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Home Agriculture and Economic Development Role of Agriculture Sector in Economic Development of a Developing Country


Role of Agriculture Sector in Economic Development of a Developing Country:


The development of any poor and backward economy can be brought by promoting its agri. sector. It is evident from the following arguments:


(1) Availability Of Food:


In case of UDCs the production of food stuff plays an important role. As a result of land reforms or increase in productivity due to better use of inputs etc. the incomes of the farmers may increase. The increase in incomes of the farmers result in increasing the demand for foodstuff. It so happens that in case of UDCs the income elasticity of demand for foodstuff is very high (ranging between 0.6 to 0.8%). Moreover, due to provision of public health services in UDCs the death rate declines while birth rate does not fall. With this the demand for food stuff goes on to increase. Again, due to industrialization, the mobility of labor to cities increases leading to increase the incomes of people. As a result, they increase the demand for consumables. In such state of affairs, if agri. sector remains passive and agri. production fails to respond the prices of food stuff will increase. Therefore, they will have to be imported from other countries having a pressure on the foreign exchange reserves of the country. Hence, to avoid such all, agri. sector will have to play it role by enhancing food production.


(2) Increase in Demand for Industrial Products:


When surplus is generated in agri. sector the purchasing power of the farmers will increase which will lead to increase the demand for industrial goods. In case of UDCs the market is limited as the incomes of farmers and the labor are limited. Therefore, the demand for manufactured goods remains limited. But when the agri. productivity increases the incomes of farmers etc., with increase leading to expand the demand for manufactured goods. In this way, the market will be extended. The manufactured sector will gain momentum. Moreover, in such, situation the demand for agri. inputs like fertilizers, tractors and harvesters will increase. This will also provide a stimulus to industrial sector. The expansion of industrial sector will have the effects on the means of transportation and communication. Following Prof. Harischman, so many forward and backwash effects will come into being. So many sectors of the economy will grow and producers profits will increase leading to enhance capital formation. This is the contribution of agri, sector to the other sectors of the economy when it trades with other sectors, according to Prof. Kuznets.


(3) Foreign Exchange Earnings:


The developing countries specialize in certain products which are to .be exported. As the production and productivity of these goods increases their exports increase. With this the foreign exchange earnings of such countries increase which can be utilized to import the capital goods. Such capital goods can be used for industrialization. In this way, the domestic use of raw material will increase leading to reduce the export surplus. But the domestic industrialization will become helpful in the production of import-substitutes. In this way, the foreign exchange could be saved. Thus, it is the agri. Development which results in foreign exchange earnings. The capital goods could be imported and industrialization process will be started. In this way, not only foreign exchange will be saved, but foreign exchange will also be earned when the manufactured exports increase. This is called 'Production Contribution' of agriculture sector, according to Prof Kuznets. As a result of this effect, in the first phase the production of the economy increases, while in the second phase the per capita output rises.


(4) Mobilization of Capital by State:


In the initial stage of economic development the capital accumulation can be made with the help of agri. surplus. As Prof. Johnson and Mellor Write:


"When the productivity increases in agri. sector, it means that either inputs are being used in lesser amount or agri. yields have been increased".


It is the labor which is the biggest input in the agri. sector which can be used for capital formation. If laborers are withdrawn from farms and they are utilized in the constructional fields the capital mobilization can be increased. Again capital mobilization from agri. sector can be made by imposing land tax, agri. income tax, educational and land cesses etc. But this is not possible because of political reasons. Thus when agri. sector contributes to other sectors of the economy and shifts resources to other sectors of the economy it is called Factor Contribution of agri. sector, according to Prof. Kuznets.


(5) Employment Opportunities:


It is the agri. sector which not only provides employment opportunities, but it also gives rise to diversification in such job opportunities. Whenever, the agri. productivity and incomes increase the demand in the rural sector increases. For example, the demands for small farmers, weavers, cobblers, carpenters, plumbers, masons, black smiths and machinists etc. will increase. In this way, the agri. development will promote the development of other sectors.


(6) Increase in the Welfare of the Rural People:


When agri. surplus increases the welfare of rural people will increase. On the basis of increased income the peasants will be able to consume those goods which have more calories like eggs, fish, ghee, butter and meat etc. They will improve their standard of living; will build good houses; will acquire luxuries of life like radio, television, dish antenna, motor-cycles, ready made garments, shoes and even cosmetics. Thus we simply say that growth of agri. sector will lead to uplift the life-standard of the people.


Relevant Articles:


Role of Agriculture Sector in Economic Development of a Developing Country
Structure of Third World Agrarian System
Economics of Agricultural Development/Stages of Agricultural Development
Strategy for Agricultural and Rural Development
Economics of Small Scale Agriculture
Economics of Agriculture Specialization
Role of Agriculture in Economic Growth
Agriculture Surplus as a Source of Capital Formation and Economic Development
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Agriculture Sector and Capital Formation in Developing Countries
Land Reforms or Agrarian Reforms
Land Reforms Measures
Effects of Agrarian Reforms
Agrarian Reforms and Economic Development
Green Revolution (GR)
Nature of Green Revolution (GR)
Causes or Importance of Green Revolution (GR)
Effects of Green Revolution (GR) on Income
Problems/Demerits of Green Revolution (GR)
Relationship Between Farm Size and Farm Output with Respect to Productivity
Productivity of Lands
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Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
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Equilibrium of Demand and Supply
Economic Resources
Scale of Production
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