Indian Economy is, usually, described as an agricultural economy. Have you ever thought why it is called so? The answer is very simple. We may see it from any angle, the contribution of agriculture in Indian economy is very great. The role and importance of agriculture in Indian economy can be judged mainly on following counts
(i) Contribution of Agriculture to National Income: The contribution of agriculture to India’s National Income had always been very large. At present the share of agriculture and allied activities in our national income is nearly 27 per cent. We know that with the process of development the share of agriculture in the national income decreases while the share of industry rises. India is also witnessing the same. In spite of this, agriculture still has the largest share in India’s national income in comparison to other economic activities. And it is estimated that for many years to come the share of agriculture in national income will continue to remain the largest one.
(ii) The Source of Livelihood: On the basis of occupation the rural households of India can broadly be classified into two categories— Agricultural rural households; and Non-agricultural rural households. Agricultural rural households include farmers and landless agricultural laborers. They all depend directly on agriculture for their living. Or the other hand, non-agricultural rural households include artisans such as carpenters, blacksmiths, weavers and potters and the people engaged in the rural services such as barbers, washermen and teachers. It is often seen that these people cannot have sufficient earning from their own occupations alone. Hence a large number of people among these households sometimes adopt agriculture as their subsidiary occupation. Besides this, all the occupations of non-agricultural rural households depend primarily on agriculture. It is thus clear that almost all rural households in India depend, directly or indirectly, on agriculture for their livelihood.
(iii) Contribution to Employment: Nearly 60 per cent of our total working population and nearly 80 percent of our rural working population even today get their employment from agriculture. When people do not get employment and livelihood in other sectors of economy, they naturally come back to agricultural sector. It is estimated that the possibility of large scale industry in the urban sector being able to provide significantly greater employment opportunities in future is not very great. Therefore, in spite of all its weaknesses, agriculture is likely to remain the most promising and the biggest source of employment in future.
(iv) The Source of Food Requirements: Food requirements of the country’s population are also met by the agricultural sector. India is now nearly self-sufficient in food grains, especially in wheat and rice. The per capita food grain requirement in India is about 172 kg per annum which has almost been met. But in respect of pulses and edible oils the situation is not satisfactory. The per capita intake of pulses should have been 25.5 kg per annum but it is only 15 kg per annum. Our main concern is that the per capita availability of pulses has come down over the years. Similarly, the per capita availability of edible oil was 6.5 kg per annum which was also below the recommended level (14 kg). Thus, agriculture is largely meeting the overall food requirements of the Indian population, yet in respect of two essential sources of nutrition—pulses and edible oil—the situation is not satisfactory.
Besides this, the fodder to nearly 25 crore livestock is also available only from the agricultural sector. In this way we in India are dependent on agriculture for country’s food and fodder requirements. Both food grains and fodder are basic and essential commodities for living.
(v) Contribution in industrial Development: Agriculture contributes to industrial development in two ways. One, by providing necessary raw materials to the industries, and second, by purchasing the goods produced by the industries. Many industries in India depend on agriculture for their raw materials, for example, Jute industry (raw jute), Sugar industry (sugarcane), Textile industry (cotton), Edible oil industries (oil seeds), Plantation industry (fruits and vegetables) etc. These are known as agro based industries. Similarly, demand for goods of many industries comes basically from agricultural sector. Take the example of tractor industry, agricultural implements industry, chemical fertilizer industry, pesticide industry, transport industry etc. Besides this, having the largest share in national income and employment the demand for goods of other industries and purchasing power of the people also depend ‘mainly on agriculture.
(vi) Contribution to Government Revenue: In the total Government revenue also, the contribution of agricultural sector is quite large. The State Governments in our country get a very large amount per year as their land-revenue. Besides the revenue receipts from other taxes also increase with the growth of agriculture.
(vii) Contribution in the Field of Export Trade: Agriculture makes an important contribution to India’s export trade directly. Important items of agricultural exports are coffee, tea, oil cakes, tobacco, cashewnuts, spices, raw cotton, rice, fruits and vegetables, flowers etc. Besides this, we also export goods manufactured mainly from raw materials produced by our agricultural sector. They include cotton yarn, cotton fabrics, cotton garments, coir yarn and coir goods, jute yarn and jute goods etc. This can be termed as indirect contribution of agriculture to the export trade. The direct contribution of agricultural sector to our export trade is nearly 18 per cent.
Thus, from all points of view agriculture occupies an important and central place in our economy. That is why it is said that the growth of Indian economy primarily depends on the growth of agriculture.