriculture remains a vital factor.

Industries get their raw materials from the agriculture sector, needless to say, that without a flourishing agriculture sector, a large part of the economy will freeze. The lessons drawn from many advanced countries’ economic history tell us that agricultural prosperity has made a significant contribution to fostering economic progress. The lessons drawn from many advanced countries’ economic history tell us that agricultural prosperity has made a significant contribution to fostering economic progress. It is right to note that today’s leading developed countries were once primarily agricultural, while the developing economies still dominate agriculture and contribute significantly to the national income.

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Role of agriculture in economic development

  1. Stimulates industrial expansion: Expansion in the agriculture sector also led to the expansion of the industrial sector. When agriculturalists have savings, they can buy consumer goods, invest in industries too. This results in an indirect expansion of the industrial sector.
  2. Providing employment: When there is an increase in the agriculture sector, its production, more employment opportunities will also be generated.  Direct employment in the crop raising,  agriculture expansion also provides work in the other sphere.
  3. Resources for Capital Formation: This is all more important because with the existing modern capitalist sector being small, there is little that can come from this sector by way of surpluses or profits for investments. On the other hand, agriculture, as is the case in India, is a big sized sector. It can contribute more to the development of the industrial sector because the primary industries run with the help of raw material which comes from agriculture. For example Sugar Industry, Juice Factory, Cotton industry, etc 
  4. Supply of Foreign Exchange: Agriculture can contribute a great deal in earning foreign currency through the export of agricultural products. The requirements for the expansion of exports can be easily met by adding a crop or two within the existing crop pattern and that too with perhaps no additional capital investments. Further, since such exports have to cater to the existing and familiar international market, no additional costs are involved to discover or nurture new markets.
  5. The Shift of Manpower: Provides work to the majority of the workforce in the country. In the least developed countries, the majority of the workforce work in disguised unemployed agriculture labour. Agricultural progress allows manpower to shift from the agricultural to the non-agricultural sector. In the initial stages, it is more necessary to shift labour from the agricultural to the non-agricultural sector from the point of view of economic growth as it relieves the burden of surplus labour-power over the limited land. Consequently, the release of surplus manpower from the agricultural sector is necessary to advance the agricultural sector and to extend the non-agricultural sector.
  6. Supply of Food and Raw Materials: Feeds the requirement of industrialization. Agriculture plays a very role in development. Contributes in many consumer goods like oil, clothing, etc.  Further food grains are very important for underdeveloped economies.  In case of shortage of food, it helps a lot in developing countries as the mass import is not possible and economically feasible for them.  So, agriculture should be given due importance so that this essential supply of food and raw material can be maintained.
  7. Helpful to Reduce Inequality: There is greater income inequality between the world’s rural and urban areas in a country which is largely agricultural and overpopulated. To reduce this income inequality, greater priority must be given to agriculture. Agricultural growth will increase the income of the majority of the rural population and hence the income inequality might be somewhat reduced.
  8. Create Effective Demand: Agricultural sector growth will tend to increase farmers’ purchasing power which will help the country’s non-agricultural sector expand. It will provide a more productive market. It is well recognized that the majority of people in underdeveloped countries rely on agriculture and it is they who must be able to afford to consume the goods produced. It will, therefore, be helpful in boosting non-agricultural sector production. Similarly, an improvement in cash crop productivity can pave the way for the promotion of the exchange economy that can help the growth of the non-agricultural sector. Buying agricultural goods such as chemicals, farm equipment, etc. also improves agricultural dead-outs.
  9. Source of Foreign Exchange for the Country: Majority of the world’s developing countries are exporters of primary products. Such goods contribute 60 to 70 per cent of overall earnings from exports. Thus the ability to import capital goods and industrial development machinery is crucially dependent on the agricultural sector’s export earnings. If agricultural exports do not increase at a sufficiently high rate, these countries will be forced to incur a heavy balance of payments deficit resulting in a serious foreign-exchange problem. Primary goods, however, face falling prices on the international market, and there is limited prospect of increasing export earnings through them. Despite this, major developing countries such as India (with industrial growth potential) are attempting to diversify their manufacturing structure and encourage the export of manufactured goods even though this involves the introduction of protection measures in the initial planning period.

Place of agriculture in the Indian economy

  1. The major source of livelihood: One of the major sources of livelihood is agriculture. More than 70% of the rural Indian people depend on agricultural activities in one sense or the other for their livelihood. The people depend on agricultural activities in one sense or the other for their livelihood. The people dependent on agriculture in the foreign countries which are developed nations such as America, Japan, and Germany have less population dependent on agriculture in comparison to India.
  2. Increase in foreign trade: Agriculture in India plays an important role in the enhancement of international trade. The commodities which are exported from India are oil cakes, tea, vegetables, and fruits, coffee, cotton, spices, tobacco, sugar, flowers vegetable oils and raw wool. Agriculture contributes a noticeable part in Indian exports. With the invention of organic farming, exports have also increased in the last few decades. 
  3. Creates employment opportunities: Indian agriculture gives employment and work to a vast majority of the people to the rural crowd. In rural and backward areas, almost 70% of the masses earn their livelihood from cultivation and allied agro-industries. Agriculture is also helpful in increasing the employment opportunities in the manner that it is helpful in industrial growth and expansion which leads to an increase in employment.
  4. More capital investment:  In today’s world modern agricultural equipment is used for cultivation, irrigation, land preparation, banding, harvesting, ploughs, etc. which requires a huge amount of investment. Income leads to savings and savings leads to investments. As we know that agriculture contributes almost 16% to the national income of the economy, there will be savings from the agriculturalist and it will lead to capital formation. The livestock viz. cattle, buffaloes, sheep, goats, horses, ponies, etc. also have its food from agriculture.

Loopholes in carrying out agricultural activities

  1. Poor inputs and techniques: The techniques and methods of cultivation have been old and inefficient. It results in a high cost of production and low productivity. These methods have not undergone and changed for centuries. The investment in agriculture in the form of manures and fertilizers, improved seeds, irrigation, tools and implements and other types of assets has been miserably low.
  2. Inadequate irrigation facilities: One of the main reasons for the weakness of Indian agriculture has been the lack of irrigation facilities in the country. The farmers have to depend upon rainfall and very few of them can avail the facilities of irrigation systems. Sometimes drought and floods also spoil the whole cultivation and crops.
  3. Indebtedness of the farmers: There is an old saying that the farmers in India are born in debt, live in debt and bequeath debt. The reasons for their indebtedness are many such as hereditary debt, litigation, want of supplementary incomes and wasteful social expenditure.
  4. Low adoption of improved technology: The adoption of high yielding varieties (HYV) is very rare in India. The important reasons for the slow growth of HYV are the non-availability of suitable seeds, the predominance of traditional seeds, short supply of recommended seeds and defective distribution system.
  5. Absence of Innovation in Agriculture: Absence of alternative for escaping pre-monsoon showers to avoid the problem of pre-harvest sprouting of crops in flood periods is a major problem. There is a lack of improved crop management practices for shifting cultivation. The facilities of storage, processing and marketing are particularly deficient for perishable commodities.
  6. Rural transport and communication network: Most of the areas remain inaccessible during rainy seasons for non-availability of all-weather roads. Roads are found to be highly damaged and there are no proper transport facilities to the access of the villagers.

Progress of Indian agriculture

  1. Government Measures: Through the five-year plans, the government of India has played an active role in the development of agriculture. Proper objectives have been laid down in the various plans. According to these objectives, corresponding measures have been spelt out. All the activities are directed towards the achievement of these objectives.
  2. Expanding Government’s Role: From the first five-year plan, the government realized that for the development of agriculture, the government has to play an important role which would be a crucial one. Agriculture is the backbone of the economy and the poor farmers cannot uplift themselves. That is why the measures needed for the upliftment of agriculture could be taken by the government. In recent years, the government’s actions have expanded to include programmes for rural development and special area programmes.
  3. Laudable objectives: The objectives of different plans are varied from time to time. Somewhere the aim was to increase productivity and elsewhere to improve the quality of food grains. Land reforms have been the other significant objective. Another important objective was to uplift the weaker sections of the society. For example, the small and marginal farmers, landless agricultural labourers, and many of those engaged in activities allied to agriculture such as animal husbandry and fisheries, etc.
  4. Appropriate measures: In order to achieve these objectives many measures have been taken by the government of India. For example, to increase the production and productivity the supply of inputs, infrastructural facilities, an extension of irrigation, modern laboratory-based seeds, include banking, marketing, credit, transportation, communication, finance, education, and information dissemination, etc.
  5. Considerable resources: Large resources have been devoted to agricultural development. These have been on the rise from plan to plan. The funding for the development of agriculture has also been increased from time to time. For the control of droughts and floods, many funds have been given by the government. Special programmes for the benefit of rural people have been introduced along with industrial development.


Agriculture is the Indian economy’s most important sector. India’s farm sector is the largest industry. Approximately 70 per cent of people in India are either farmers as a vocation or as workers. The share of GDP is just 18 per cent. But it provides employment for around 50 per cent of the workforce in the country. It provides food in India for about 135 crore people. India has become the world’s largest producer of pulses, rice, wheat spices, etc. Approximately 12 per cent of export earnings come from the agricultural sector. The Indian trade surplus of 14.6 billion dollars from agriculture generated in 2018. These stats show how big and important part of the country’s functioning is the agriculture sector. With constant changes and developments happening, policies being introduced, it is only going to go upwards from here and will always remain as an important factor in the economic development of the nation.


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