IMPORTANCE OF AGRICULTURE FOR GROWTH OF INDIAN ECONOMY

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1 IMPORTANCE OF AGRICULTURE FOR GROWTH OF INDIAN ECONOMY Dr. Fulwinder Pal Singh Associate Professor of Economics, Cum Principal SBJS Khalsa College,Satlani Sahib,Amritsar ABSTRACT Agriculture is the backbone of India s economy; it provides direct employment to about two-thirds of working people in the country, produces about a third of GDP and contributes about one fifth share in India s exports. It forms the basis for many premier industries of India, including the cotton textile, jute and sugar industries. Being the largest source of employment and income to the millions of people, it provides a vast market for our industrial products. It is because of this paramount significance of agriculture in India s economy that this sector has been, and continues to be, accorded a pride of place in India s plans for economic development. The rate of growth of an economy depends upon the growth rate of its slowest moving sectors, and agriculture with its being subject to diminishing returns, clearly qualifies for the position. Myint I. PLACE OF AGRICULTURE IN INDIAN ECONOMY Agriculture occupies a very important place in the life and economy of India. It is the backbone of our economic system and our premier economic activity. The following facts clearly bring out the importance of agriculture in the economic life of the country. 1. Agriculture is the main occupation of the people of India. Over 50 percent of our working force was engaged in agriculture in the year of Agriculture thus provides means of livelihood to a vast majority of people. We find a sharp contrast when we see that only 1.2 percent of the working force in Great Britain and the U.S.A. and around 3 to 4 percent in France, Germany and 1.6 percent in Canada are engaged in agriculture. Further, this percentage of people deriving their livelihood directly from the agriculture pursuits has remained almost steady in this country. This is again something peculiar with India because in all other important countries the relative importance of agriculture has been on the decline with development of their economies. 2. Agriculture is also the premier source of our national income. In , it contributed around 55 percent of our national income. Though percentage-wise this figure has declined since then to around 17 percent in , still in absolute terms( as also in relative importance) agriculture is the predominant sector of our economy. 3. Agriculture also forms the basis of our industries. Raw materials like cotton, jute, oilseeds, etc. are supplied by agriculture to manufacturing industries. If agriculture is undeveloped, industry cannot expand because of inadequate supply of raw materials unless such materials are imported from other countries. 4. Again, food surplus in the rural economy, technically called marketed surplus, is of utmost importance for the maintenance of population engaged in non-agriculture vocations. Industry and trade can grow only when agriculture can afford to provide sufficient supplies of food grains to people working in industrial and commercial activities. 475 P a g e

2 5. Agriculture and allied products from the bulk of our exports. As an example, one may mention tea, coffee, raw cotton, fruits, vegetables, fish and marine products, animal products and so on. In , exports of agriculture and allied goods accounted for about 12 percent of our total exports. The exports of these products enable us to cut our import bill which is rising due to increasing world prices and increasing import requirements of our own economy. The performance of agricultural sector influences the growth of the Indian economy. The prosperity of the rural economy is also closely linked to agriculture and allied activities. The rural sector( including agriculture) is being increasingly seen as a potential source of domestic demand, a recognition that is shaping the marketing strategies of entrepreneurs Economic Survey This preponderating importance of agriculture is, however, a serious drawback. It has led to an imbalance in the occupational distribution of our population and has made our economy lopsided. And, what is more unfortunate is that our agriculture is in a state of absolute underdevelopment. Yield per acre is deplorably low and agricultural incomes stand no comparison with agricultural incomes in other countries of the world. The plans have correctly placed a great emphasis on agricultural development. II. CROPPING PATTERN IN INDIA Cropping pattern refers to the proportion of sown area under different crops, say between food crops and nonfood crops. It is determine by a number of factors such as physical characteristics of the soil, rainfall and weather conditions, relative prices of different crops in the market, availability of inputs, etc. A change in some of these factors, such as relative change in market prices of different crops, easy availability of certain inputs, may cause a change in the cropping pattern. For example, if non-food crops such as cotton, sugarcane, etc. fetch more price in the market, there may be a shift in area from food to non-food crops. It may be a shift in area from non-food to food crops if either the price of food grain rises, or there are technological changes which increase food crops productivity more than the non-food crops. This is because producing food grains would ensure a higher income to the farmers, if the relative inputs that goes into producing food such as high-yielding varieties of seeds, fertilizers, pesticides, credit facilities, etc., are easily available. The following Table1.1 shows the distribution of sown area under food and non-food crops. Table 1.1 Area under Food and Non-Food Crops Crop Food grain crops Non-food crops All crops Source : Agriculture statistics At a Glance The main features of cropping pattern in India are: 1. Food crops, viz., cereals and pulses account for 66 percent of the gross cropped area. 2. Within the group of food grains, cereals occupy over 79 percent of the cropped area while pulses account for less than 21 percent. 476 P a g e

3 Rice is the largest food crop in India while wheat is the second largest. Of the total area under food grains, rice accounts for about 34 percent. Wheat is grown over 23 percent of the area under food crops. 4. The coarse cereals, viz., jowar, maize, bajra, ragi, etc., account for about 20 percent of the gross area under food grains. 5. Non-food grains or cash crops compromising oilseeds, cotton, jute, sugarcane, etc., are grown over 34 percent of the total gross cropped area. We process only 2 percent of our fruit and vegetables, while Brazil, Malaysia and Philippines process 70 to 80 percent. A focus on packaging, processing and distribution can generate millions of jobs in villages and check migration to urban areas. -Amit Mitra III. MAJOR CROP-PRODUCING STATES There are vast interregional imbalances in the production of various agricultural crops. For example, Punjab, Uttar Pradesh and Haryana together produce almost three-fourths of the total wheat output in India, while nearly half of total rice production comes from West Bengal, Punjab and Uttar Pradesh. Maharashtra, Karnataka and Uttar Pradesh supply about half of the total coarse cereal ( Jowar, Bajra, Maize, etc.) with Maharashtra alone contributing about a quarter of output. Nearly sixty percent of output of pulses are produced in Madhya Pradesh, Uttar Pradesh and Maharashtra, each contributing nearly twenty percent share. Oil seeds are largely produced in Gujarat, Tamil Nadu, and Andhra Pradesh which together provide nearly half of country s total production. Table 1.2 : Production of Some selected agriculture commodities Crops Rice Wheat Pulses Total Foodgrains Oilseeds Sugarcane Cotton * Jute and Mesta ** *In million bales of 170 kg each. ** In million bales of 180 kg each. Source : Economic survey and earlier surveys Over two-thirds of India s sugarcane production comes from Uttar Pradesh Maharashtra and Andhra Pradesh, where UP alone counts for over forty percent of output. Eighty percent of total potato production comes from UP, West Bengal and Bihar where UP and Bihar each account for about thirty percent of total output. Maharashtra produces nearly one third of total onion production and together with Gujarat and Karnataka, these three states account for nearly sixty percent of total onion output. 477 P a g e

4 IV. AGRICULTURAL DEVELOPMENT SINCE INDEPENDENCE The principal programmes of agricultural development taken up during the Plans related the increase in agricultural production by bringing about land reforms thereby changing the social and economic structure of the rural society. Education was imparted to the rural folk in the new methods and techniques of better farming, horticulture, etc. through a comprehensive programme of community development and national extension. Basic facilities like irrigation, transport and electricity were extended to the remotest parts of the countrysides. Facilities for credit and marketing, provision of price incentives and spread of literacy through adult education programmes were taken up to bring about a substantial rise in agricultural productivity. 1. Growth performance : Growth performance of agriculture has been slow and erratic. In three decades between 1951 and 1980, the growth rate of agriculture averaged around 2.4 percent. It performed well during the Sixth Plan ( ) and eighth Plan ( ) where the growth rate was 4.3 percent and 4.7 percent respectively. In all the others Plans, the growth rate was painfully slow and ranged between 2 and 3 percent. The Eleventh Plan ended with an annual average growth rate of 3.6 percent. The Twelfths Plan ( ) projects a 4 percent average growth rate for the agricultural sector. The actual growth rate during was 1.5 percent that improved to 4.2 percent in but then declined to -0.2 percent in Agriculture Production: Production of agricultural goods such as wheat, rice, sugarcane, cotton, etc., has shown substantial improvement, while output of pulses has not performed well. The following Table 1.2 shows the output trends in some major agriculture commodities. Consequent to the heavy investment in the development of agriculture during the plans, output of both food and non-food crops has considerably increased, through much of the gain has accrued in the case of foodgrains production. From an extremely low output of 52 million tones in , foodgrains production increased to about 265 million tones in though it marginally declined to about 253 million tones in The productivity of food crops, particularly wheat, increased substantially after with the onset of Green Revolution. Coarse grains too showed some good trends, but growth in output of pulses has been extremely trady, increasing from around 8 million tones in to 17 million tones in Among the non-food crops, sugarcane output increased sharply from 57 million tones in to around 359 million tones in Cotton production showed a nearly twelve fold and jute and mesta recorded near four fold increase respectively. Oilseeds too recorded a six fold increase in output. Thus, there has been a significant progress in agriculture, though the growth rate has not been very promising. 3. Index of Agricultural Production: A better idea of growth in agriculture can be made from the index number of agriculture production. Between and , the agriculture production increased substantially. However, in and , because of severe crop failure the agriculture production substantially declined. But, since then, there has been a marked increase in the agriculture production. The index of agricultural production for all commodities ( with triennium ending = 100 ), which stood at 85.9 in went up to in indicating moderate growth of agriculture in these three decades. In , the index number of agricultural production stood at The base year for index of agricultural production has now been changed to triennium ending = 100. With this new base, the index rose from in to in but declined to in due to adverse climate conditions. 478 P a g e

5 Table 1.3 : Index Numbers of Agriculture Production (Base : Triennium ending = 100) Foodgrains Rice Wheat Coarse Cereals Pulses Non Foodgrains Oilseeds Cotton Jute Sugarcane All Commodities Source : Compiled from Economic Survey The Major outcome of agricultural development during the Five-Year Plans has been that India, which frequently had to resort to heavy imports of foodgrains, has now become self-sufficient in this field. However, this self-sufficiency is at rather a low level of per capita consumption. The per-capita availability of food grains has not increased. In fact, it has fallen marginally from about 468 grams per day in 1951 to 450 grams per day in But it rose sharply to 511 grams per day in Within foodgrains, the per capita availability of pulses has declined from 69 grams per day in 1951 to about 42 grams in Much of the agriculture development has, however, been concentrated in only some regions like Punjab, Haryana, Western Uttar Pradesh, parts of Rajasthan and Tamil Nadu. The crops that have gained most from the planned development process is largely the food-grains crops, mainly wheat and rice and sugarcane among the cash crops. In the process the regional imbalance in agriculture growth rates has further widened and also the rich farmers in the well-to-do agricultural regions have cornered most of the gains of development. The rainfied ( non irrigated) areas have not shown very satisfactory progress during the Plans as is clear from the fact that pulses, which are essentially low rate of growth. It seems that most of the development efforts during the Plans have been concentrated on expansions of food grains so as to achieve self-sufficiency in food or to build up food security with much less concern for other crops. 479 P a g e

6 V. CAUSE OF SLOW GROWTH IN AGRICULTURE It may, however, be pointed out that in spite of such a heavy investment in agriculture during our Five-Year Plans, the results in terms of output have not been highly satisfactory. There is scarcity of raw materials originating from agriculture. We are still dependent upon rainfall for irrigation of almost 70 percent of our land. In brief we have not made much of progress in the field of agriculture although we have put in so much of money in this sector. The reason for this failure on the agricultural from may be easily found out in our faulty planning of agriculture. The rate of growth in our agriculture has been very slow because of the following factors: 1. Less emphasis on quick yielding projects. Unfortunately, in our planning much emphasis was placed upon those projects in agriculture which have a long gestation period. Quick yielding projects were not given their due importance. For example, much attention was paid to major-irrigation projects while minor-irrigation schemes were not given the place they deserved. Further, much attention was given to the increase in irrigation potential rather than looking after and maintaining the existing works. This has resulted in much loss irrigation potential. 2. Inadequate provision for agriculture inputs. While the need to have good and sufficient inputs in agriculture is fully felt, there is still an inadequate supply of the same. Irrigation facilities, though expanding, are still not enough and vast tracts are still dependent upon rains. We are still victims of floods and droughts, pests and plant diseases. Obviously, not only should we arrange for much larger timely and sufficient supplies of the traditional inputs, but also develop locally available inputs. 3. Inadequate credit facilities. The inadequacy of credit facilities has long been felt and regarded as one of the major drawbacks of our agriculture. For centuries, our farmers have been dependent upon non-institutional credit facilities with all the attendant limitations of the same. The development credit, till recently, has been rather slow while the need of credit has been mounting. Realizing that the programme of development of agriculture cannot be carried out successfully unless there is a provision for credit facilities, the authorities are now trying their best to promote credit facilities. Co-operative credit is being boosted up; the Reserve Bank of India takes a special interest in development of co-operative credit; major commercial banks have been nationalized and are expanding their credit facilities to the rural areas. Regional Rural Banks have also been established and NABARD has been set up as an apex institution in the field of rural credit. Agriculture sector has suffered from a typical anti-agricultural bias due to nature of policies followed in other sectors like industry, trade, exchange rate, etc. Agricultural policies provided little incentive for the farmers as the agricultural prices were depressed and there were numerous controls and restriction due to which this sector was disprotected vis-à-vis other sectors of the economy. P.D. Jeromi VI. INITIATIVES GIVEN TO AGRICULTURE IN BUDGET Target for agriculture credit in has been fixed at a record level of Rs. 10 Lakh crores. 2. Farmers will also benefit from 60 day s interest waiver announced on 31 Dec To ensure flow of credit to small farmers, Government to support NABARD for computerization and integration of all functional Primary Agriculture Credit Societies with the Core Banking System of District Central Cooperative Banks. This will be done in 3 years at an estimated cost of Rs. 1,900 crores. 480 P a g e

7 4. Coverage under Fasal Bima Yojana scheme will be increased from 30% of cropped area in to 40% in and 50% in for which a budget provision of Rs crore has been made. 5. New mini labs in Krishi Vigyan Kendras (KVKs) and ensure 100% coverage of all 648 KVKs in the country for soil sample testing. 6. The Long Term Irrigation Fund already set up in NABARD to be augmented by 100% to take the total corpus of this Fund to Rs. 40,000 crores. 7. Dedicated Micro Irrigation Fund in NABARD to achieve per drop more crop with an initial corpus of Rs. 5,000 crores besides an already existing long term irrigation fund. 8. Coverage of National Agriculture Market (e-nam) to be expanded from 250 markets to 585 APMCs. Assistance up to Rs. 75 laks will be provided to every e-nam. 9. A model law on contract farming to be prepared and circulated among the States for adoption. 10. Dairy Processing and Infrastructure Development Fund to be set up in NABARD with a corpus of Rs crores and will be increased to Rs crores over 3 years. 481 P a g e