Role of Agriculture in Indian Economy

Introduction to Role of Agriculture in Indian economy: Agriculture is the backbone of the Indian economy. Indian farmers are second to none in productivity, although there are millions of small and medium-scale farmers. Agricultural economics is an applied sector dealing with the production and distribution of food and fiber products from the application of economic theory.

India has made great efforts to become self-sufficient in food production and this effort of India has led to the Green Revolution. The Green Revolution came into being to improve agriculture in India. The services rendered by the Green Revolution in the agricultural sector of the Indian economy are as follows;

• Acquisition of more land for farming purposes 
• Expansion of irrigation facilities 
• Improved use of seeds and improved use of high yielding varieties 
• Improved by agricultural research Implementing techniques 
• Water management 
• Plan conservation activities through the use of fertilizers, pesticides, and crops. 

The Government of India also set up the Ministry of Food Processing Industries to encourage and make the agricultural sector of the Indian economy more profitable. India’s agriculture sector is heavily dependent on the monsoon season as heavy rains during this time lead to a bumper crop. But year-round agriculture cannot depend on just one season. Given this fact, another green revolution is likely to be formed to overcome such restrictions. Increasing growth rate and irrigation area, better water management, improving soil quality, and diversification of high-cost production, fruits, vegetables, herbs, flowers, medicinal plants, and biodiesel are also on the list of services. It will be taken up by the Green Revolution to improve agriculture in India. 

Guide on role of agriculture in Indian economy, importance of agriculture, objectives, facts, and major crop production in India

Importance of Agriculture in the Indian Economy 

The importance of the agriculture sector in the Indian economy is given below;

• Agriculture is one of the major players in the economy and it is the backbone of the country. 
• This is the basic activity of the nation. 
• It provides employment opportunities to rural agricultural and non-agricultural laborers. 
• It also plays an important role in international trade in import and export activities.

Agriculture is key in all economies regardless of their level of development. It meets some of the basic human needs by providing food and non-food needs. It provides;

1. food items such as Rice, Wheat, Coarse Grains, and Pulses, 
2. commercial crops like Oilseeds, Cotton, and Sugarcane, 
3. planting crops like Tea and Coffee, and 
4. horticultural crops like fruits, vegetables, flowers, spices, cashews, and coconut. In addition, some related activities such as milk and dairy products, poultry products, and fisheries are included in the agricultural sector. Most of the developed and industrialized countries got the initial impetus for industrial development from agriculture. 

Key objectives of agriculture in the Indian economy

• To improve the economic potential of farming by significantly increasing the net income of farmers and to ensure that agricultural growth is measured by the progress made in that income. 
• Conservation and improvement of land, water, biodiversity, and genetic resources necessary for a sustainable increase in productivity, profitability, and stability of large agricultural systems by creating economic stakes in conservation. 
• To provide supportive services to farmers at reasonable prices, including supply of seeds, irrigation, electricity, machinery, equipment, fertilizers, and loans. 
• Strengthening the biological protection of crops, farm animals, fish, and forest trees to protect the livelihood and income of farming families and to protect the health and trade of the nation.
• To provide appropriate price and trade policy mechanisms to increase the income of farmers. 
• To provide appropriate risk management measures to the farmers for proper and timely compensation. 
• India is a global outsourcing hub in the production and supply of inputs required for sustainable agriculture, products, and processes developed through biotechnology and information and communication technology (ICT). 

Facts about the role of agriculture in the Indian economy 

To assess the role and importance of agriculture, it is necessary to assess its role in the development of the economy. Such a contribution can be measured in terms of its share of gross domestic product (GDP), employment, exports, etc. Another aspect of the role of agriculture is that it supports the industrial sector through the supply of raw materials on the one hand and the other. On the other hand, food for the manpower engaged in this sector. Moreover, it creates demand for industrial products.

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To analyze the role and importance of agriculture in the economy, one has to study all these aspects. Agricultural land is being brought under industrial and commercial use, thus putting pressure on the rest of the agricultural land. Many export sectors have been opened for agricultural commodities. 

Agriculture provides food for the ever-growing population – Due to high population pressures, labor surplus economies like India and rapid increase in food demand, rapid increase in food production. The current level of food consumption in these countries is very low and a slight increase in personal income leads to a rapid increase in food demand (in other words it can be said that the demand for food in developing countries and there is a lot of flexibility). Therefore, unless agriculture can supplement the surplus of foodstuffs in the market, a crisis is bound to arise. Many developing countries are going through this phase and agriculture has been developed to meet the growing food needs. 

Role of agriculture in the Indian economy

Share in national income

From the very beginning, agriculture has been contributing a large share to our national income. Agriculture and allied activities contributed about 59% to the total national income. Although the share of agriculture is gradually declining with the development of other sectors, this share is still much higher than that of the developed countries of the world. 

Agriculture plays an important role in job creation

At least two-thirds of the working population in India earn their living through agricultural activities. Other sectors in India have failed to create more employment opportunities due to the growing working population. More than two-thirds of our working population in India is directly involved in agriculture and also depends on it for their livelihood. 

Supply of raw materials to agro-based industries

Agriculture in India has been a major source of supply of raw materials to various important industries of our country. The Cotton and Jute Textile, Sugar, Vegetable, Edible Oil Plantation Industries (such as Tea, Coffee, Rubber) and agro-based cottage industries are also regularly collecting their raw materials directly from agriculture.

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Source of government revenue

Agriculture is a major source of revenue for the Central and State Governments of the country. The government is getting a lot of revenue from the increase in land revenue. Some other sectors like railways, roadways are also earning a good portion of their income from the movement of agricultural goods. 

Role of agriculture in economic planning

The planning potential in India also depends on the agricultural sector. A good harvest always stimulates the country’s planned economic growth by creating a better business environment for transportation systems, manufacturing industries, domestic trade, and so on. A good harvest also provides the government with significant sums of money to cover its planned expenses.

In the same way, a bad crop leads to a complete decline in the country’s business, which in turn leads to the failure of economic planning. Thus, in a country like India, the agricultural sector is playing a very important role and the prosperity of the Indian economy still depends largely on the agricultural sector. Thus, the above analysis shows that agricultural development is a prerequisite for sectoral diversity and economic growth. 

A source of food security for a growing population

Agriculture is the only major source of food supply as it is providing regular food to such a large population of our country. It is estimated that about 60% of domestic consumption comes from agricultural products. Due to high population pressure, labor surplus economies like India, and rapid increase in food demand, food production is increasing rapidly.

The current level of food consumption in these countries is very low and a slight increase in personal income leads to a rapid increase in food demand (in other words it can be said that the demand for food in developing countries There is a lot of flexibility. Therefore, unless agriculture can supplement the surplus of foodstuffs in the market, a crisis is bound to arise. Many developing countries are going through this phase and agriculture has been developed to meet the growing food needs.

Contribution to capital formation – There is general agreement on the formation of necessary capital. As agriculture is the largest industry in a developing country like India, it can and must play a significant role in increasing the rate of capital formation. If it fails to do so, the whole process of economic growth will suffer.

Commercial importance and industrial development for agriculture in India

Indian agriculture is playing a vital role in the country’s internal and external trade. Agricultural products such as Tea, Coffee, Sugar, Tobacco, Spices, Cashews, etc. are the mainstays of our exports and account for about 50% of our total exports. In addition to manufactured jute, cotton textiles and sugar also contribute another 20% to the country’s total exports. Thus, about 70% of India’s exports come from the agricultural sector. In addition, agriculture is helping the country earn valuable foreign exchange to meet the country’s required import bill.

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The market of Industrial Products – As more than two-thirds of the population of developing countries like India live in rural areas, increasing rural purchasing power is a valuable impetus for industrial development. 

Role of Agriculture for Industrial Development

About 50% of the income generated in the manufacturing sector in India comes from all these agro-based industries. Furthermore, agriculture can provide a market for industrial products as an increase in the level of agricultural income can lead to the expansion of the market for industrial products. 

Significance in International Trade – For many years, India’s three agricultural exports – Cotton, Jute, and Tea – accounted for more than 50% of the country’s export earnings.

Major crop production in India

Horticulture is one of the important sectors of Indian agriculture and it plays an important role in the country’s economy. Many horticultural crops are suitable for almost all agro-climatic zones of the country. India has emerged as the world’s largest producer of Mangoes, Bananas, and Coconuts and the 2nd largest producer and exporter of Tea, Coffee, Cashews, and Spices.

About 39% of the world’s mangoes and 23% of Bananas are grown in India. In the case of Grapes, the country has recorded the highest production capacity in the world (25.4 tons per hectare). Exports of fresh and processed fruits, vegetables, cut flowers, and dried flowers have also picked up. 

Significant trends for agriculture growth in India

1. Changing demand due to income growth, globalization, and health awareness is further affecting production in the future. In India, demand for fruits and vegetables, dairy products, fish, and meat is going to increase in the future.
2. Improvement in technology, safe cultivation of high-value vegetables and other vegetables will be more. Then, there will be high demand for affordable quality products.
3.  More competition will be there among private companies that provide innovative products, improved seeds, fertilizers, plant protection chemicals, custom farm machinery, and fodder for animals in cost-effective ways at more lucrative prices to farmers. 
4. Some technologies will be widely used in the future and some will become commonplace in a short time while some will take time to mature. There will be more vertical and urban farming, and there will be long-term efforts to find new areas for production, such as barren deserts and seawater. 
5. Also, small and medium farmers will use these technologies with the help of private players, government, or farmer producer organizations (FPOs). Therefore, some modern tools will make agriculture more profitable and environmentally friendly.
6. In agriculture, the use of nanomaterials will reduce waste, reduce nutrient losses in fertilization, and increase productivity through pest and nutrient management. IFFCO has already successfully tested nano-fertilizers. 
7. India has improved its digital connectivity and market access has become much easier.  
8. More work will certainly be done by the government, village communities, agricultural start-ups, and private players to save the rapidly depleting water resources. IoT, Satellites, drones will be used to better collect data on soil health, crop area, and yield, which will reduce the cost of insurers with better estimates and make the system more accurate and efficient. 
9. There will be more specialized marketers in operations which will make the work easier and more efficient even in small farms.

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Key features of Indian agriculture 

The specific features of Indian agriculture will enable us to gauge its potential and performance capabilities. At the time of independence, Indian agriculture was called ‘backward’. This is reflected in the low productivity of land per worker as well as per hectare. The reason for the backwardness of the agricultural sector was attributed to outdated and traditional techniques and the system of land relations.

By land relations system we mean the relationship between landowners and real farmers. This system was extremely exploitative at the time of independence. Demand for land continued to grow due to growing population pressures and the lack of adequate employment opportunities outside of agriculture. 

The land was not improved by landowners because their rents were rising and farmers had little left to make such reforms. The large cultivated area depended only on rainwater supply. Thus, most of the land could be used to produce only one crop during the year. The overall effect of these conditions on Indian agriculture was that it did not significantly increase production.

During the first half of the twentieth century, the average growth rate of agricultural production was only 0.25% per annum. The growth rate of agricultural production has improved significantly since independence. On average, the rate is estimated at 2.7% per annum. However, the overall growth rate is not evenly distributed across regions or crops. It also has not been stable over time. 

Agriculture is the main occupation. If the monsoon is good, the yield will be high and if the monsoon is below average, the crops will be bad. Sometimes floods destroy our crops. Due to inadequate irrigation facilities, agriculture is dependent on the monsoon. Population growth increases the pressure on land ownership. Land ownerships are fragmented and subdivided and become non-economic.

Inadequate irrigation facilities and unpredictable rains reduce agricultural production, farmers get work for a few months in a year. Their ability to work cannot be used properly. Along with employment in agriculture, there is also hidden unemployment. Due to the large subdivision and fragmentation of the holdings, the landholding size is quite small. The methods of agricultural production with tools are traditional in India. The reason is people’s poverty and illiteracy. Traditional technology is a major cause of low productivity.