UNIT – 1

NATURE AND IMPORTANCE OF

AGRICULTURE
INTRODUCTION

 Agriculture is the backbone of Indian economy. Agriculture is the most

important occupation for most of the Indian families.
 In India, agriculture contributes about 16% of total GDP & 10% of total
exports.
 That's reason India secured second position worldwide in terms of farm
output. About 75% people are living in rural areas and are still dependent on
Agriculture. About 43% of India's geographical area is used for agricultural
activity.
Definition of Agriculture Economics

 Agriculture Economics can also be defined as the knowledge and art Of

cultivating the soil of the land"
 According to Goodwin, "Agriculture Economies is the study of the
allocation of scarce resources among those competing and alternative
uses found in the production, processing, distribution, and consumption
of agricultural commodities.
Nature of Agriculture Economics

 The nature of agricultural economics is such that it obtains most of the

principles from general economics, thus there is no basic difference
between general and agricultural economics. Thus the need to separate
these two is that agricultural economics does not imply direct
application of the principles but before application they are modified so
that their postulates totally tally with the situations. These modifications
are so large and varied that there is a complete justification for studying
it as a separate branch of knowledge.
Nature of Agriculture Economics

 Terminology
Microeconomics
Macroeconomics
Static economics
Dynamic economics
Resources
Wants
Profit
Utility
Consumption economics
Nature of Agriculture Economics

 production economics
Production function
Marginal product
Total product
Average product
Elasticity of production
Nature of Agriculture Economics

 Nature of agricultural economics:

Micro as well as Macro
When the subject of study is individual farmer then it is micro-
economics and when we study agricultural economy as a whole then it
is called macro-economics
 Static as well as Dynamic
The basic difference between the two is that in former , time variable is
not taken into account while the latter analysis deals with a period of
time. In the present day dynamic concept is gaining momentum.
Nature of Agriculture Economics

 Applied science or Pure science

Agriculturist economics such as Frosten and Leoger have classified it as
an applied science as it is concerned with the identification, description
and classification of economic problems of agriculture. Thus,
agricultural economics is concerned with the evolving of appropriate
principles that govern the amount of land, labour, and capital that the
farmer should use to maximize his profit and using the factors
efficiently.
Nature of Agriculture Economics

 Science or Art
Agriculture is the science and art of cultivation of crops and raising the
livestock and is not only a mode of livelihood but also a way of life.
Agricultural production economics is a science because it relies on the
principles and verifications of the data. It is an art because it deals with
the various ways of application of the principles and to suit the
conditions.
Scope of Agriculture economics

Agriculture sector is considered to be the most important in Indian scenario. The

scope of agricultural production economics includes production, distribution,
consumption and government activities in relation to agriculture and farm
enterprises. To be more specific, the scope of agricultural economics can also be
analysed on the political aspect. Self sufficiency in food produce can reduce
foreign dependence fro food supply and raw materials , specially in times of crisis.
There is a large scope of agri. economics in various factors of production also viz.
land, labour, capital, organization etc.
The scope of agricultural production economics as quoted by Taylor “ Agricultural
economics deals with the principles which underline the farmers’ problems of what
to produce and how to produce what to sell and how to sell in order to secure the
largest net profit for himself consistent with the best interest of the society as a
whole. ”
Principles applied in Agricultural Production Economics

1. Law of equi -marginal return

2. Law of diminishing return
3. Law of opportunity cost
4. Law of substitution
5. Law of comparative advantage
6. Principle of combining enterprises
7. Cost concepts and principles
Importance of Agriculture Economics

agricultural economics finds to seek relevance between cause and effect

in agriculture.
It uses theoretical concepts of economics to provide answers to the
problems of agriculture and agribusiness.
Agricultural economists here have to play a major role in understanding
the complication involved in the foundation systems.
Importance of Agricultural Economics

1- Increases in Per Capita Income

2- Major Source of Employment
3- Reduction in Poverty
4- Supply Of Food
5- Supply of Surplus Labour
7- Source Of National Income
8- Supply of Raw Material
9- Development of Industrial Sector
Role of Agricultural Economics

Largest Producer of Milk, Cashew nuts, Coconuts, Tea. Ginger, Turmeric

& Black Pepper. Second largest producer of Wheat, Rice, Sugar and
Groundnut and Pulses.
Third largest producer of Tobacco.
Largest Cattle population-281 million
Third largest in implementation of
Mechanization
SHARE IN NATIONAL INCOME

Although the share of agriculture in the total national income has been
gradually decreasing on account of the development of secondary &
tertiary sectors, it still contributed about 18% of nation income in 2006-07.
(in 1950-51, it was 59%)
SOURCE OF EMPLOYMENT

In India, agriculture is the main source of employment. Even in 2004-05,

more than 56% of the total labour force of India is engaged in agriculture
& depend on it for their livelihood(1950-51:69.5%). It becomes evident
from this fact that other sectors of the economy could not generate enough
employment for the growing population.
PROVISION OF FOOD GRAINS

 Agriculture in India has played an important role in meeting almost the entire
food needs of the people.
 The production of food grains in India has increased from 51 million tonnes in
1950-51 to 208.3 million tonnes in 2005-06.
 This has enabled the country to overcome the problems of food grain
shortages. The country almost self sufficient in food grains & no longer
depends on import of food grains.
PROVISION OF FOOD GRAINS

 Agriculture in India has played an important role in meeting almost the entire
food needs of the people.
 The production of food grains in India has increased from 51 million tonnes in
1950-51 to 208.3 million tonnes in 2005-06.
 This has enabled the country to overcome the problems of food grain
shortages. The country almost self sufficient in food grains & no longer
depends on import of food grains.
SIGNIFICANCE FOR TRADE &
TRANSPORT

Various means of transport like roadways & railways get bulk

of their business from the movement of agriculture
commodities & raw materials
SOURCE OF REVENUE FOR THE
GOVERNMENT

Through the direct contribution of agricultural taxes to the central &

state government is not significant, they get a significant part of
their total revenue in terms of land revenue, irrigation charges, taxes
imposed on the commodities purchased by the cultivators etc.
central government also earns revenue from export duties.
EARNER OF FOREIGN EXCHANGE

 Through exports of agricultural commodities like tea,

cotton, coffee, jute, fruits, vegetables, spices, sugar, oil, etc.
in the past, export of agricultural products accounted for
about 70% of the export earnings of the country.
SUPPLY OF RAW MATERIALS TO
INDUSTRIAL SECTOR

 Many industries like cotton industry, sugar industries, jute

industries etc,. depends on agriculture for their raw material
requirements.
 Moreover, workers engaged in various industries depend on
agriculture for their food requirement.
MARKET FOR INDUSTRIAL PRODUCT

 Agriculture provides markets for large number of industrial

products. Since about two thirds of India lives in rural areas, there
is a large rural purchasing power which has created a large
demand for all type of industrial products.
 Green revolution has considerably increased the purchasing
power of the large farmers in the recent years.
CONCLUSION

 On over all view, India has always been benefited by

AGRICULTURE.
 Though the future of India is industrialisation, the contribution of
agriculture would always prove to be vital for making India a
powerful & stable economy in the future.