What is the role of agriculture in economic development


Role of Agriculture in Economic Development

  1. Contribution to National Income. Agriculture contributes even now a major share of the national income in India. …
  2. Major source of Livelihood. The main source of livelihood is agriculture. …
  3. Provider of Employment. …
  4. Industrial development. …
  5. International Trade. …
  6. Capital Formation and Investment. …
  7. Food and Fodder. …
  8. Economic Planning. …
  9. International Ranking. …

Agriculture plays a major role in economic growth and development. As the provider of food it is a cornerstone of human existence. As a furnisher of industrial raw materials it is an important contributor to economic activity in other sectors of the economy.


How does agriculture contribute to economic development?

Contribution of Agriculture to Economic Development

  1. Factor Contribution: Development of agriculture releases some resources for being transferred to the other sectors. …
  2. Product Contribution: The product contribution of agriculture towards an overall economic development takes two forms. …
  3. Market Contribution:

How does agriculture affect the US economy?

agriculture therefore spurs the growth of entire economies and stimulates demand for U.S. exports. Exports and Jobs In 2018, U.S. agricultural exports totaled $140 billion, with developing countries accounting for $90 billion, or nearly two-thirds of total agricultural exports.

Does agriculture contribute to economic growth?

Now, as we can see that agriculture has a big contribution, its growth will stimulate the overall growth of the economy. Now, this has been argued widely that a country prospers when its secondary or industry sector outnumbers other sectors. Most developed nations has witnessed a massive industrial revolution in its history.

How can agriculture help the economy?

Agriculture makes a huge contribution to the economic development in the following ways: It provides raw material and food to the non-agricultural sectors. It creates demand for goods that are produced in non-agricultural sectors. Rural community acquires purchasing power by selling the surplus. It also helps to earn valuable foreign exchange …


What is the role of agriculture in economic development of India?

Over 70 per cent of the rural households depend on agriculture. Agriculture is an important sector of Indian economy as it contributes about 17% to the total GDP and provides employment to over 60% of the population. Indian agriculture has registered impressive growth over last few decades.

What are the major roles of agriculture in the economy?

According to Muir, “Agricultural progress is essential to provide food for growing non-agricultural labour force, raw materials for industrial production and saving and tax revenue to support development of the rest of the economy, to earn foreign exchange and to provide a growing market for domestic manufactures.”

Why agriculture is the backbone of the economy?

Agriculture makes its contribution to economic development in following ways: By providing food and raw material to non-agricultural sectors of the economy, by creating demand for goods produced in non-agricultural sectors, by the rural people on the strength of the purchasing power, earned by them on selling the …

What is the role of agriculture in sustainable development?

A sustainable practice of agriculture leads to a healthy environment and people. How agricultural goods are produced determines for instance the quality of ground water and food and consequently also our human health, and further how much the sector is contributing to climate change.

How does agriculture contribute to economic development?

The role of agriculture in economic development is multifaceted. Food production and similar agricultural businesses have the potential to feed a nation, supply jobs, and contribute to the tax base of local and national governments. Developing nations can dramatically reduce poverty through efforts to stimulate agricultural business growth. Studies indicate that regardless of whether a developing country is poor or wealthy, focused efforts to grow the agricultural sector have the same effects: reduced poverty, improved food supplies, and increased exports.

How does agriculture help the economy?

As seen in the early history of the United States, many countries begin building economic strength and international trade through agriculture. Once a country becomes stronger in terms of the economy, many turn to more advanced businesses and trade options, such as natural resources, technology, or industrial products. Fewer citizens produce agricultural products for a living. Economic growth naturally produces higher average earnings, more advanced and stable infrastructure, and better educational opportunities. Citizens can expand away from merely acquiring necessities and look to fulfilling wants and interests, including exotic foods, imported fibers, and other agricultural products from around the world.

What is the role of agriculture in the economy?

Agricultural sector plays a strategic role in the process of economic development of a country. It has already made a significant contribution to the economic prosperity of advanced countries and its role in the economic development of less developed countries is of vital importance. ADVERTISEMENTS: In other words, where per capita real income is …

Why is agriculture important for the economy?

If agriculture fails to meet the rising demand of food products, it is found to affect adversely the growth rate of the economy. Raising supply of food by agricultura l sector has, therefore, great importance for economic growth of a country.

How does rural economy affect social welfare?

The rising agricultural surplus caused by increasing agricultural production and productivity tends to improve social welfare, particularly in rural areas. The living standard of rural masses rises and they start consuming nutritious diet including eggs, milk, ghee and fruits. They lead a comfortable life having all modern amenities—a better house, motor-cycle, radio, television and use of better clothes.

Why is the progress in agriculture important?

The progress in agricultural sector provides surplus for increasing the exports of agricultural products. In the earlier stages of development, an increase in the exports earning is more desirable because of the greater strains on the foreign exchange situation needed for the financing of imports of basic and essential capital goods.

How can agriculture reduce inequality?

In a country which is predominantly agricultural and overpopulated, there is greater inequality of income between the rural and urban areas of the country. To reduce this inequality of income, it is necessary to accord higher priority to agriculture. The prosperity of agriculture would raise the income of the majority of the rural population and thus the disparity in income may be reduced to a certain extent.

Why is increased agricultural output important?

It is seen that increased agricultural output and productivity tend to contribute substantially to an overall economic development of the country, it will be rational and appropriate to place greater emphasis on further development of the agricultural sector.

What is the backbone of an economy?

The agriculture sector is the backbone of an economy which provides the basic ingredients to mankind and now raw material for industrialisation.

What are the two factors that contribute to the structural transformation of an economy?

for the structural transformation of an economy are: (1) an income. elasticity of demand for food that is less than 1 and declining, and. (2) the possibility of a substantial expansion of agricultural production. with a constant or declining farm labor force.

What is a sector with respect to?

sectors with respect to (1) direct government investment or aids to

What led to early and revolutionary reductions in the world?

advanced technology lead to early and revolutionary reductions in

How many industries are there in the world?

only existing industry of any consequence. Typically, some 40 to 60

How does agriculture contribute to the economy?

Contribution of Agriculture towards the economy. Via agriculture, a massive amount of raw materials are provided to the other sectors of the economy – the secondary and tertiary sectors. This means that agriculture perhaps creates a market for all the goods produced in the non-agricultural sector.

What is the role of agriculture in the Indian economy?

October 1, 2020. September 22, 2020 by Anannya Srusti. Agriculture which comprises one of the major farm producers in the world is also a crucial part of the economy of the Indian subcontinent. People of India are majorly dependent on agriculture as their primary source of income.

What is surplus from agriculture?

The surplus which is gained from the agricultural products goes into investment in the form of taxes so that it can later be used to purchase non-agricultural products. There are a lot of rural people who are either under-educated or completely uneducated.

Why does the farmer come to the rescue?

The farmer here comes to the rescue because he is the one who ensures that all the factors which influence the production of crops are taken care of in a way that deliberately avoids harm or errors. The sowing, as well as harvesting of crops, depends largely upon the season.

What is the state of farmers in India?

State of farmers in the country. Despite both agriculture as well as farmers playing a key role in the economic development of India, the state of farmers in the country is appalling. A study has shown that the overall condition of the majority of farmers in the country is extremely unpleasant. In India, while agriculture does generate …

Why is India important to farmers?

India, being an agriculturally important nation, farmers serves as the foundation of the country . Without the farmers in the country, India’s prime source of the economy would tend to collapse. In the process of exporting, the quality of the food grains becomes the chief principle which determines if the food grains are good enough …

How does agriculture help India?

Agriculture, as well as farming, helps these people by providing them with employment. It can hence be noted that with the help of agriculture, the economy of India is kept self-sustaining. When agriculture is unsuccessful in achieving the food supplies of the country, it has harmful as well as unfavourable effects on the economy of that country.

How does agriculture affect the economy?

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.

What is the importance of agriculture in India?

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.

Why is the release of surplus manpower from the agricultural sector necessary?

Consequently, the release of surplus manpower from the agricultural sector is necessary to advance the agricultural sector and to extend the non-agricultural sector. 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.

How does agriculture increase demand?

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.

How does agriculture contribute to foreign exchange?

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.

How does agriculture stimulate industrial expansion?

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.

Why is capital formation important?

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.

Why is agriculture important for development?

economy, agricultural development is essential for a successful industrialization strategy for developing countries. Development thinking and practice in the 1960s and 1970s tended to neglect agriculture as a leading sector, with its emphasis on import substitution industrialization and export promotion. This thinking was aided by the literature concerning the terms of trade of agriculture. Concerning the terms of trade for agriculture, which can summarize the “price bias” and the rate of taxation on agriculture, and which can be considered as a policy instrument, there is extensive literature on its pattern in the course of development, starting with the Soviet industrialization debate of the 1920s (Preobrazhensky, 1965). Under the assumption that agricultural production would not suffer, given the inelasticity of aggregate agricultural supply with respect to price, and the further assumption that industrial investment gives higher rates of return, the idea was to “force” savings, food, and labor out of agriculture through explicit and implicit taxation in order to finance industrial growth. Such thinking provided the intellectual basis for policies that were applied in many countries in sub-Saharan Africa and other regions in the 1960s and 1970s, that taxed explicitly and implicitly agriculture. The results of such policies were disastrous for growth, leading to the adoption of structural adjustment programs that aimed at reversing such policies (for a summary of the issues and debate concerning agricultural taxation see Sarris, 1994). Sah and Stiglitz (1984, 1987) have provided a framework for thinking about the agricultural terms of trade in its relation to the overall “investible surplus” of the economy, defined as the difference between the total production and consumption of the non-agricultural product. The logic of their argument is fairly straightforward. Assuming that agricultural or industrial laborers do not produce much saving for investment, and that foreign savings are constrained, the major sources of domestic savings are private profits from non-agricultural production and public tax revenues from exports or imports. Since the major part of non-agricultural production cost is labor, and since wages in a developing country seem to respond to the cost of food, non- agricultural profits can be raised by keeping the price of food and hence wages down. Also if most of exports are agricultural, while imports are non-agricultural, the government can increase public revenue by taxing exports and/or imports. Both of these policies imply a reduction in the terms of trade for agriculture. In their later work Sah and Stiglitz (1987) widened the framework and clarified further the logic of the above argument. They showed that suppressing the terms of trade of agriculture below the levels dictated by international prices, increases the domestic investible surplus of the economy. In other words the agricultural sector must be taxed, or equivalently the non-agricultural sector must be subsidized vis-a-vis world prices, in order to raise the level of aggregate domestic investment. There is a critical level of the domestic agricultural terms of trade, which is below the international terms of trade, and which maximizes the total level of domestic surplus. Furthermore, the suppression of the internal terms of trade does not have to impoverish urban workers. Similar results about the agricultural terms of trade were obtained in earlier research dealing with growth in dual economies such as the works by Hornby (1968) and Bardhan (1970, chapter 9), under different assumptions. In all of the above literature the basic assumption is that the major source of domestic savings is non-agricultural profits. This is basically a functional view of savings and income distribution. Translated to personal income distribution this view assumes that the recipients of agricultural

Why is TFP growth so high in agriculture?

supposedly more dynamic manufacturing sector. The results suggest that the high rates of TFP growth in agriculture reflect effective systems of developing and disseminating internationally innovations in agriculture, and this seems to be related to the establishment in the early 1960s of a large-scale system for international agricultural research. Thus a hypothesis is that the “globalization” of agricultural research, has contributed to faster TFP growth in agriculture, compared to that of manufacturing, for which a large portion of applied research is privately funded and appropriated. While these results are very interesting, it is not clear whether they are due to disproportionally high public investments in agriculture, or other policies discriminating against other sectors. If, for instance, the contribution to infrastructure or education to TFP growth is similar across sectors, it would be no surprise if higher TFP growth in one sector is due to higher shares of public expenditures on these factors devoted to this sector. In fact Byerlee (1996) exhibits data that show that developing countries have invested proportionally more in agricultural research recently than developed countries, and this would be consistent with the above results. Also it may be the case that technological improvements in agriculture are reflected more in increased quantities of capital in the developed countries, compared to the developing countries, hence masking the impact of technical changes on TFP. Hence the assessment that larger TFP growth in agriculture implies that agriculture should not be discriminated against is incomplete without the analysis of the sectoral utilization of public growth enhancing expenditures, as well as analysis of the elasticity of capital inputs with respect to technological improvements. Concerning factor supply, the data in Mundlak (1999) suggest the following: * The share of agriculture in total investment, and in total capital is smaller than its shares in output and the labor force. This is an indication of lower capital-labor ratios in agriculture compared to non-agriculture. * Average labor productivity growth in agriculture has exceeded that of non-agriculture. * The share of agriculture in total investment has been declining since 1970. * The share of manufacturing in total investment has also been declining. This indicates that other sectors, probably services have attracted increasing shares of investment. * The capital-output ratio in agriculture seems to have increased over the last thirty years (indicating capital deepening). * In most countries the capital-labor ratio has grown over time in the economy as a whole as well as in agriculture. Mundlak interprets this evidence as suggesting that demand is the dominant determinant of agricultural growth. Sluggish agricultural demand growth, due to low-income elasticity of demand for agricultural products, implies low growth in agricultural output and investment. Similarly the increasing capital labor ratio in agriculture reflects the out-migration of farm labor, as well as a shift to more capital intensive techniques. An aspect that has not been appreciated in the above literature is the contribution of the institutional environment to agricultural growth. Of course, the reason for such neglect is that for most of the countries studied with data before 1985-90, there had not been any institutional change in the structure of agricultural production, to justify any attribution of growth to such

What are the main themes of endogenous growth?

This essentially macroeconomic approach to growth, has placed much less emphasis on sectoral aspects of growth and poverty reduction. This, lack of sectoral emphasis, however, gives little practical guidance to policy makers who have to make decisions about the allocation of public resources, as well as sources of funds to finance public expenditures. Similarly the latest World Bank Development Report for 2000/2001 titled “Attacking Poverty,” that emphasizes three themes, opportunity, empowerment, and security , is notable for the relatively limited discussion of sectoral priorities in reducing poverty and enhancing growth. It is well known that the majority of the world’s poor live in rural areas. Of the about 1.2 billion people in the world that are estimated to live on less than one dollar a day, about three quarters work and live in rural areas, and depend to a large extent on agriculture. This would seem to be good reason for support of rural poverty reduction strategies, and labor intensive agricultural growth. Yet, since the mid-1980s, aid in support of agriculture has fallen sharply in both absolute as well as relative terms, inducing slower growth in staple food yields and lower elasticity of poverty to overall growth. The recent IFAD Rural Poverty Report 2001 (IFAD 2001) mentions that real net aid disbursements to developing countries have fallen from 2.7 percent of their GDP in 1992 (or 0.33 percent of OECD GDP) to 1.4 percent of their GDP in 1998 (or 0.24 percent of OECD GDP). Over the same period, of this smaller aid disbursements, the proportion of sectorally allocated aid going to agriculture, forestry and fisheries has declined from 20.2 percent to 12.5 percent. It is not clear why there has been such a decline in support for agriculture. Lipton (2000) suggests that this could be justified under the following arguments: * if public action were more cost-effective in reducing urban poverty; * if the role of agriculture and the rural sector in supporting and advancing poor people in low income countries has declined; * if rural people gained more from urban poverty reduction than vice versa; * if rural anti-poverty spending deterred successful urbanization; * if rural anti-poverty spending induced less economic growth than urban poverty reduction; or * if labor-intensive methods for small farmers and orientation of support for staple food production has disadvantages in the context of more globalized markets. Lipton suggests that none of these arguments holds true and some of his and other arguments why this is so will be considered later. Nevertheless, in the context of public resource allocation, the major questions that policy makers may ask concerning support for agriculture are the following. Under what conditions does additional or disproportional support for agriculture will be both overall growth enhancing as well as poverty reducing? Is there a trade-off between faster growth and poverty reduction in the

Does government investment influence private investment?

that government investment influences positively private investment, as one would expect, but the financing of investment makes a difference, as deficit financing via domestic borrowing crowds out private investments.

Why is agriculture important in rural development?

Agriculture also plays an important part in rural development, especially due to land use, in countries where the sector is of less economic significance. 3. The main potential contributions of farming to rural development are in terms of supporting employment, ancillary businesses, and environmental services. …

How can farming contribute to rural development?

3. The main potential contributions of farming to rural development are in terms of supporting employment, ancillary businesses, and environmental services. In peripheral regions, farming may be necessary to support the economic…show more content…

What is the importance of maintaining farm employment?

The maintenance of appropriate levels of farm employment is a key concern in countries where the greater part of employment is currently provided in the farming sector. Political and social stability could be especially threatened by changes in economic activity which produce sudden impacts on farming. Small and isolated economies, particularly those whose trade is dependent on a limited range of agricultural products, may be vulnerable to changes in global trading conditions. Even in those economically developing countries in which one agricultural sector is considered efficient in global terms, rural society, which overall depends on many other sectors of activity may be at risk of serious upheaval from rapid change. In these regions, efforts to strengthen the farm sector could include investment and improvements in productivity, while assuring the management of consequent changes to rural employment

What is the role of peasants in the economy?

For centuries, peasants have constituted the great majority of all agricultural labour. Peasants can be described as groups of people that practice self-sufficient agricultural activities, although peasant farming is not just an enterprise but also a unit of domestic economy (Gałęski, 1972: 41). Industrialisation and the changes it has brought forth in the economy and society have modified the way in which peasants live and are perceived in modern times, especially in Western countries. Throughout industrialisation and the rise of capitalism, peasantry as a social group has been expected to disappear in numerous occasions as a result of these processes. However, it would be incorrect to assume that peasants and their way of living have ceased


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