15 Reason Why Agriculture is Important? Benefits and It's Role in Indian economy

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Importance of Agriculture: Agriculture is the main occupation in India. Two thirds of the population is directly or indirectly dependent on agriculture.

It is not just a means of livelihood but a way of life. It is the main source of food, fodder and fuel. It is the basis of economic development.
The productivity per hectare and per worker was very low during independence.
However, with the introduction of economic planning from 1950-51 and especially after 1962 with special emphasis on agricultural development, the previous trend of stable agriculture was completely changed.

  • The area of ​​agriculture is continuously increasing.
  • Significant increase has been recorded in food crops.
  • There was a steady increase in the yield per hectare during the plan period.

Importance of agriculture 

India is an agricultural country. 71% people live in villages and most of them are dependent on agriculture. Therefore, the development of agriculture gives a boost to the economy. The progress of industry, trade and transport is impossible without the progress of agriculture. The stability of prices also depends on agricultural development.

Agriculture is the backbone of our economy. Agriculture is not only important from an economic point of view, but it has a profound impact on our social, political and cultural life.

Although industries have been playing an important role in the Indian economy, the contribution of agriculture in the development of the Indian economy cannot be denied.

This can be measured and observed by the following facts and figures:

1. Agricultural Impact on National Income:

The contribution of agriculture towards GDP during the first two decades ranged from 48 to 60%. In the year 2001-2002, this contribution came down to only 26%.

2. Contribution to Government Budget:

From the First Five Year Plan, agriculture has been considered as the major revenue collection sector for both the central and state budgets. However, governments earn huge revenue from agriculture and its allied activities like cattle rearing, animal husbandry, poultry, fish farming etc. Indian Railways also earns a handsome revenue in the form of freight charges for agricultural products along with the state transport system, both semi-finished and abolished.

3. Agriculture provides food for the growing population

Due to extreme pressure from population labor surplus economies like India and rapid increase in demand for food, food production grows at a faster rate. The current level of food consumption in these countries is very low and with a small increase in per capita income, there has been a rapid increase in the demand for food (in other words it can be said that the income elasticity of demand for food in developing countries is too much).

Therefore, unless agriculture is able to steadily increase the marketing of the food surplus, a crisis is bound to emerge. Many developing countries are passing through this phase and agriculture has been developed to meet the increasing food requirements for Ma.

4. Contribution to Capital Formation:

There is general agreement on requirement capital formation. Since agriculture is the largest industry in a developing country like India, it can play an important role in increasing the rate of capital formation. If it fails to do so, the whole process will jolt economic growth.

Read also: Importance of Food

The following policies are taken to extract surplus from agriculture:

Transfer of labor and capital from farm to non-farm activities.

The taxation of agriculture should be in such a way that the burden on agriculture exceeds the government services rendered to agriculture. Therefore, the generation of surplus from agriculture will ultimately depend on increasing agricultural productivity.

5. Supply of Raw Materials to Agro-based Industries:

Agriculture supplies raw materials to various agro-based industries such as sugar, jute, cotton textiles and vegetable industries. Food processing industries are likewise dependent on agriculture. Therefore the development of these industries is completely dependent on agriculture.

6. Market for Industrial Products:

Increase in rural purchasing power is essential for industrial development as two-thirds of the Indian population lives in villages. After the Green Revolution, the purchasing power of the big farmers increased due to their increased income and negligible tax burden.

7. Impact on Internal and External Trade and Commerce:

Indian agriculture plays an important role in the internal and external trade of the country. Internal trade in food grains and other agricultural products helps in the expansion of the service sector.

8. Agriculture plays an important role in generating employment

At least two-thirds of the labor population in India earns their living through agricultural activities. Employment opportunities in India have failed to grow in other sectors.

9. Requirement of Manpower:

Construction works and other sectors require a large number of skilled and unskilled workers. This labor is supplied by Indian agriculture.

10. Greater Benefits:

Indian agriculture has a cost advantage in many agricultural commodities in the export sector due to low agricultural cost and self-sufficiency in input supply.

11. Main Source of Food:

Agriculture provides food for the nation. Before 1947 we were short of food, but after 1969 the Green Revolution in agriculture made us self-sufficient in food production. The production of rice in 2003-04 was 870 lakh metric tonnes and that of wheat was 721 lakh metric tonnes.

12. Transportation:

Means of transport are needed to move consumers and agricultural raw materials from farms to markets and factories. Transport is also needed to pick up chemical fertilizers, seeds, diesel and farm equipment to and from the market and factories.

13. Source of Savings:

The Green Revolution has increased production manifold and farmers have become prosperous. The extra income earned by these farmers can be saved and invested in banks.

14. Capital Formation:

Agriculture also helps in capital formation. Surplus income from agricultural production can be invested in other sources like banks, shares etc. The use of tractors and harvesters enhances capital formation.

15. International Importance:

India ranks top in the production of groundnut and sugarcane. It ranks second in the production of rice and staple cotton. It ranks third in the production of tobacco. Our agricultural universities are serving as role models for other developing countries.

Importance of agriculture in Indian economy

Roles of agriculture in the development of the Indian economy

1. Contribution to Gross Domestic Product (National Income):

Agriculture contributed to about 55 per cent of India's national income (GDP) in 1950-51.

However, the percentage gradually declined to 19.4 in 2007-08. In other countries, the percentage contribution of agriculture to the national income is very low.
In most developed countries of the world – such as the UK, and the USA, Canada, Japan and Australia – it is below 5 per cent.

In fact, the regional composition of GDP indicates the level of development of a country. The higher the contribution of agriculture and allied activities to the GDP, the more economically backward a country should be. Thus, the spread of agriculture in India's national production is a symptom of backwardness.

2. Employment Generation:

Most of the people in India get their livelihood from agriculture. Agriculture is still the predominant sector as a high proportion of the population dependent on agriculture is still working. The percentage of the working population in India based on agriculture was 69.7 as per the 1961 and 1971 censuses.

The percentage has remained more or less unchanged since then. In 2001, this dropped to 57 per cent. The percentage varies between 1 and 7 in most industrially advanced countries. 

In contrast, it occurs between 40 and 70 in most developing countries. In China, the percentage is probably the highest (72), followed by India (52.7), Indonesia (52), Myanmar (50) and Egypt (42).

3. Contribution to Industrial Development

Agriculture is important for another reason as well. If it fails to develop at a reasonable pace, it may prove to be a major constraint on the growth of industrial and other sectors. In addition, agriculture may serve the purpose of industrial expansion by becoming a major market for industrial goods.

In India, agriculture has been a major supplier of raw materials for all the jute and cotton textiles, sugar, vanaspati, and basic industries such as plantation. Additionally, some industries indirectly depend on agriculture such as small-scale and cottage industries such as handloom weaving, oil crushing, rice bran, and so on.

Such agro-based industries – which depend on agriculture for their raw materials – account for half of the income generated in India's secondary (manufacturing) sector.

4. Contribution to Foreign Trade:

Agriculture has played a very important role in India's external trade. India's three main items of traditional exports, tea, jute and cotton, are agro-based. Other commodities include sugar, oilseeds, tobacco, and spices.

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