The
agriculture sector is the backbone of an economy which provides the basic
ingredients to mankind and now raw material for industrialization.
Therefore, the role of agriculture for the development of an
economy may be stated as below:
1. Contribution to National Income:
The lessons
drawn from the economic history of many advanced countries tell us that
agricultural prosperity contributed considerably in fostering economic
advancement. It is correctly observed that, “The leading industrialized
countries of today were once predominantly agricultural while the developing
economies still have the dominance of agriculture and it largely contributes to
the national income. In India, still 28% of national income comes from this
sector.
2. Source of Food Supply:
Agriculture
is the basic source of food supply of all the countries of the world—whether
underdeveloped, developing or even developed. Due to heavy pressure of
population in underdeveloped and developing countries and its rapid increase,
the demand for food is increasing at a fast rate. 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 agricultural sector has,
therefore, great importance for economic growth of a country.
Increase in demand for food in an economy is determined by the
following equation:
D = P + 2g
Here,
D stands for
Annual Rate of Growth in demand for food.
P stands for
Population Growth Rate.
g stands for
Rate of Increase in per Capital Income.
2 stand for
Income Elasticity of Demand for Agricultural Products.
3. Pre-Requisite for Raw Material:
Agricultural
advancement is necessary for improving the supply of raw materials for the
agro-based industries especially in developing countries. The shortage of
agricultural goods has its impact upon on industrial production and a
consequent increase in the general price level. It will impede the growth of
the country’s economy. The flour mills, rice shellers, oil & dal mills,
bread, meat, milk products sugar factories, wineries, jute mills, textile mills
and numerous other industries are based on agricultural products.
4. Provision of Surplus:
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.
Johnson and
Mellor are of the opinion, “In view of the urgent need for enlarged foreign
exchange earnings and the lack of alternative opportunities, substantial
expansion of agricultural export production is frequently a rational policy
even though the world supply—demand situation for a commodity is unfavorable.”
5. Shift of Manpower:
Initially,
agriculture absorbs a large quantity of labour force. In India still about 62%
labour is absorbed in this sector. Agricultural progress permits the shift of
manpower from agricultural to non-agricultural sector. In the initial stages,
the diversion of labour from agricultural to non-agricultural sector is more
important from the point of view of economic development as it eases the burden
of surplus labour force over the limited land. Thus, the release of surplus
manpower from the agricultural sector is necessary for the progress of
agricultural sector and for expanding the non-agricultural sector.
6. Creation of Infrastructure:
The
development of agriculture requires roads, market yards, storage,
transportation railways, postal services and many others for an infrastructure
creating demand for industrial products and the development of commercial
sector.
7. Relief from Shortage of Capital:
The
development of agricultural sector has minimized the burden of several
developed countries who were facing the shortage of foreign capital. If foreign
capital is available with the ‘strings’ attached to it, it will create another
significant problem. Agriculture sector requires less capital for its
development thus it minimizes growth problem of foreign capital.
8. Helpful to 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.
9. Based on Democratic Notions:
If the
agricultural sector does not grow at a faster rate, it may result in the
growing discontentment amongst the masses which is never healthy for the smooth
running of democratic governments. For economic development, it is necessary to
minimize political as well as social tensions. In case the majority of the
people have to be kindled with the hopes of prosperity, this can be attained
with the help of agricultural progress. Thus development of agriculture sector
is also relevant on political and social grounds.
10. Create Effective Demand:
The
development of agricultural sector would tend to increase the purchasing power
of agriculturists which will help the growth of the non-agricultural sector of
the country. It will provide a market for increased production. In
underdeveloped countries, it is well known that the majority of people depend
upon agriculture and it is they who must be able to afford to consume the goods
produced.
Therefore,
it will be helpful in stimulating the growth of the non- agricultural sector.
Similarly improvement in the productivity of cash crops may pave the way for
the promotion of exchange economy which may help the growth of non-agricultural
sector. Purchase of industrial products such as pesticides, farm machinery etc.
also provide boost to industrial dead out.
11. Helpful in Phasing out Economic Depression:
During
depression, industrial production can be stopped or reduced but agricultural
production continues as it produces basic necessities of life. Thus it
continues to create effective demand even during adverse conditions of the
economy.
12. Source of Foreign Exchange for the Country:
Most of the
developing countries of the world are exporters of primary products. These
products contribute 60 to 70 per cent of their total export earning. Thus, the
capacity to import capital goods and machinery for industrial development
depends crucially on the export earning of the agriculture sector. If exports
of agricultural goods fail to increase at a sufficiently high rate, these
countries are forced to incur heavy deficit in the balance of payments
resulting in a serious foreign exchange problem.
However, primary
goods face declining prices in international market and the prospects of
increasing export earnings through them are limited. Due to this, large
developing countries like India (having potentialities of industrial
development) are trying to diversify their production structure and promote the
exports of manufactured goods even though this requires the adoption of
protective measures in the initial period of planning.
13. Contribution to Capital Formation:
Underdeveloped
and developing countries need huge amount of capital for its economic
development. In the initial stages of economic development, it is agriculture
that constitutes a significant source of capital formation.
Agriculture sector provides funds for capital formation in many
ways as:
(i) agricultural
taxation,
(ii) export
of agricultural products,
(iii)
collection of agricultural products at low prices by the government and selling
it at higher prices. This method is adopted by Russia and China,
(iv) labour
in disguised unemployment, largely confined to agriculture, is viewed as a
source of investible surplus,
(v) transfer
of labour and capital from farm to non-farm activities etc.
14. Employment Opportunities for Rural People:
Agriculture
provides employment opportunities for rural people on a large scale in
underdeveloped and developing countries. It is an important source of
livelihood. Generally, landless workers and marginal farmers are engaged in
non-agricultural jobs like handicrafts, furniture, textiles, leather, metal
work, processing industries, and in other service sectors. These rural units
fulfill merely local demands. In India about 70.6% of total labour force
depends upon agriculture.
15. Improving Rural Welfare:
It is time
that rural economy depends on agriculture and allied occupations in an
underdeveloped country. 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.
16. Extension of Market for Industrial Output:
As a result
of agricultural progress, there will be extension of market for industrial
products. Increase in agricultural productivity leads to increase in the income
of rural population which is turn leads to more demand for industrial products,
thus development of industrial sector.
According to
Dr. Bright Singh, “Increase in agricultural production and the rise in the
per-capita income of the rural community, together with the industrialisation
and urbanisation, lead to an increased demand in industrial production.” In
this way, agricultural sector helps promote economic growth by securing as a
supplement to industrial sector.
Conclusion:
From the
above cited explanation we conclude that agricultural development is a must for
the economic development of a country. Even developed countries lay emphasis on
agricultural development. 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.”
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