What is the importance of agriculture in indian economy

Though industry has been playing an important role in Indian economy, still the contribution of agriculture in the development of Indian economy cannot be denied.

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

1. Agricultural influence on national income:

The contribution of agriculture during the first two decades towards the gross domestic product ranged between 48 and 60%. In the year 2001-2002, this contribution declined to only about 26%.

2. Agriculture plays vital role in generating employment:

In India at least two-thirds of the working population earn their living through agricultural works. In India other sectors have failed generate much of employment opportunity the growing working populations.

3. Agriculture makes provision for food for the ever increasing population:

Due to the excessive pressure of population labour surplus economies like India and rapid increase in the demand for food, food production increases at a fast rate. The existing levels of food consumption in these countries are very low and with a little increase in the capita income, the demand for food rise steeply (in other words it can be stated that the income elasticity of demand for food is very high in developing countries).

Therefore, unless agriculture is able to continuously increase it marketed surplus of food grains, a crisis is like to emerge. Many developing countries are passing through this phase and in a bid to ma the increasing food requirements agriculture has been developed.

4. Contribution to capital formation:

There is general agreement on the necessity capital formation. Since agriculture happens be the largest industry in developing country like India, it can and must play an important role in pushing up the rate of capital formation. If it fails to do so, the whole process economic development will suffer a setback.

To extract surplus from agriculture the following policies are taken:

(i) Transfer of labour and capital from farm non-farm activities.

(ii) Taxation of agriculture should be in such a way that the burden on agriculture is greater than the government services provided to agriculture. Therefore, generation of surplus from agriculture will ultimately depend on increasing the agricultural productivity considerably.

5. Supply of raw material to agro-based industries:

Agriculture supplies raw materials to various agro-based industries like sugar, jute, cotton textile and vanaspati industries. Food processing industries are similarly dependent on agriculture. Therefore the development of these industries entirely is dependent on agriculture.

6. Market for industrial products:

Increase in rural purchasing power is very necessary for industrial development as two- thirds of Indian population live in villages. After green revolution the purchasing power of the large farmers increased due to their enhanced income and negligible tax burden.

7. Influence on internal and external trade and commerce:

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

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