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Economic development is a process whereby the real national income of a country increases over a long period of time. If the increase in real national income is greater than the increase in population growth, the real per capita income would increase. Thus the increase in real GNP is a representative of economic development.

Now this has always been a matter of interest for the experts that how the GNP of a country would increase or what determines economic development and growth. Commonly it is said that (i) manpower, (ii) capital accumulation, (iii) natural resources, (iv) technology and (v) entrepreneurial abilities play important role to determine economic growth. Among these factors of economic growth, it is the capital accumulation which plays the vital role. The capital accumulation depends upon the creation of surplus, as in an industry, the surplus is created through profits of the industrialists etc. In the same way, the economists are of the view that the surplus can also be created through agriculture.

The creation of agri. surplus becomes possible by (i) increasing agri. production, (ii) utilizing the surplus labor in agri. sector, (iii) imposing tax on agri. sector and (iv) keeping terms of trade against agri. sector.

Theories and Models about Creation of Surplus Through Agriculture:

(i) Agriculture Surplus as a Source of Capital Formation and Economic Development.

(ii) Surplus Labor as a Source of Capital Formation and Economic Development.