Lecture 4 - Performance of Indian Agriculture | Indian Economy - In Depth Analysis - Economics PDF Download

 Page 1


PERFORMANCE OF INDIAN AGRICULTURE 
 
1 
 
 
 
 
 
 
 
 
Lesson : Performance of Indian Agriculture 
Lesson Developer: Sanjeev Kumar 
College/ Department:  Dyal Singh College 
 
 
 
  
Page 2


PERFORMANCE OF INDIAN AGRICULTURE 
 
1 
 
 
 
 
 
 
 
 
Lesson : Performance of Indian Agriculture 
Lesson Developer: Sanjeev Kumar 
College/ Department:  Dyal Singh College 
 
 
 
  
PERFORMANCE OF INDIAN AGRICULTURE 
 
2 
 
 
Learning Outcomes of the Chapter 
After read this chapter, you should be familiar with the following aspects; 
? Role of agriculture in Indian economy 
? Status of Indian agriculture in advanced economies 
? Silent features of Indian agriculture 
? Trend of production and productivity of Indian agriculture 
? Productivity Levels of Different Commodity at International Level 
? Causes/ problems of low productivity in Indian agriculture 
? Remedial measures of low productivity/ factors determining productivity of 
Indian agriculture 
 
 
  
Page 3


PERFORMANCE OF INDIAN AGRICULTURE 
 
1 
 
 
 
 
 
 
 
 
Lesson : Performance of Indian Agriculture 
Lesson Developer: Sanjeev Kumar 
College/ Department:  Dyal Singh College 
 
 
 
  
PERFORMANCE OF INDIAN AGRICULTURE 
 
2 
 
 
Learning Outcomes of the Chapter 
After read this chapter, you should be familiar with the following aspects; 
? Role of agriculture in Indian economy 
? Status of Indian agriculture in advanced economies 
? Silent features of Indian agriculture 
? Trend of production and productivity of Indian agriculture 
? Productivity Levels of Different Commodity at International Level 
? Causes/ problems of low productivity in Indian agriculture 
? Remedial measures of low productivity/ factors determining productivity of 
Indian agriculture 
 
 
  
PERFORMANCE OF INDIAN AGRICULTURE 
 
3 
 
1.1 INTRODUCTION 
The role of agriculture in the context of development theory and practice has long been 
an issue of intense academic debate. Many early development economist such as Rosenstein-
Rodan , Lewis, Scitovsky, Hirschman,  Jorgenson, Fei and Ranis, highlighted agriculture because 
of abundance of resources in agriculture sector and its ability to transfer surpluses to more 
important industrial sector. They considered agriculture only as a reservoir and source of 
abundant labour and transferable product and financial surplus. Thus the primary role of 
agriculture in the process of transformation of developing economies was conceived as 
subordinate to the main strategy aimed at achieving a high rate of industrial growth. They viewed 
the role of agriculture as ancillary to the main strategy of growth, which was accelerating 
industrialization. Thus, 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. 
 The agriculture sector of India is the very important sector, not only that it contributes 
around one-fifth to national domestic product, but this sector also provides employment to about 
sixty per cent of our population. It also accounts for a significant contributors of total exports and 
also supplies raw material to a large number of industries. Rural areas are goodmarkets for 
industrial goods and contribute a sizeable portion in household savings that are very important 
source of resource mobilization. According to Prof. Gunnar Myrdal, ‘It is in the agriculture 
sector that he battle for long-term economic development of India will be won or lost.’ 
1.2 WORLD SCENARIO OF AGRICULTURE SECTOR 
The contribution of agriculture to the Indian economy is much greater as compared to 
other developed countries. As shown in Table 1, in US only 2 per cent of population is 
dependent on agriculture and for EU-15 this ratio is 2.8 per cent. On the other hand, share of 
agricultural GDP is 1.5 per cent and 2.0 percent respectively for US and EU-15. But for India, 
China and other developing countries the picture is absolutely different. In India, while 
agriculturecontributes to 21 per cent of GDP and but about 70 per cent population is engaged in 
this sector. This situation clearly reveals the fact that agricultural sector has a dominant role in 
Indian economy as it provides livelihood support to around two-third of the rural population. 
Page 4


PERFORMANCE OF INDIAN AGRICULTURE 
 
1 
 
 
 
 
 
 
 
 
Lesson : Performance of Indian Agriculture 
Lesson Developer: Sanjeev Kumar 
College/ Department:  Dyal Singh College 
 
 
 
  
PERFORMANCE OF INDIAN AGRICULTURE 
 
2 
 
 
Learning Outcomes of the Chapter 
After read this chapter, you should be familiar with the following aspects; 
? Role of agriculture in Indian economy 
? Status of Indian agriculture in advanced economies 
? Silent features of Indian agriculture 
? Trend of production and productivity of Indian agriculture 
? Productivity Levels of Different Commodity at International Level 
? Causes/ problems of low productivity in Indian agriculture 
? Remedial measures of low productivity/ factors determining productivity of 
Indian agriculture 
 
 
  
PERFORMANCE OF INDIAN AGRICULTURE 
 
3 
 
1.1 INTRODUCTION 
The role of agriculture in the context of development theory and practice has long been 
an issue of intense academic debate. Many early development economist such as Rosenstein-
Rodan , Lewis, Scitovsky, Hirschman,  Jorgenson, Fei and Ranis, highlighted agriculture because 
of abundance of resources in agriculture sector and its ability to transfer surpluses to more 
important industrial sector. They considered agriculture only as a reservoir and source of 
abundant labour and transferable product and financial surplus. Thus the primary role of 
agriculture in the process of transformation of developing economies was conceived as 
subordinate to the main strategy aimed at achieving a high rate of industrial growth. They viewed 
the role of agriculture as ancillary to the main strategy of growth, which was accelerating 
industrialization. Thus, 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. 
 The agriculture sector of India is the very important sector, not only that it contributes 
around one-fifth to national domestic product, but this sector also provides employment to about 
sixty per cent of our population. It also accounts for a significant contributors of total exports and 
also supplies raw material to a large number of industries. Rural areas are goodmarkets for 
industrial goods and contribute a sizeable portion in household savings that are very important 
source of resource mobilization. According to Prof. Gunnar Myrdal, ‘It is in the agriculture 
sector that he battle for long-term economic development of India will be won or lost.’ 
1.2 WORLD SCENARIO OF AGRICULTURE SECTOR 
The contribution of agriculture to the Indian economy is much greater as compared to 
other developed countries. As shown in Table 1, in US only 2 per cent of population is 
dependent on agriculture and for EU-15 this ratio is 2.8 per cent. On the other hand, share of 
agricultural GDP is 1.5 per cent and 2.0 percent respectively for US and EU-15. But for India, 
China and other developing countries the picture is absolutely different. In India, while 
agriculturecontributes to 21 per cent of GDP and but about 70 per cent population is engaged in 
this sector. This situation clearly reveals the fact that agricultural sector has a dominant role in 
Indian economy as it provides livelihood support to around two-third of the rural population. 
PERFORMANCE OF INDIAN AGRICULTURE 
 
4 
 
Table 1: -Status of Agriculture of Different Economies 
 US EU-15 China India 
Agricultural GDP (Percent) 1.5 2.0 15.0 20.5 
Population (Percent) 2.0 3.8 66.0 70.0 
Average Farm Size (Hectare) 197.2 20.0 - 1.41 
Source: FAO (2006) 
1.3 IMPORTANCE OF INDIAN AGRICULTURE 
 Indian economy is the one of the world’s oldest agrarian economies. The importance of 
agriculture in the Indian economy will be clear from the following aspects; 
? Contribution to Gross Domestic Product 
Agriculture used to contribute two-third of the Gross Domestic Product (GDP) at the 
time of the First World War. Its share declined from 58.2 per cent in 1950-51 to 14.0 per 
cent in 2013-14 [Table 2]. In last few years the contribution of agriculture in the GDP 
has been declined rapidly with the development of the economy which is also in tune 
with development process in the world. After deceleration of agricultural share in GDP, 
it continues to hold the dominant place because the growth of secondary and tertiary 
sector depends on agricultural sector. 
? Contribution to Employment 
Agricultural sector has been and is a major source of livelihood in India. During the 
nineteenth century, the size of labour force depends on agriculture had more than sixty 
per cent.The contribution of this sector in employment has not been changed 
significantly since last five decades. Now, around 58 per cent population is engaged with 
sector [Table 2]. 
? Contribution to Foreign Trade 
The agricultural sector is a net earner of foreign exchange which is needed for capital 
and maintenance imports required in the non-agricultural sector. The share of 
agricultural export in total export of the country has declined from 44.3 percent in 1960-
61 to 11.9 per cent in 2013-14 [Table 2].It has a quite significant role in foreign trade. 
 
Page 5


PERFORMANCE OF INDIAN AGRICULTURE 
 
1 
 
 
 
 
 
 
 
 
Lesson : Performance of Indian Agriculture 
Lesson Developer: Sanjeev Kumar 
College/ Department:  Dyal Singh College 
 
 
 
  
PERFORMANCE OF INDIAN AGRICULTURE 
 
2 
 
 
Learning Outcomes of the Chapter 
After read this chapter, you should be familiar with the following aspects; 
? Role of agriculture in Indian economy 
? Status of Indian agriculture in advanced economies 
? Silent features of Indian agriculture 
? Trend of production and productivity of Indian agriculture 
? Productivity Levels of Different Commodity at International Level 
? Causes/ problems of low productivity in Indian agriculture 
? Remedial measures of low productivity/ factors determining productivity of 
Indian agriculture 
 
 
  
PERFORMANCE OF INDIAN AGRICULTURE 
 
3 
 
1.1 INTRODUCTION 
The role of agriculture in the context of development theory and practice has long been 
an issue of intense academic debate. Many early development economist such as Rosenstein-
Rodan , Lewis, Scitovsky, Hirschman,  Jorgenson, Fei and Ranis, highlighted agriculture because 
of abundance of resources in agriculture sector and its ability to transfer surpluses to more 
important industrial sector. They considered agriculture only as a reservoir and source of 
abundant labour and transferable product and financial surplus. Thus the primary role of 
agriculture in the process of transformation of developing economies was conceived as 
subordinate to the main strategy aimed at achieving a high rate of industrial growth. They viewed 
the role of agriculture as ancillary to the main strategy of growth, which was accelerating 
industrialization. Thus, 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. 
 The agriculture sector of India is the very important sector, not only that it contributes 
around one-fifth to national domestic product, but this sector also provides employment to about 
sixty per cent of our population. It also accounts for a significant contributors of total exports and 
also supplies raw material to a large number of industries. Rural areas are goodmarkets for 
industrial goods and contribute a sizeable portion in household savings that are very important 
source of resource mobilization. According to Prof. Gunnar Myrdal, ‘It is in the agriculture 
sector that he battle for long-term economic development of India will be won or lost.’ 
1.2 WORLD SCENARIO OF AGRICULTURE SECTOR 
The contribution of agriculture to the Indian economy is much greater as compared to 
other developed countries. As shown in Table 1, in US only 2 per cent of population is 
dependent on agriculture and for EU-15 this ratio is 2.8 per cent. On the other hand, share of 
agricultural GDP is 1.5 per cent and 2.0 percent respectively for US and EU-15. But for India, 
China and other developing countries the picture is absolutely different. In India, while 
agriculturecontributes to 21 per cent of GDP and but about 70 per cent population is engaged in 
this sector. This situation clearly reveals the fact that agricultural sector has a dominant role in 
Indian economy as it provides livelihood support to around two-third of the rural population. 
PERFORMANCE OF INDIAN AGRICULTURE 
 
4 
 
Table 1: -Status of Agriculture of Different Economies 
 US EU-15 China India 
Agricultural GDP (Percent) 1.5 2.0 15.0 20.5 
Population (Percent) 2.0 3.8 66.0 70.0 
Average Farm Size (Hectare) 197.2 20.0 - 1.41 
Source: FAO (2006) 
1.3 IMPORTANCE OF INDIAN AGRICULTURE 
 Indian economy is the one of the world’s oldest agrarian economies. The importance of 
agriculture in the Indian economy will be clear from the following aspects; 
? Contribution to Gross Domestic Product 
Agriculture used to contribute two-third of the Gross Domestic Product (GDP) at the 
time of the First World War. Its share declined from 58.2 per cent in 1950-51 to 14.0 per 
cent in 2013-14 [Table 2]. In last few years the contribution of agriculture in the GDP 
has been declined rapidly with the development of the economy which is also in tune 
with development process in the world. After deceleration of agricultural share in GDP, 
it continues to hold the dominant place because the growth of secondary and tertiary 
sector depends on agricultural sector. 
? Contribution to Employment 
Agricultural sector has been and is a major source of livelihood in India. During the 
nineteenth century, the size of labour force depends on agriculture had more than sixty 
per cent.The contribution of this sector in employment has not been changed 
significantly since last five decades. Now, around 58 per cent population is engaged with 
sector [Table 2]. 
? Contribution to Foreign Trade 
The agricultural sector is a net earner of foreign exchange which is needed for capital 
and maintenance imports required in the non-agricultural sector. The share of 
agricultural export in total export of the country has declined from 44.3 percent in 1960-
61 to 11.9 per cent in 2013-14 [Table 2].It has a quite significant role in foreign trade. 
 
PERFORMANCE OF INDIAN AGRICULTURE 
 
5 
 
Table: - 2 
IMPORTANCE OF AGRICULTURE IN INDIAN E CONOMY
Year
GDP at 
current price
E xport E mployment
1950-51 58.2 69.4
1960-61 48.0 44.3 69.5
1970-71 47.9 31.7 67.8
1980-81 38.8 27.8 60.5
1990-91 33.2 18.5 59.0
2000-01 25.5 17.6 58.4
2010-11 14.6 13.5 58.0
20013-14 13.9 11.9 58.0
     Role in national income, employment and trade
Percent share in economy
 
Source: Author’s calculations based on National Accounts Statistics. 
 
? Contribution to Industrialization 
The agricultural sector is the main sources of raw material of industrial sector. Textiles, 
sugar and oil processing industries etc.depends on raw material of agricultural sector. 
Constraint-free growth of industrial sector requires that growth of agricultural sector and 
is reflected in high incomes of the rural masses.  
? Primary Source of Saving 
Agricultural sector has emerged as a significant source of small saving after Green 
Revolution. Some farmers have started generating surplus for investment. Saving 
potential has been quite significant in agricultural sector and can be contribute to growth 
process of the nation both within and outside agriculture. 
? Social and Political Significance