Importance of Agriculture in Indian Economy

18 Sep

Importance of Agriculture in Indian Economy

The following points emphasize the importance of agriculture in Indian Economy.

(i) Share of Agriculture in National Income

Agriculture has got a prime role in Indian economy. Though the share of agriculture in national income has come down, still it has a substantial share in GDP The contributory share of agriculture in Gross Domestic Product was 55.4% in 1950-51, 52% in 1960-61 and is reduced to 18.5% only at present. The share of the agricultural sector’s capital formation in GDP declined from 2.2% in the late 1999s to 1.9% at present.

(ii) Important Contribution to Employment

Agriculture sector, at present, provides livelihood to 65 to 70% of the total population. The sector provides employment to 58.4% of country’s work force and is the single largest private sector occupation.

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(iii) Important Source of Industrial Development

Various important industries in India find their raw material from agriculture sector -cotton and jute textile industries, sugar, vanaspati etc are directly dependent on agriculture. Handloom, spinning oil milling, rice thrashing etc are various small scale and cottage industries which are dependent on agriculture sector for their raw material. This highlights the importance of agriculture in industrial development of the nation.

(iv) Importance in International Trade

India’s foreign trade is deeply associated with agriculture sector. Agriculture accounts for about 14.7% of the total export earnings. Besides, goods made with the raw material of agriculture sector also contribute about 20% in Indian exports. In other words, agriculture and its related goods contribute about 38% in total exports of die country.

Minimum Support Price of Agriculture Products

Keeping in view the interests of the farmers as also the need of self reliance, Government has been announcing Minimum Support Price (MSP) for 24 major crops. The main objectives of announcing MSP are :

  1. To prevent fall in prices in the situation of over production.
  2. To protect the interest of farmers by ensuring them a minimum price for their crops in Minimum support price announced by the government is that price at which government is ready to purchase the crop from the farmers directly if crop price becomes lower to MSP.

    As a result, market price of the crop never comes down from the level of MSP This minimum price security gives incentives to farmers to increase their production.

    These minimum support prices of various crops are announced on the basis of recommendations made by Agriculture Cost and Price Commission (ACPC) which takes into consideration the inputs costs and favourable returns to the farmers while recommending MSP.

Foodgrains Procurement and Stocks in India

  • Food grains procurement by the Government serves the dual purpose of providing support prices to the farmers and of building up public stocks of food grains. Procurement operations are carried out by the Food Corporation of India (FCI) and the state agencies designated by State Government Procurement prices are based on support prices recommended by CACP (Commission for Agricultural Costs and Prices).
  • Food stocks are maintained by the Central Government for 3 purposes:
    1. Meeting the prescribed minimum buffer stock norms for food security.
    2. For monthly release of food grains for supply through PDS (Public Distribution System).
    3. For market intervention to augment supply so as to help moderate the open market prices.

Buffer Stock in India

  • The years 2001-02 and 2002-03 witnessed high levels of stock buildup in the central pool. Food grains stocks reached a peak of 64.7 million tonnes, an all time record in June 2002.

    The year 2003-04 witnessed a general easing in the food grains stocks with relatively lower procurement of rice and wheat following a bad agricultural year in 2002-03 and relatively high off-take of food grains especially for drought-related relief operations and under the welfare schemes.

  • The steady reduction, in stocks prompted the Government to stop fresh allocation of rice and wheat for export with effect from August 2003, which has continued till date.

    The year 2004-05 started with a much lower stock of 20 million tonnes on April 1, 2004, down from 32.8 million tonnes on April 1, 2003. Stocks however, remained consistently higher than the buffer requirement during 2004-05 with sufficient procurement of rice and wheat and relatively lower off-take than in the previous year. On April 1, 2005, the stock at 17.40 million tonnes was above the buffer norm of 16.2 million tonnes.

Green Revolution in India

  • Indian Green Revolution is associated with the use of HYVS (High Yielding Variety Seeds), chemical fertilizers and new technology which led to a sharp rise in agricultural production during the middle of 1960.
  • The term Green Revolution was given by American scientist, Dr. William Gande.
  • During the middle of sixties, Indian agriculture scientists developed a number of new high yielding varieties of wheat by processing wheat seeds imported from Mexico. A similar improvement in variety of rice was also observed.
  • The credit of this goes not only to Nobel Laureate Dr. Norman Borlaug, but also to India’s Dr. MS Swaminathan.

Second Green Revolution in India

(Strategy Adopted In 11th Plan)

  • The urgent need for taking agriculture to a higher trajectory of 4 per cent annual growth can be met only with improvement in the scale as well as quality of agricultural reforms undertaken by the various states and agencies at the various levels.

    These reforms must aim at efficient use of resources and conservation of soil, water and ecology on a sustainable basis, and in a holistic framework. Such a holistic framework must incorporate financing of rural infrastructure such as water, roads and power.

  • The Approach Paper to the Eleventh Five Year Plan has aptly highlighted such a holistic framework and suggested the following strategy to raise agricultural output.
    1. Doubling the rate of growth of irrigated area
    2. Improving water management, rain water harvesting and watershed development
    3. Reclaiming degraded land and focusing on soil quality
    4. Bridging the knowledge gap through effective extension
    5. Diversifying into high value outputs, fruits, vegetables, flowers, herbs and spices, medicinal plants, bamboo, bio-diesel, but with adequate measures to ensure food security
    6. Promoting animal husbandry and fishery
    7. Providing easy access to credit at affordable rates
    8. Improving the incentive structure and functioning of markets; and
    9. Refocusing on land reforms issues.
  • National Commission on Farmers has already laid the foundation for such a framework.
  • Program formulation as well as their implementation in the States must be based on unique regional contexts incorporating agro-climatic conditions; and availability of appropriate research and development (R and D) backed by timely and adequate extension of finance.
Agriculture Holdings in India
Type Holding (in hect.) (% of Total)
Marginal Holding Less than one 59%
Small Holding 1 – 4 32.2%
Medium Holding 4 – 10 7.2%
Large Holding More than 10 1.6%
Other Revolutions
Revolution Area
Yellow Revolution Oil seeds
White Revolution Milk
Blue Revolution Fish
Pink Revolution Shrimp
Gray Revolution Wool
Golden Revolution Horticulture

White Revolution and Operation Flood in India

White revolution is associated with a sharp increase in milk production. During 1964-65, Intensive Cattle Development Program (ICDP) was introduced in the country in which a package of improved animal husbandry was given to cattle owners for promoting white revolution in the country.

Later on, to accelerate the pace of white revolution, a new program named ‘Operation Flood’ was introduced in the country.

The Operation Flood Program, which is the world’s largest integrated dairy development program, has made considerable progress in achieving its outlined objectives.

Buffaloes, Cows and Goats contribute 50%, 46% and 4% respectively in total milk production of the country. India stands first in the world in milk production.

USA stands second in the world. Dr. Varghese Kurien is the pioneer of operation flood in India

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