1

ROLE OF AGRICULTURE
IN INDIAN ECONOMY

SECTION D
VSHALVAIB

12/07/21
 ROLE OF AGRICULTURE
IN INDIAN ECONOMY
 Submitted To:  Submitted By:

Dr. Tapan Kumar Nayak Shivi Bindra BM-09198

Prof . Sanjay Kumar Mangla Shobhit Jaiswal BM-09199

Tanushree Das BM-09224

Vaibhav Jain BM-09230

Vijay Kumar Barma BM-

09234

Priyanka Sharma BM-09240

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 INDEX
 India’s Agricultural
 Abstract Development Strategy
 Introduction  Agricultural Productivity in
India
 Justification
 Low Productivity Causes
 Objectives
 Increasing Agricultural
 Literature Review Productivity

 Role of Agriculture  Agricultural Marketing

 Cropping Pattern in  Agricultural Pricing Policy

India  Summary

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 ABSTRACT

 Indian agriculture is at crossroads and one of the

major challenges is to reverse deceleration in
agricultural growth. Main reason for deceleration in
agricultural growth is:
 Declining investment particularly public investment
in agriculture research and development and
irrigation, combined with inefficiency of institutions
providing inputs and services including rural credit
and extension.

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 ABSTRACT(contd..)
 Other factors such as:

 Land Fragmentation

 Out-dated tenancy laws,

 Lack of Modern Market and Rural Infrastructure,

 Inappropriate input pricing policies, etc.

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 INTRODUCTION

 Agriculture is said to be the BACK BONE of Indian

Economy and supporting it, it provides livelihood
to about one-third of the Indian population.
 It contributes about one-third of gross value added
in India, the single largest contributor to the GDP.
 Approx 43% of India’s land is used for Agricultural
purposes. Its role in economic development apart, it
is a way of life and, therefore, in its development
lays the general well being of the people.

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 JUSTIFICATION

 The sensex and certain sectors of the economy have

seen unprecedented growth, but yet the most
important sector to the country which shapes the
backbone of Indian Economy has been lagging
behind.
 With more than half the population in the country
still associated with agriculture, urgent reforms
need to be made so that this sector in itself can grow
rapidly.

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 JUSTIFICATION(contd..)

 Contributing to almost one fourth of the nation’s gross

domestic product (GDP), it provides employment to
millions of people living in the rural areas.

 With the tremendous increase in population, the land

holdings of farmers have shrunk to abysmal levels. The
farmers themselves have become grossly indebted and if
the rains are not on their side and the crop fails, then they
are often staring at unemployment and mere survival.

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 OBJECTIVE
 Summarizing Indian Agriculture in papers is very
tough task. In this report we will be generally
focusing on:
 Role of Agriculture,

 Cropping Pattern in India,

 India’s Agricultural development Strategy,

 Agricultural Productivity in India,

 Causes of Low Productivity,

 Agricultural Marketing

 Agricultural Policy 9 12/07/21

 LITERTURE REVIEW

 Efficiency measurements have been attempted in Indian

agriculture since 1970’s. Efficiency has been measured and
decomposed in two various components using both
parametric as well as non-parametric methods. The two
principle methods that have been employed to analyze the
efficiency are :

 Data Development Analysis

 Stochastic Frontier Analysis also known as SFA.

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 Kaliranjan (1981), points out that given the same access to
input, the responsiveness of the small farmers to economic
opportunities is the same as the case with the large farmers.
His study is based on 70 farmers from Coimbatore district in
the state of Tamil Nadu.
 Battese and Coelli (1995), performed a stochastic frontier
analysis using a panel data for 10 years. They documented
that schooling increase efficiency while the age decreases it.

 Tedese and Krishnamurthy(1997), suggests a methodology to

obtain economic efficiency of firms using returns to scale.
He documents that half of the rice sample farmers in
Karnataka are economically efficient.

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 ROLE OF AGRICULTURE

 India is a predominant agricultural country, the statistics shows that

predominance continued over a century. In terms of percentage
shares there occurs a marginal downward shift from 76% to 62% in
the population depending on agriculture. Though in terms of the
people who depends on agriculture there is a big increase which
have affected the availability of land per capita. It also contributes
around 29% of GDP.

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Contribution to National Income:

 Today Agriculture contributes a major part of

National Income in India. As according to the
distribution of National Income by industrial origin
for the period 1950-51 to 1979-80 clearly shows
around 40% share of various agricultural
commodities, ancillary activities and animal
husbandry. During the fifties, it contributed around
half of the National output. Though there occurs fall
in eighties and nineties which now stood to 25% in
2002-03 but still it maintains good share in the
national income.
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Major source of Livelihood:

 If six out of ten peoples in any country depends on

Agriculture then don’t we say that country as
AGRICULTURAL COUNTRY, this is what is the
ratio in India in dependency on Agriculture.
 Over the years 1921-2001, the size of labor force
dependent on agriculture had face a drastic change
and it had been doubled during this period.
 This sector is plagued by underemployment,
disguised unemployment and low productivity
employment.

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Provider of Employment:

 Majority of the Indian masses has been

overwhelmed by the work and being provided
employment because of the Agriculture.
 About 70% peoples in rural areas earn their
livelihood from cultivation and allied agro-
industries.
 In 1995, agriculture provided employment to
around 97 million persons, which now is increased
to 235 million. 

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Industrial Development:

 Agriculture has big role in the development of the

industries specially the agro-based industries such as
textiles, sugar, tea, and paper.
 We have various other industries like handloom
weaving and other cottage industries, which also
depends for input from agriculture. The prosperity of
these agro-based industries directly depends on
availability of inputs from agricultural sectors.
 There also lies links or dependency between prosperity
of industries and agricultural prosperity that demand for
industrial products, depends upon the income of the
farmers, which in turn depends upon agricultural
production. 16 12/07/21
International Trade:

 Indian agriculture plays a significant role in the

country’s International trade.
 Country’s foreign trade especially in the export of
traditional commodities like jute, tea, tobacco and
coffee depends a great deal on supplies of
agricultural sector.
 When crop failure occurs the country becomes a net
importer of food grains. Therefore, the balance of
trade in the country is affected a great deal by the
performance of this sector.

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Capital Formation & Investment:

 Agricultural assets like land, irrigation facilities, tractors,

agriculture implements; ploughs, pump sets and
storages are the major part of production assets of the
country. Government revenues also depend a great deal
on agricultural prosperity. The direct contribution of
agricultural taxes to the revenues of the centre and the
states is not significant but indirectly the agriculture
through its effect on the whole economy of the country
has a considerable influence on the revenues of the
central and state government. Since agricultural
contributes about 25% of the national income, this sector
is the primary source of savings and hence capital
formation for the economy.

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 Food & Fodder:
 In India, agriculture
basically meets almost all
the food requirements of
the people. In order to
sustain the livestock,
fodder is also being
provided by the agriculture
whose number runs to
several crores.
 
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Income:
 On account of agricultural
predominance the income
of large majority of people
depends on agricultural
production. Indirectly, a
considerable part of trade
and commerce depends on
agricultural production.
With low income of
agricultural workers there
is demand recession in the
whole economy, which
affects other sectors as well.
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 Cost of Living:
 Cost of living of people in
country is greatly affected
with agricultural prosperity.
Agriculture is known as
GAMBLE IN RAINS
because of uncertainty of
the monsoons. In drought,
availability of food grains is
directly affected which leads
to rise in food grain prices.
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Economy Planning:
 Importance of agriculture in the
National Economy can be
illustrated by many facts, as it is
the backbone of the Indian
economy.
 For example, agriculture is the
main support for India’s
transport system, since railways
and roadways secure bulk of
their business from the
movement of business.
Agriculture growth has direct
impact on poverty eradication.
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 Per Capita Ratio:

 Agriculture has low capital output ratio.

 It means it requires lesser capita per unit of output produced

compared with the industries and therefore a capital poor
economy has to place reliance on development of agriculture
which would increase employment with the increase in
production in the rural areas.

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Impact on Revenue: Problem:

 Government revenues also  Trend of migration from

depends a great deal on Rural to Urban areas has
agricultural prosperity. The created a dual problem.
direct contribution of
agricultural taxes to the On the one hand,
revenues of the centre and the
states is not significant but  It has deprived rural areas
indirectly agriculture through
its effect on the whole economy of skilled and educated
of the country has a persons and on other hand,
considerable influence on the
revenues of Central State  Has created problem of
government. Urban Congestion.

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CROPPING PATTERN IN
INDIA
 CROPPING PATTERN

Cropping activities go on all the year-round

in India, provided water is available for
irrigation

A broad picture of the major cropping

patterns in India can be presented by taking
the major crops into consideration.
 CROPPING PATTERN

To begin with, the south-westerly monsoon

crops (KHARIF), bajra, maize, ragi,
groundnut and cotton.

Among the post-monsoon crops (RABI),

wheat, gram etc can also be considered to be
the base crops for describing the cropping
patterns.
The land may be occupied by one crops during one
season (mono-cropping), or by two crops (double-
cropping) which may be grown in a year in sequence.
Of late, the trend is even more than two crops
(multiple-cropping) in a year.

In any locality, the prevalent cropping systems

are the cumulative results of past and present
decisions by individuals, communities or
governments and their agencies. These
decisions are usually based on experience,
tradition, expected profit, personal preferences
and resources, social and political pressures
etc.
 INDIA’s AGRICULTURAL
DEVELOPMENT STRATEGY
 Use of fertilizer
 Fertilizer is a necessary input for increasing
agriculture productivity. The most commonly used
fertilizer in India is manure which is prepared
from cow dung and other waste products.
Fertilizers are classified into 3
categories:nitrogenous,phosphatic and potash.
These fertilizer are useful in two ways.
• first, they are useful in raising productivity
of land
• second, they are useful in restoring fertility of
fallow land.
 Use of human labour

 Human labour play an important role in

agriculture production.In developed region,the
use of human labour was comparatively less
than that in less development region but the
peculiarity of this type of household was that
most
of the labour family.
 Human labour is substitute by machine
labour. The maximum human labour was
used in the case of Landlabour linkage.
 Extensive cultivation

 Extensive cultivation means increasing the

total area under cultivation.The total area
under crop can be increased by bringing
under cultivation,cultivable land which was
lying waste or making uncultivable land
suitable for growing crops through
agriculture reaserch.
Intensive cultivation

Intensive cultivation implies growing more on the same

area.
How can this be done? This can be done through
The use of better and modern method of cultivation,
use of better quality,seeds,fertilizer,pesticides,proper
irrigation facilities. In other word by using better
input we can grow more on the same piece of land
For ex- the traditional method of cultivation involves
Growing a single crop and then leaving the land fallow
For the rest of the year to restore its fertility.
Strategy to improve
product quality
 Seeds
 Good quality seed is an important factor in
agriculture productivity. The use of good quality
seeds leads to higher land productivity. However, it
is seen that many farmers are not in a position to use
good quality seeds due to many reasons.
(a) Farmers do not have enough resources to
purchase these seeds.

(b) Farmers are unwilling to accept the HYV(high

yielding variety) seeds.
pesticides

 More than 5% of the crop in India is damaged by

pests,insects and also weeds. It because of the lack
of use of pesticides. However, we must not make
indiscriminate use of toxic pesticides as they can
have an adverse effect not only on human health
but can also lead to environmental degradation
through soil,water and air pollution.
 AGRICULTURE
PRODUCTIVITY IN INDIA
 AGRICULTURE PRODUCTIVITY IN
INDIA
 India’s agricultural sector faces number of problems. The very and
most prominent agricultural problem is LOW PRODUCTION and
LOW PRODUCTIVITY. The agricultural productivity is relatively
low in India as compared to other countries.

 It can be measured in two ways:

o Productivity per worker engaged in Agricultural operation.

o Productivity per Unit of land.

 Productivity per worker engaged

 In Agriculture, productivity per worker is 1/3 of the

productivity per worker in large industrial establishments.

 Similar to this, capital intensity per worker is lower in

Agriculture as compared to other sectors.

 Agricultural productivity per worker varies a great deal in

different region of the country.

 The Agricultural productivity per worker can be increased if

the workers are able to do hard work. Also the cropping
pattern and also the productivity of land on which workers
operates matters a lot in this regard.
 Productivity of Land

 It means YIELD/HECTARE of land.

 Index number of yield/hectare of land has gone up from 92.6 in

1970-71 to 103 in 1985-86 and to 154.5 in 1996-97 and fell to 149 in
1999-2000.

 If we talk about the planning period, the first two plans had
continuous growth of agricultural productivity which tormented
in III plan.
 Productivity of Land(contd..)

 After that, the new agricultural strategy came in which yield/hectare

began to increase.

 The productivity of land is improving and infact average

yield/hectare in India is much below the world’s average in all crops.

 Green Revolution has helped in improving Indian agriculture

production.

 By adoption of proper strategies, it has pushed up the level of

Productivity.
 LOW AGRICULTURAL
PRODUCTIVITY IN INDIA
 CAUSES OF LOW
AGRICULTURAL PRODUCTIVITY

 Pressure of population:

 Country’s population is much greater than its share in the land of the
world.

 With greater pressure on existing land, the prospects of improvement in

land are reduced partly because of low per capita saving and investment
and existing low level of investment in land.

 All these factors affect Productivity.

 CAUSES OF LOW AGRICULTURAL
PRODUCTIVITY(contd..)

 Size of Holdings:

 The size of holdings are small, scattered and fragmented.

 Non-availability of irrigation facilities and poor rainfall.

 Due to increase in Population, size of families are increasing and no

increase in the availability of cultivable land.

 All these prove a big handicap for improving agricultural productivity.

 CAUSES OF LOW AGRICULTURAL
PRODUCTIVITY(contd..)
 Nature of Soil:

 Two-third of land depends on rain. Inadequate rainfall affects the

soil productivity.

 Cropping continuously without replenishing of lost fertility leads to

depletion of condition of soil.

 These all involves big expenditure beyond the means of common

farmers.
 CAUSES OF LOW AGRICULTURAL
PRODUCTIVITY(contd..)

 Lack of Irrigation facilities:

 If we see the area under irrigation, only one-third of total

cultivated area is provided with irrigation facilities and the rest
of the area has to depend on rainfall.

 In Irrigation, optimum use of water is not made on account of

non-availability of suitable water channels etc.

 This all leads to the low-productivity in agriculture.

 CAUSES OF LOW AGRICULTURAL
PRODUCTIVITY(contd..)

 Use of Manures:

 Wastage of organic manures in the rural areas and urban waste in

cities and towns which can be fruitfully utilized for increasing the
fertility.

 For Agricultural purpose, there is a need for institutionalized effort

for conservation of the manures.

 Use of chemical fertilizers will also affect the Agricultural

Productivity.
 SOME IMPORTANT FACTS

 India's food grain production was 212 million tonnes in the last year

 It should increase to 250 million tonnes by 2010

 India may become a net importer of foodgarins,in near future and face a
deficit of 36 million tonnes by 2020(Prof B.Bhattacharya, IIFT in Yojna,
January 2001),when India's population is projected to be 1.3 billion.
 Though there has been significant gain in the productivity of food grains,
due to sustained efforts, from 522 kg/ha in 1950-51 to 1697 kg/ha in
1999-2000, it remains very low as compared to international standards.
 China produces 40% more food than India on just 60% of the land
areas(arable land) of India (CII-McKinsey Study).McKins
 Causes of Low Agricultural Productivity(Contu)

 About 63% of the net sown area is rainfed, where productivity is much
less than irrigated area.
 58% rice seeds are non-certified. The hybrid are cultivated only in 2.44 to
31.5% of the area under vegetables.
 Fretilizer use is 100 kg/ha as against more than 300 kg/ha in china.

 Imbalance in use of fertilizer.

 Inefficient use of water,nutrients and pesticides, which impair soil and

crop health.For example,our cotton yields are less than 20 percent of the
yields in Egypt and the US, though we use 25 times as much water to raise
a tonne of cotton(Dr.M.S.Swaminathan, Hindu Survey, 2000-01)

.
 Facts(contd..)

 The average yield in India is less than 50% of the potential yield indicating wide
gap in diffusion of technology.
 Declining public investments in agriculture.

 Poor post-harvest and processing facilities sometimes lead to glut in the market
and force the farmers distress sale, which demotivates them.
 Lack of incentive for making improvements on land

 Subdivision and fragmentation of land holding

 Lack of proper irrigation facilities.

 Dependence on traditional methods of cultivation

 Lack of proper credit facilities.

Crop Average Indian Potential Indian
Yield(Tonnes/ha) Yield(Tonnes/ha)*
*
Rice 2.9 4 to 5
Wheat 2.6 4 to 5
Pulses 0.6 2 to 2.5
Potato 17 70
Tomato 18 60
Cabbage 23 65
Banana 32 60
Pineaaple 14 80
 INCREASING AGRICULTURAL
PRODUCTIVITY

 a) Extensive cultivation-Increasing the total area under

cultivation by bringing cultivable land which is lying waste
or making uncultivable land suitable for growing crops
through agricultural research.

 b) Intensive cultivation-Growing more on the same area by

using better and modern methods of cultivation, use of
better quality seeds, fertilizers, pesticides, proper irrigation
facilities.
c)Abolition of intermediaries

d)Providing security to tenant farmers(tenant farmers who take land on rent and share
produce with the land owners)

e)Ceiling on land holdinds- maximum limit to which an individual can own agricultural land.

f)Consolidation of land holdings.

g)Provision of credit facilities

h)Availability of better quality of inputs:

Seeds

fertilizers

pesticides
AGRICULTURAL

MARKETING
 Barter system

 Commercialization of agriculture

 Agricultural marketing
 Earlier it involved buying and
selling of products.

 According to National
Commission of Agriculture it
starts with decision to produce
salable farm commodity and
involves all the transaction
processes.
 Three important functions are

 Assembling

 Processing

 Distribution
 Existing systems in marketing

 Sale to money lenders and traders.

 Haats and Shanties.

 Mandies and wholesale market.

 Co-operative market.
 Disabilities faced in marketing
Lack of knowledge of hybrid seeds.

 Low quality of seeds.

 Above factors discourage the farmers

 Requisites of good marketing

 Quality of produce should be good.

 Looking after the needs of farmer.
 Good means of transport and
communication.
 Market at convenient distance.
 Grading and standardization.
Agricultural Price
Policy
The main objectives of the Government's price policy
for agricultural produce, aims at ensuring
remunerative prices to the growers for their produce
with a view to encourage higher investment and
production. Towards the end, minimum support prices
for major agricultural products are announced each
year which are fixed after taking into account, the
recommendations of the Commission for Agricultural
Costs and Prices (CACP).
The CACP while recommending prices takes into
account all-important factors, viz.
1.Cost of Production
2.Changes in Input Prices
3.Input/Output Price Parity
4.Trends in Market Prices
5.Inter-crop Price Parity
6.Demand and Supply Situation
7.Effect on Industrial Cost Structure
8.Effect on General Price Level
9.Effect on Cost of Living
10.International Market Price Situation
11.Parity between Prices Paid and Prices
Received by farmers (Terms of Trade).
Of all the factors, cost of production is the
most tangible factor and it takes into account all
operational and fixed demands. Government
organises Price Support Scheme(PSS) of the
commodities, through various public and
cooperative agencies such as ,FCI(food
corporation of india) ,Tobacco Board, etc., for
which the Market Selling Prices are fixed.
For commodities not covered under PSS,
Government also arranges for market
intervention on specific request from the States
for specific quantity at a mutually agreed price.
The losses, if any, are borne by the Centre and
State on 50:50 basis. The price policy paid rich
dividends.
 SUMMARY

 In our report, we have found that agriculture sector has a

pivotal role in Indian economy.
 Agricultural production has increased just upto the
POINT OF SELF SUFFICIENCY.
 Measures are taken by government to increase
Agricultural production and its development strategy.
 Credit facilities are provided to farmers.

 Policy measures are of significant importance.

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tHaNk YoU

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