Agriculture is the Primary sector of Economy. It makes direct use of natural resources.

It is
contrasted with secondary sector (producing manufactured& other processed goods) & the
Tertiary sector (producing services). This sector is usually most important in less developed
countries & typically less important in industrial countries. Until the industrial revolution,
vast majority of human population laboured in agriculture. Pre Industrial agriculture was
typically subsistent in which farmers raised most of their crop for their own consumption
instead of cash crop for trade. A remarkable shift in agriculture practices has occurred over
the past century in response of new technology & the development of world market. This also
led to technological improvements in agricultural techniques. Now, Agriculture with its allied
sector is unquestionably the largest livelihood provider in India, more so in the vast rural
area. It also contributes a significant figure to GDP. Most of the industries also depend on
agriculture sector for their raw materials. The planned approach to development has helped
the country to reach a stage where the country is self sufficient in food grains and has a
comfortable buffer stock. These achievements have been possible mainly through the
favourable policy framework. The policy of Indian Agriculture was to achieve food security
by providing incentive for growth along with equitable access to food. As a result terrible
famine shave become events of the past and the agricultural production does not show large
variation even in the event of adverse climatic condition.

III. Importance of Agriculture

Agriculture plays a crucial role in the life of an economy. It is the backbone of our economic
system. Agriculture not only provides food and raw material but also employment
opportunities to a very large proportion of population. The following facts clearly highlight
the importance of agriculture in this country.

1. Source of Livelihood:

In India the main occupation of our working population is agriculture. About 70 per cent of
our population is directly engaged in agriculture. In advanced countries, this ratio is very
small being 5 per cent in U.K., 4 per cent in USA., 16 per cent in Australia, 14 per cent in
France, 21 per cent in Japan and 32 per cent in USSR.This high proportion in agriculture is
due to the fact that the non-agricultural activities have not been developed to absorb the
rapidly growing population.
2. Contribution to National Income:

Agriculture is the premier source of our national income. According to National Income
Committee and C.S.O., in 1960-61, 52 per cent of national income was contributed by
agriculture and allied occupations. In 1976-77, this sector alone contributed 42.2 per cent
while in 1981-82, its contribution was to the tune of 41.8 per cent.In 2001-02, it contributed
around 32.4 per cent of national income. This was further reduced to 28 per cent in 1999-
2000. Contrary to this, the proportion of agriculture in U.K. is only 3.1, in USA it is 3
percent, 2.5 per cent in Canada, 6 per cent in Japan, 7.6 per cent in Australia.The mere
conclusion of all this is that more developed a country the smaller is the contribution of
agriculture in national output.
3. Supply of Food and Fodder:

Agriculture sector also provides fodder for livestock (35.33 crores). Cow and buffalo provide
protective food in the form of milk and they also provide draught power for farm operations.
Moreover, it also meets the food requirements of the people. Import of food grains has been
very small in recent years, rather export avenues are being looked for.

4. Importance in International Trade:

It is the agricultural sector that feeds country's trade. Agricultural products like tea, sugar,
rice, tobacco, spices etc. constitute the main items of exports of India. If the development
process of agriculture is smooth, export increases and imports are reduced considerably.Thus,
it helps to reduce the adverse balance of payments and save our foreign exchange. This
amount can be well utilized to import other necessary inputs, raw-material, machinery and
other infra-structure which is otherwise useful for the promotion of economic development of
the country.
5. Marketable Surplus:

The development of agricultural sector leads to marketable surplus. As country develops

more and more people are to be engaged in mining, manufacturing and other non-
agricultural sector. All these people depend upon the food production which they can meet
from the marketable surplus.As agricultural development takes place, output increases and
marketable surplus expands. This can be sold to other countries. Here, it is worth mentioning
that the development of Japan and other countries were made possible by the surplus of
agriculture. There is no reason why this could not be done in our own case.

6. Source of Raw Material:

Agriculture has been the source of raw materials to the leading industries like cotton and jute
textiles, sugar, tobacco, edible and non-edible oils etc. All these depend directly on agriculture.Apart
from this, many others like processing of fruits and vegetables, dal milling, rice husking, gur making
also depend on agriculture for their raw material. According to United Nations Survey, the industries
with raw material of agricultural origin accounted for 50 per cent of the value added and 64 per cent
of all jobs in the industrial sector

7. Importance in Transport:

Agriculture is the main support for railways and roadways which transport bulk of
agricultural produce from farm to the mandies and factories. Internal trade is mostly in
agricultural products. Besides, the finance of the govt, also, to the large extent, depends upon
the prosperity of agricultural sector.
8. Contribution to Foreign Exchange Resources:

Agricultural sector constitutes an important place in the country's export trade. According to
an estimate, agricultural commodities like jute, tobacco, oilseeds, spices, raw cotton, tea and
coffee accounted for about 18 per cent of the total value of exports in India. This shows that
agriculture products still continue to be significant source of earning foreign exchange.

9. Vast Employment Opportunities:

The agricultural sector is significant as it provides greater employment opportunities in the

construction of irrigation projects, drainage system and other such activities.With the fast
growing population and high incidence of unemployment and disguised unemployment in
backward countries, it is only agriculture sector which provides more employment chances to
the labour force. In this way, significance of agriculture emerges more and more.

10. Overall Economic Development:

In the course of economic development, agriculture employs majority of people. This means
raising the level of the national income and standard of living of the common man.The rapid"
rate of growth in agriculture sector gives progressive outlook and further motivation for
development. As a result, it helps to create proper atmosphere for general economic
development of the economy. Thus, economic development depends on the rate at which
agriculture grows.

11. Source of Saving:

Improvement in agriculture can go a long way in increasing savings. It is seen that rich
farmers have started saving especially after green revolution in the country. This surplus
amount can be invested in agriculture sector for further; development of the sector. Saving
potentials are large in agriculture sector which can be properly tapped for the development of
the country.

12. Source of Government Income:

In India, many state governments get sizeable revenue from the agriculture sector. Land
revenue, agricultural income tax, irrigation tax and some other types of taxes are being levied
on agriculture by the state governments. Moreover, considerably revenue is earned by way of
excise duty and export duty on agricultural products. Raj committee on Agricultural Taxation
has suggested imposition of taxation on agricultural income for raising revenue.

13. Basis of Economic Development:

Prof. Nurkse has laid sufficient emphasis on the improvement of agriculture for a balanced
growth of an economy. The development of agriculture provides necessary capital for the
development of other sectors like industry, transport and foreign trade. In fact, a balanced
development of agriculture and industry is the need of the day.
From the above, explanation it may be concluded that agriculture occupies an important place
in the development of an economy. It is in fact, a pre-condition for economic upliftment.
VI. India: Issues And Priorities For Agriculture

 CHALLENGES

Three agriculture sector challenges are important to India’s overall development and the
improved welfare of its rural poor:
1. Raising agricultural productivity per unit of land: Raising productivity per unit of land
will need to be the main engine of agricultural growth as virtually all cultivable land is
farmed. Water resources are also limited and water for irrigation must contend with
increasing industrial and urban needs. All measures to increase productivity will need
exploiting, amongst them: increasing yields, diversification to higher value crops, and
developing value chains to reduce marketing costs.
2. Reducing rural poverty through a socially inclusive strategy that comprises both
agriculture as well as non-farm employment: Rural development must also benefit the
poor, landless, women, scheduled castes and tribes. Moreover, there are strong regional
disparities: the majority of India’s poor are in rain-fed areas or in the Eastern Indo-Gangetic
plains. Reaching such groups has not been easy. While progress has been made - the rural
population classified as poor fell from nearly 40% in the early 1990s to below 30% by the
mid-2000s (about a 1% fall per year) – there is a clear need for a faster reduction. Hence,
poverty alleviation is a central pillar of the rural development efforts of the Government and
the World Bank.
3. Ensuring that agricultural growth responds to food security needs:
The sharp rise in food-grain production during India’s Green Revolution of the 1970s enabled
the country to achieve self-sufficiency in food-grains and stave off the threat of famine.
Agricultural intensification in the 1970s to 1980s saw an increased demand for rural labor
that raised rural wages and, together with declining food prices, reduced rural poverty.
However agricultural growth in the 1990s and 2000s slowed down, averaging about 3.5% per
annum, and cereal yields have increased by only 1.4% per annum in the 2000s. The slow-
down in agricultural growth has become a major cause for concern. India’s rice yields are
one-third of China’s and about half of those in Vietnam and Indonesia. The same is true for
most other agricultural commodities.
Policy makers will thus need to initiate and/or conclude policy actions and public programs to
shift the sector away from the existing policy and institutional regime that appears to be no
longer viable and build a solid foundation for a much more productive, internationally
competitive, and diversified agricultural sector.


 PRIORITY AREAS FOR SUPPORT

1. Enhancing agricultural productivity, competitiveness, and rural growth

Promoting new technologies and reforming agricultural research and extension: Major reform
and strengthening of India’s agricultural research and extension systems is one of the most
important needs for agricultural growth. These services have declined over time due to
chronic underfunding of infrastructure and operations, no replacement of aging researchers or
broad access to state-of-the-art technologies. Research now has little to provide beyond the
time-worn packages of the past. Public extension services are struggling and offer little new
knowledge to farmers. There is too little connection between research and extension, or
between these services and the private sector.
2. Improving Water Resources and Irrigation/Drainage Management: Agriculture is
India’s largest user of water. However, increasing competition for water between industry,
domestic use and agriculture has highlighted the need to plan and manage water on a river
basin and multi-sectoral basis. As urban and other demands multiply, less water is likely to be
available for irrigation. Ways to radically enhance the productivity of irrigation (“more crop
per drop”) need to be found. Piped conveyance, better on-farm management of water, and use
of more efficient delivery mechanisms such as drip irrigation are among the actions that
could be taken. There is also a need to manage as opposed to exploit the use of groundwater.
Incentives to pump less water such as levying electricity charges or community monitoring of
use have not yet succeeded beyond sporadic initiatives. Other key priorities include: (i)
modernizing Irrigation and Drainage Departments to integrate the participation of farmers
and other agencies in managing irrigation water; (ii) improving cost recovery; (iii)
rationalizing public expenditures, with priority to completing schemes with the highest
returns; and (iv) allocating sufficient resources for operations and maintenance for the
sustainability of investments.
3. Facilitating agricultural diversification to higher-value commodities: Encouraging
farmers to diversify to higher value commodities will be a significant factor for higher
agricultural growth, particularly in rain-fed areas where poverty is high. Moreover,
considerable potential exists for expanding agro-processing and building competitive value
chains from producers to urban centers and export markets. While diversification initiatives
should be left to farmers and entrepreneurs, the Government can, first and foremost, liberalize
constraints to marketing, transport, export and processing. It can also play a small regulatory
role, taking due care that this does not become an impediment.
Promoting high growth commodities: Some agricultural sub-sectors have particularly high
potential for expansion, notably dairy. The livestock sector, primarily due to dairy,
contributes over a quarter of agricultural GDP and is a source of income for 70% of India’s
rural families, mostly those who are poor and headed by women. Growth in milk production,
at about 4% per annum, has been brisk, but future domestic demand is expected to grow by at
least 5% per annum. Milk production is constrained, however, by the poor genetic quality of
cows, inadequate nutrients, inaccessible veterinary care, and other factors. A targeted
program to tackle these constraints could boost production and have good impact on poverty.
4. Developing markets, agricultural credit and public expenditures: India’s legacy of
extensive government involvement in agricultural marketing has created restrictions in
internal and external trade, resulting in cumbersome and high-cost marketing and transport
options for agricultural commodities. Even so, private sector investment in marketing, value
chains and agro-processing is growing, but much slower than potential. While some
restrictions are being lifted, considerably more needs to be done to enable diversification and
minimize consumer prices. Improving access to rural finance for farmers is another need as it
remains difficult for farmers to get credit. Moreover, subsidies on power, fertilizers and
irrigation have progressively come to dominate Government expenditures on the sector, and
are now four times larger than investment expenditures, crowding out top priorities such as
agricultural research and extension.
5.. Poverty alleviation and community actionsWhile agricultural growth will, in itself,
provide the base for increasing incomes, for the 170 million or so rural persons that are below
the poverty line, additional measures are required to make this growth inclusive. For instance,
a rural livelihoods program that empowers communities to become self-reliant has been
found to be particularly effective and well-suited for scaling-up. This program promotes the
formation of self-help groups, increases community savings, and promotes local initiatives to
increase incomes and employment. By federating to become larger entities, these institutions
of the poor gain the strength to negotiate better prices and market access for their products,
and also gain the political power over local governments to provide them with better
technical and social services. These self-help groups are particularly effective at reaching
women and impoverished families.
6. Sustaining the environment and future agricultural productivityIn parts of India, the over-pumping of
water for agricultural use is leading to falling groundwater levels. Conversely, water-logging is leading to the
build-up of salts in the soils of some irrigated areas. In rain-fed areas on the other hand, where the majority of
the rural population live, agricultural practices need adapting to reduce soil erosion and increase the
absorption of rainfall. Overexploited and degrading forest land need mitigation measures. There are proven
solutions to nearly all of these problems. The most comprehensive is through watershed management
programs, where communities engage in land planning and adopt agricultural practices that protect soils,
increase water absorption and raise productivity through higher yields and crop diversification. At issue,
however, is how to scale up such initiatives to cover larger areas of the country. Climate change must also be
considered. More extreme events – droughts, floods, erratic rains – are expected and would have greatest
impact in rain-fed areas. The watershed program, allied with initiatives from agricultural research and
extension, may be the most suited agricultural program for promoting new varieties of crops and improved
farm practices. But other thrusts, such as the livelihoods program and development of off-farm employment
may also be key.

VII. Recent Government Policies Affecting Indian Agriculture:

As part of its national agriculture program, India is prioritizing crops that require significant
intensification, especially for fungicides. The focus on more sugarcane production,
horticulture and continued growth in the production of grains can lead to a significant boon
for the crop protection industry. Some major recent trends include:
1. Year of horticulture: Agriculture Secretary Mr. P.K. Basu said that the Ministry of
Agriculture is giving significant thrust to the horticulture sector. The year 2012-13 has been
declared as the “Year of Horticulture.” Two conferences are going to be organized during the
year. The first conference in February will focus on planting, material improvement and crop
management while the second conference in November will be on post-harvest management
and processing. Throughout the year, exhibitions will be held.

2. Government of India likely to allow fresh export of sugar: The Government of India is
likely to allow 1 million tones of fresh sugar exports with an aim to help cash-strapped sugar
mills take advantage of the higher export price and repay farmers of previous cane purchases.
In early January, the Supreme Court asked the mills to repay within three months around Rs 9
billion ($180 million) to farmers in the state of Uttar Pradesh for cane purchases made during
2006-2008.
3. Subsidized crop loans likely to be extended to farm equipment: The Ministry of
Agriculture proposes to extend subsidized crop loan of 4% for agriculture mechanization. At
present, the loan at the subsidized rate is only available for crop-related inputs such as seeds.
Officials said the idea is to bring down farmers’ labour costs, which account for around 25%
of total costs.
4. Government of India to discontinue technological missions for cotton and jute: To
give priority to food grain production, the Union Ministry of Agriculture has decided to end
the technological missions for cotton and jute beginning in April. The move was partly
prompted by farmers growing more cash crops beyond domestic demand. “In cotton, the
acreage has gone up sharply year, in anticipation of higher prices. However, domestic
demand is not much. Now, producers eye export market and there is no reason why the
government will fund a crop to meet overseas demand,” a government official said.

5. Cash transfer to farmers faces hurdle: The Indian Government buys rice, wheat and
other crops from the farmers at a price known as “minimum support price” (MSP). The Food
Ministry introduces this year a plan to transfer the MSP directly to the farmers’ accounts or
through account a check system, but it has run into roadblocks. The plan was strongly
opposed by the cartel of middlemen and commission agents. Commission agents purchase
grains from farmers at low rates and sell the produce to Food Corporation of India at MSP. If
payments are made directly to the farmers, the middlemen will lose their commission.Many
states have not yet adopted a system to directly transfer money to farmers for grains procured
on behalf of Food Corporation of India (FCI), making the plan purposeless. In Punjab, one of
India’s biggest contributors of grains, the government is facing the biggest challenge in
starting the process of direct payment, as the state has a well-established system of
commission agents and middle men. The Food Corporation of India had to discontinue the
process of direct payment during the current season midway because of dispute between FCI
and commission agents. The direct payment system could allow smallholders to better
manage input costs because of India’s MSP predictability.

Conclusion:

Agriculture makes the highest contribution to India's GDP. Agriculture contributes almost
about 13.7 percent to the country's GDP. It has been seen in the last few years that the input
of the agriculture sector has been declining, but it is still the biggest contributor. Agriculture
occupies a prominent position in Indian policy-making not only because of its contribution to
GDP but also because of the large proportion of the population that is dependent on the sector
for its livelihood. However it is clear that India’s agricultural sector has made huge strides in
developing its potential. The green revolution massively increased the production of vital
food grains and introduced technological innovations into agriculture. This progress is
manifested in India’s net trade position. Where once India had to depend on imports to feed
its people, since 1990 it is a net exporter of agri-food products. Its agriculture is large and
diverse and its sheer size means that even slight changes in its trade have significant effects
on world agricultural markets. Training the farmers and educating them appropriately to
change their mindset and reorienting them to take up new activities or adopt foreign
technology is of utmost importance. In this context, it is necessary to involve non-
governmental organizations in training and mobilizing the rural poor to face the challenge of
liberalization. Also, with domestic economic reforms, more care needs to be exercised to
draw up state-specific liberalization measures to maximize their benefits. Lastly, in the
implementation of these reforms for successful globalization, one crucial element, not
entirely within control is the need for good governance and stability in the political and
economic environment.