What is the importance of agriculture in Indian economy?

Agriculture forms the backbone of the Indian economy and despite concerted industrialization in the last 40 years, agriculture still occupies a place of pride. Agriculture is contributing nearly 30 per cent of the national income, providing employment to about 70 per cent of the working population and accounting for a sizable share of the country’s foreign exchange earnings. It provides the food grains to feed the large population of 85 crores. It is also the supplier of raw material to many industries.

Contribution to National Income

The data supplied by the National Income Committee and the Central Statistical Organization clearly shows that agriculture contributed about 56 per cent of the national income in 1950-51 but contributed only 22 per cent of the national income in 2006-07. The perusal of data in Table 1.3 reveals that the share of agriculture in the national income was reckoned at about 56 per cent during 1950-51 and remained above 50 per cent during the following twenty years. However, the contribution of agriculture has declined in the last fifteen years due to rapid increase in the production of industrial goods and services.

Contribution to Employment.

Agriculture, directly or indirectly, has continued to be the main source of livelihood for the majority of the population in India. The decennial censuses indicate that 70 per cent of the population is supported by agriculture. These censuses show that an overwhelming majority of workers have been engaged in cultivation. Dependence of working population on other fields of agriculture like livestock, fisheries, forest etc., is less. The distribution of agricultural labourer force and population is given in Table 1.4. On the basis of above figures, it can be concluded that:

The proportion of working population engaged in agriculture in other countries is very small. It is only two and three per cent in the U.K. and the U.S.A., 6 per cent in Australia and 7 per cent in France. In backward and underdeveloped countries the proportion of working population engaged in agricul- ture is quite high. For instance, it is 42 per cent in Egypt, 52 per cent in Indonesia and 72 per cent in China.

Contribution of Manpower to industry.

The agricultural labourer of rural sector has been the supplier of manpower to industry. The findings of the Commission on Labourer are indicative that the Indian factory operatives were nearly all migrants from the rural areas. This drift to urban areas continues. This is due to lack of opportunities for employment and income in rural areas on the one hand and lure of employment, higher income and urban facilities on the other.

Contribution to Foreign Exchange Resources

Agricultural products-primary produce and manufactured through agricultural raw material occupy an important place in the country’s export. According to an estimate, agricultural commodities like raw cotton and jute, unmanufactured tobacco, oilseeds, spices, tea and coffee accounted for about 49 per cent of the total value of exports in 1988-89. This makes a sizable contribution to the foreign exchange resources of the country.

Interdependence between Agriculture and Industry

There is a close interdependence between agriculture and industry. This is to the supply of raw materials and inputs from agriculture to industry and vice-versa; secondly, the supply of wage goods to the industrial sector; thirdly, the supply of basic consumption goods to the agricultural population; and finally, the supply of materials for the building up of economic and social overheads in the agricultural sector. The interdependence between agriculture and industry is becoming stronger as the economy is developing. The application of science and technology in agriculture induces innovations in respect of

industrial products, which are used for agricultural production. Agricultural inputs like fertilizers, pes- ticides, diesel oil, electric motor, diesel engines, pump sets, agricultural tools and implements, tractors, power tillers etc., are supplied by the industry and oil, sugar, jute and cotton textiles and tobacco industries rely heavily on the agricultural sector. Even the processing industries, which are utilizing agricultural raw material, and developing fruit canning, milk products, meat products etc.

Contribution to Capital Formation

The pace of development is largely determined by the rate at which production assets increase. Before independence, the capital formation in Indian agriculture was of a low order. During this period, agriculture suffered from constant low yield technology, inequitable land tenure system and exploita- tion of the rural masses. The capital formation includes land development, construction of houses etc. Since independence, much more investment both public and private has been made in agriculture. The creation of physical assets has generally taken the form of land development, construction of irrigation facilities, roads and communication, farm buildings, agricultural machinery and equipment, warehouses, cold storages, market yard etc. This capital formation is helping not only development of agriculture but also the entire economy.

Contribution to Purchasing Power of People

Agriculture provides purchasing power not only to those directly engaged in it but to others also who are in the industries and services. When farmers earn more they also spend more. In the process, they create new markets and new opportunities for hundreds of blacksmiths, carpenters, masons, weavers, potters, leather workers, utensil-makers, tailors, cotton ginners, oil pressers, transporters and countless others. Thus, there are many industries, the prosperity and employment of which are dependent upon the purchasing power of the agricultural population.

Hence, it is concluded that besides purchasing food for non-agricultural workers and raw materials for consumer industries, it has created demands for a great many new industries, which, in turn, have provided high and well paid employment. This existing role of agriculture in the Indian economy points out the necessity for the development of Indian agriculture to the fullest extent possible as the prosperity of agriculture largely stands for the prosperity of the economy. The significance of agriculture lies in the fact that the development in agriculture is an essential condition for the development of the national economy.

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