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Importance of Agriculture in Indian Economy

06-NOV-2015 15:52

    As we know that India is an agricultural economy. Its 55% population is employed by agriculture and it contributes around 14% of the Indian GDP. But as our economy is growing the contribution of this sector is decreasing year by year. Agriculture used to contribute around 53% percent which is slow down to 14% currently. Agriculture and allied sector contributes around 10% of country’s export currently.

    Overview of India’s Agricultural Economy

    In the early 1950s, half of India’s GDP came from the agricultural sector. By 1995, that contribution was halved again to about 25 per cent. As would be expected of virtually all countries in the process of development, India’s agricultural sector’s share has declined consistently over time as seen in the table below.









    Percentage share of GDP (at constant price)








    In the last five decades, the Government’s objectives in agricultural policy and the instruments used to realize the objectives have changed from time to time, depending on both internal and external factors. Agricultural policies can be divided into supply side and demand side policies. The former include those relating to land reform and land use, development and diffusion of new technologies, public investment in irrigation and rural infrastructure and agricultural price supports. The demand side policies on the other hand, include state interventions in agricultural markets as well as operation of public distribution systems. Such policies also have macro effects in terms of their impact on government budgets.

    Macro level policies include policies to strengthen agricultural and non-agricultural sector linkages and industrial policies that affect input supplies to agriculture and the supply of agricultural materials. During the pre-green revolution period, from independence to 1964-1965, the agricultural sector grew at annual average of 2.7 per cent. This period saw a major policy thrust towards land reform and the development of irrigation. With the green revolution period from the mid-1960s to 1991, the agricultural sector grew at 3.2 per cent during 1965-1966 to 1975-1976, and at 3.1 per cent during 1976-1977 to 1991-1992. The policy package for this period was substantial and consisted of:

    a) Introduction of high-yielding varieties of wheat and rice by strengthening agricultural research and extension services,

    b) Measures to increase the supply of agricultural inputs such as chemical fertilizers and pesticides,

    c) Expansion of major and minor irrigation facilities,

    d) Announcement of minimum support prices for major crops, government procurement of cereals for building buffer stocks and to meet public distribution needs, and

    e) Provision of agricultural credit on a priority basis.

    f)  This period also witnessed a number of market intervention measures by the central and state Governments. The promotional measures relate to the development and regulation of primary markets in the nature of physical and institutional infrastructure at the first contact point for farmers to sell their surplus products. Crops, Production, Productivity, Inputs and Surpluses

    Crop-Specific Growth

    As per 2nd advance estimates for 2011-12, total food grains production is estimated at a record level of 250.42 million tonnes which is 5.64 million tonnes higher than that of the last year production. Production of rice is estimated at 102.75 million tonnes, Wheat is 88.31 million tonnes, coarse cereals 42.08 million tonnes and pulses 17.28 million tonnes. Oilseeds production during 2011-12 is estimated at 30.53 million tonnes, sugarcane production is estimated at 347.87 million tonnes and cotton production is estimated at 34.09 million bales (of 170 kg. each). Jute production has been estimated at 10.95 million bales (of 180 kg each). Despite inconsistent climatic factors in some parts of the country, there has been a record production, surpassing the targeted production of 245 million tonnes of food grains by more than 5 million tonnes during 2011-12. Growth in the production of agricultural crops depends upon acreage and yield. Given the limitations in the expansion of acreage, the main source of long-term output growth is improvement in yields. In the case of wheat, the growth in area and yield have been marginal during 2000-01 to 2010-11 suggesting that the yield levels have plateaued for this crop. This suggests the need for renewed research to boost production and productivity. All the major coarse cereals display a negative growth in area during both the periods except for maize, which recorded an annual growth rate of 2.68 per cent in the 2000-01 to 2010-11 periods. The production of maize has also increased by 7.12 percent in the latter Period. The biggest increase in the growth rates of yields in the two periods, however, is in groundnut and cotton. Cotton has experienced significant changes with the introduction of Bt cotton in 2002. By 2011-12, almost 90 percent of cotton area is covered under Bt. cotton, production has more than doubled (compared to 2002-03), yields have gone up by almost 70 percent, and export potential for more than Rs 10,000 crore worth of raw cotton per year has been created.

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