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Agricultural and Rural development

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“Most of the people in the world are poor, so if we knew the economics of being poor we would know much of the economics that really matters. Most of the world’s poor people earn their living from agriculture, so if we knew the economics of agriculture we would know much of the economics of being poor” (Shultz, 1979).

Agriculture is one of the strongest determining factors for a country’s growth. In this paper, we highlight the importance of Agriculture in Rural development as well as, the National Economy as a whole by adopting the statistical method of regression analysis.

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Here, we also discuss the advantages and disadvantages of green revolution. Furthermore, we intend to throw light on the plight of Indian farmers, and the problems faced by agricultural sector in India.

In spite of Agriculture being the backbone of our country’s development and the farmers being the backbone of Agriculture, we somehow tend to neglect their needs and prosperity.

Even though the development of Industrial sector has given us very sophisticated lives , we can live in a palace, dress ourselves in the best of the attire but, at the end of the day what matters is the quality and quantity of the food we eat to satiate the basic need of hunger.

According to Wikipedia, 68.8% of our population lives in rural India and 60.41% of the workforce solely depends upon agriculture sector for employment. In order to develop their standard of living, we need to focus on development of agricultural sector and it’s extended arms, the agro-based Industries.

To establish a link between agricultural growth and economic growth , i.e., GDP through regression analysis between variation in GDP and agricultural growth in different time periods between 1951-2011 The effects and side effects of green revolution on GDP

Link between Agricultural sector and Rural India, problems faced and Solutions Studying Agriculture as an industry.

Literature review
In the context of Indian economy, we have come across a remarkable study by Dholakia & Dholakia (1992) of IIM, Ahmedabad wherein the role of agriculture in rural as well as overall growth of about 40 LDCs including India has been analysed by Regression Analysis. Their study concludes that agriculture as a sector of growth had dominated the scene by contributing to rural as well as overall economic growth massively upto the 1980’s after which Industrial sector has taken the lead. But they also stress on the multiplier effect of agriculture being the primary sector of growth and recognize the sector as the main driver of growth.

Effect of Agriculture on GDP
According to the 2011 census, 83.25 crore (68.8 % of total population) still live in rural areas. Most of the people in rural areas earn their livelihood from agriculture and allied sectors i.e. from farming and agro-based industries (60.41% of total work force). Also, poverty mostly persists here (27.1 % in 1999-2000). Thus, development of agriculture is critical for inclusive and sustainable rural development. Assuming rural development to be a direct consequence of overall economic development of the country, we now try to statistically prove the importance of agriculture in the GDP from 1950-51 to 2011-12 by employing the following multiple regression : GDP = a0 + a1 AG + a2 IND + a3 SERV + u …………………………….. (1)

Where GDP = Gross Domestic Product at Factor Price of Indian Economy,AG= output from Agriculture, IND= output from Industrial Sector, SERV= output from Services Sector, all at 2004-05 constant prices , u=error term. The idea is to show how growth of the country is affected by the growth in the three sectors of the economy by using time series data of historical % growth of the sectors taken from the Economic Survey, Government of India, 2012-13. Regression Results for 1950-51 to 1966-67:

GDP = 0.095 + 0.53 AG + 0.13 IND + 0.34 SERV
(0.47) (49.47) (6.74) (5.98)

R2 =0.99, F=1286.06 ….. (1)

Regression Results for 1967-68 to 1982-83:

GDP = -0.315 + 0.42 AG + 0.21 IND + 0.43 SERV
(-0.94) (30.3) (6.93) (5.48)

R2 =0.99, F=559.10 ….. (2)

Regression Results for 1983-84 to 1996-97:

GDP = -0.062 + 0.35 AG + 0.26 IND + 0.39 SERV
(-0.28) (33.01) (12.57) (9.95)

R2 =0.99, F=891.09 ….. (3)

Regression Results for 1997-98 to 2011-12:

GDP = -0.341 + 0.26 AG + 0.28 IND + 0.52 SERV
(-0.735) (10.26) (9.09) (9.05)

R2 =0.98, F=172.08 ….. (4)

Regression Results for 1950-51 to 2011-12:

GDP = -0.968 + 0.41 AG + 0.18 IND + 0.59 SERV
(-4.77) (29.41) (7.50)

R2 =0.97, F=649.42 ….. (5)

Time Period
Variation in GDP due to AG
Variation in GDP due to IND
Variation in GDP due to SERV
Significance of the sample periods

1950-51 to 1966-67
53 %

Before the First Green Revolution in 1967-68

1967-68 to 1982-83
First Green Revolution period

1983-84 to 1996-97
Second green revolution period from 1983-84 till end of Eighth Plan

1997-98 to 2011-2012
Rest of the years after 1997-98
1950-51 to 2011-12
Entire sample period

All the five equations estimated are statistically highly significant. In almost all the equations the importance of agriculture in determining the variations in the growth of total GDP in India is reflected.. All the estimated regression coefficients are statistically significant as reflected in their respective t-ratios and high R2 values and also associated with very high F-statistics fully justifying the accuracy and forecasting ability of the model. Overall we see that the role of agriculture has decelerated after the eighties with services sector gaining ground. But still agriculture retains its importance as both industry and services sector can grow only when agriculture is doing its best. If agricultural growth rate falters , then the resultant rising food prices, import of food grains and other raw materials etc. shall disturb the equilibrium of the entire economy so much that no government policy can rescue the economy out of such depression. Hence, the role of agriculture remains primary to the growth of other sectors and even , rural development.

Green Revolution
Green revolution started in 1967-68 for increasing the production of food crops for the tremendously increasing population by employing scientific methods of production such introduction of HYV and application of modern agricultural techniques.

The positive impacts are :

Increase in Production / yield.

Advantage to farmers: this includes their economic situation improving, even small and marginal farmers (although they were late in joining) getting better yield, control on many insects and pests, mechanizing improved working conditions.

Better land use by employing two and three crop pattern.

Better scientific methods applied as per requirement of farms.

New seeds have been developed with better yield and disease fighting capability.

Improves country’s economic development.

According to the findings of our regression analysis, we see a declining growth rate in agricultural sector after the first green revolution and a further after the second green revolution.

The Negative impacts are :

Degradation of land : Due to heavy chemical fertilizer inputs land has become hard and carbon material has gone down.

Weeds have increased: Due to heavy crop rotation pattern we do not give rest to land nor we have time to employ proper weed removal system which has increased weeds.

Pest infestation has gone up: Pests which we used to control by bio degradable methods have become resistant to many pesticides and now these chemical pesticides have become non effective.

Loss of bio diversity: Due to heavy use of chemical pesticides, insecticides and fertilizers we have lost many birds and friendly insects and this is a big loss in long term.

Effect on Water: Water table has gone down due to lack of water harvesting systems and now we have to pull water from 300 to 400 ft. depth which was 40 to 50 feet earlier as well as there is high amounts of chemical found in water.

Furthermore, there were other revolutions in the field of agriculture like the White Revolution for increasing milk production, Blue Revolution for fisheries , Silver Revolution for poultry, Silver Fibre Revolution for increasing cotton production and so on.

Problems faced by the Agricultural Sector

Non- economic Problems :
Role of women: The importance of women in agriculture has been increasing. They work in “land preparation, seed selection and seed production, sowing, in applying manure, fertilizer and pesticides, weeding, transplanting, threshing, winnowing and harvesting etc as well as in animal husbandry and dairying, and collection of fuel wood, fodder and other products for family needs. Despite their importance, women are continually denied their property rights and access to other productive resources.

Low level of formal education and skills: Education and skills are important for improving farming practices, investment and productivity.. The low level of farmers’ education limits public dissemination of knowledge. The NSS farmers’ Survey clearly shows that awareness about bio-fertilizers, minimum support prices and WTO is associated with education levels which are lower for marginal and small farmers.

Economic Problems :

Land Issues:
The average size of land holdings is very small (less than 2 hectares) and is subject to fragmentation due to land ceiling acts, and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labour.

Credit and Indebtedness: Small holdings need credit for both consumption and investment purposes. Increasing indebtedness is one of the reasons for indebtedness among these farmers in recent years. Dependence of small and marginal farmers on informal sources is high even in states like Andhra Pradesh, Punjab and Tamil Nadu. For example, small and marginal farmers of Andhra Pradesh have to depend on 73% to 83% of their loans on informal sources.

Water problems: Water is the leading input in agriculture. Development of irrigation and water management are crucial for raising levels of living in rural areas. Agriculture has to compete for water with urbanization, drinking water and industrialization.

Agricultural as an Industry
America’s agricultural industry is completely controlled by a few major groups like Monsanto The output because of the huge investments made my these groups have increased approx. 10 times more according to various sources, enough to satisfy the country’s demand but, just like we have two sides to every coin, Agricultural industry becomes a monopoly. These groups increase and decrease the prices of food crops as per their wish and the demand of costumers. Small and marginal farmers play a very insignificant role in the country and common man suffers because inflation. Now, here in India, we can predict a very similar situation to be taking place in the near future. Industries like Reliance have already started their investment in agriculture. There can be huge increase in the output and production but, it will most definitely be a trouble for the common man.

Suggestions :
1) Protecting women’s rights in land, enhancing infrastructure support to women farmers, and giving legal support on existing laws, will facilitate recognition for women as farmers and enable them to access credit, inputs, and marketing outlets.

2) As part of the reforms, lease market should be freed and some sort of security for tenants has to be guaranteed.

3) It is important for small holding farmers to have a reasonable level of awareness regarding information on agriculture. They can be provided with proper education facilities and knowledge specific to farming techniques.

4) In order to overcome climate change sensitive issues, we need to adopt new techniques of production such as hydroponics.

5) Promoting water harvesting, conservation and efficient and equitable use of water by empowering Gram Sabhas to function as Pani Panchayats. Optimal allocation of water resources and enhancing irrigation facilities in an equitable manner shall go a long way in improving productivity.

6) Government should release new plans and schemes for the development of standard of living of Rural India and also give them new equipments are subsidies.


1) India is second in the world in crop output, next to China. According to Wikipedia more than 1.4 million square-kilometers of land in India is under cultivation. 2) 61 percent of land is fully dependant on rain. Thus if rain fails or gets delayed, crops fail driving debt ridden farmers to suicide. 3) Providing food and 100 days of employment to farmers by way of schemes such as NREGA won’t actually fulfill the objective of agricultural and rural development. 4) Other schemes provided by the government for development of rural India and agriculture are : a) Indira Awaas Yojana, 1986, (b) Rural Infrastructure Development Fund, 1996, (c) Swarnjayanti Gram Swarozgar Yojana, 1999, (d) Total Sanitation Campaign, 1999, (e) Pradhan Mantri Gram Sadak Yojana, 2000, (f) National Nutrition Mission, 2001 5) Green Revolution made the rich, richer and the poor, poorer. 6) The over 600 million Indians dependent on agriculture are not all farmers. 7) Because of urbanization, the land used for farming has drastically decreased.

Agriculture in our country has played a key role in determining the growth of GDP since the beginning of the planning era. It has also been found as the main driver of growth of our rural village economy as well as of industry and services sector. The contribution of agriculture to GDP growth, growth of employment in general and rural employment in particular, supply of food grains, raw materials, and above all the livelihood of rural people in the villages etc. has been enormous during the period 1950-51 and 2011-12.Despite that, there have been pitfalls in performance of the sector, and its growth rate particularly in recent years has faltered leading to widespread imports of food grains, rise in food prices, farmers’ suicides receiving alarming proportion as a result of declining level of public investment in irrigation and other rural infrastructure and decelerating total factor productivity. The way out as suggested in this paper include enhancing the rate of agricultural growth to about 4% by way of enhancing factor productivity, fresh land reform measures, adoption of modern agricultural technology and practices, ensuring smooth and easy credit for farmers, increasing public investment in rural infrastructure like irrigation, roads etc, initiating market reforms for a suitable remunerative support price for agriculture, bridging the growing gap between scientific know-how and the field level do-how and by rationalizing agricultural subsidy inter alia. This shall go a long way in bringing all round growth of Indian economy and the much desired inclusiveness in our rural and village economy.

“India lives in its villages”
Mahatma Gandhi

Cite this Agricultural and Rural development

Agricultural and Rural development. (2016, Jul 24). Retrieved from https://graduateway.com/agricultural-and-rural-development/

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