INDIAN INSTITUTE OF LEGAL STUDIES

AGRICULTURE AND ITS IMPORTANCE ON INDIAN

ECONOMY

PROJECT UNDERTAKEN BY:

SUSMITA PAUL
B.COM LLB (HONS) SEM-1
ROLL NO: 18

UNDER THE GUIDANCE OF:

Ms. BINITA RAI
ASSISTANT PROFESSOR OF ECONOMICS
INDIAN INSTITUTE OF LEGAL STUDIES
 ACKNOWLEDGEMENT
I would like to express my special thanks of gratitude to my teacher Ms. Binita Rai, who gave
me the golden opportunity to do this wonderful assignment of Economics on "
AGRICULTURE AND ITS IMPORTANCE ON INDIAN ECONOMY”, who also helped me
in completing my assignment. I came to know about so many new things and I am really
thankful to them. Secondly, I would also like to thank my parents and friends who helped me
a lot in finalizing this project within the limited time frame.
 TABLE OF CONTENT

SL NO. CHAPTERIZATION PAGE NO.

1. SYNOPSIS 1

2. INTRODUCTION 4
ROLE OF AGRICULTURE IN INDIAN
3. ECONOMY 5
IMPORTANCE OF AGRICULTURE IN INDIAN
4. ECONOMY 7
SHARE OF AGRICULTURE IN INDIAN
5. ECONOMY 9
IMPORTANT FEATURES OF INDIAN
6. AGRICULTURE 10

7. CONCLUSION 12

8. BIBLIOGRAPHY 13
 SYNOPSIS
EVOLUTION OF THE PROBLEM

Agriculture in India has evolved significantly since its inception around 9000 BCE,
transitioning from subsistence farming to a vital sector of the economy. Historically,
agricultural practices flourished during the Indus Valley Civilization and later expanded with
innovations like irrigation systems and crop diversification. The Green Revolution in the
1960s marked a turning point, enhancing food security and self-sufficiency through high-
yield varieties and improved farming techniques. Today, agriculture remains crucial,
supporting about 70% of rural livelihoods and contributing approximately 18% to GDP,
despite its declining share due to industrial and service sector growth.

STATEMENT OF THE PROBLEM

Agriculture is a cornerstone of the Indian economy, significantly impacting employment,

food security, and rural development. Approximately 54% of the population relies on
agriculture for their livelihood, contributing around 17% to the GDP. Despite a declining
share in national income due to industrial growth, agriculture remains vital for economic
stability and sustains millions of households. It also supports ancillary industries and plays a
crucial role in international trade.

HYPOTHESIS

Agriculture is a cornerstone of the Indian economy, significantly influencing employment,

food security, and rural development. It employs over 50% of the workforce and contributes
approximately 17-20% to the GDP, underscoring its vital role in sustaining livelihoods for
millions. Despite a declining share in national income due to industrial growth, agriculture
remains essential for economic stability and cultural heritage, linking rural communities and
supporting ancillary industries.

RESEARCH QUESTIONS

1. What is the current contribution of agriculture to India's GDP, and how has this
changed over the past few decades?
2. What are the effects of modern agricultural practices on productivity and
sustainability in India?

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 3. How does the agricultural sector contribute to food security in India, especially in the
context of a growing population?

OBJECTIVE OF THE STUDY

The objective of the study on Agriculture and Its Importance in the Indian Economy is to
analyze the multifaceted role that agriculture plays in shaping the economic landscape of
India. This sector not only serves as a primary source of livelihood for a significant portion of
the population—approximately 54.6% of individuals are engaged in agriculture and allied
activities—but also contributes substantially to the national GDP, accounting for around 17-
20% in recent years.

SIGNIFICANCE OF THE STUDY

The study of agriculture's significance in the Indian economy is crucial, as it remains a

cornerstone of rural livelihoods and national food security. Approximately 54.6% of the
population relies on agriculture for their income, contributing around 17.5% to the GDP.
Despite a declining share in national income due to industrial growth, agriculture supports
over half of the workforce and provides essential raw materials for industries

SCOPE OF THE STUDY

The study of Agriculture and its Importance on the Indian Economy encompasses a
comprehensive analysis of the agricultural sector's multifaceted role in shaping India's
economic landscape. Agriculture remains a pivotal component of the Indian economy,
employing more than 50% of the workforce and contributing significantly to the Gross
Domestic Product (GDP), with estimates indicating a contribution of around 17.5% in recent
years.

LIMITATION OF THE STUDY

The study of agriculture's importance in the Indian economy faces several limitations that
affect its comprehensiveness and applicability. Data Constraints: The reliance on
government statistical surveys can lead to biases, as these sources may not fully capture the
informal agricultural sector, which is significant in India. This underreporting can skew the
understanding of agricultural productivity and employment dynamics. The analysis often
focuses on specific periods, such as 2014 to 2024, which may overlook long-term trends and
historical contexts that are crucial for understanding agricultural evolution in India. This

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limited temporal perspective can result in an incomplete picture of the sector's challenges and
successes over time.

RESEARCH METHODOLOGY

The study is purely based on doctrinal method. The study primarily relies on secondary data,
which includes government reports, census data, and statistical abstracts to analyze trends and
patterns in agricultural performance. This data provides insights into the sector's contribution
to GDP, employment, and overall economic development. Additionally, primary data is
collected through surveys and interviews with farmers across various regions to understand
their economic conditions, challenges faced, and perceptions regarding agricultural policies.

MODE OF CITATION

The citation style for the essential elements of “Agriculture and its importance in Indian
Economy” INDIA is of the Blue Book of 20th edition.

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 INTRODUCTION

The Agriculture in India is basically a part of life; it is a system of work and

culture. None of the farmer of the country likes to keep out land fallow, whether it is profitabl
e or not. Farmers spend maximum time in the field. Earlier the country was self-dependent
and was termed as ‘Golden Bird’.

However, the situation changed with the arrival of Mughals and Britishers and their colonial
policies. After independence our main problem was how to feed to people. Then our planners
and policy makers, agricultural scientists and economists decided to produce more foodgrains
in order to achieve self-sufficiency. The period of late mid sixties is known as the green
revolution period. Dr. Swaminathan and Dr. Borlag along with other agricultural scientists
took a challenge to enhance the production and they succeeded. After overcoming the food
problem by producing sufficient paddy and wheat, the next aim was to become self sufficient
in pulses, oilseed and milk, with quality products. Currently the country is in a position to
export the agricultural produce and
products. Now the country is economically sound as the per capita income of the people hasin
creased but still it is not fully satisfactory. The farmers are yet to undertake cultivation in a
professional way. Many industries have come up with new agriculture products. Now the
question is how to make the best use of alternative available.

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 ROLE OF AGRICULTURE IN INDIAN ECONOMY

Indian agriculture was in the stage of great development and maturity much before the newly
advanced countries of the world embarked on the path of progress. There was a proper
balance between agriculture and industry and both flourished hand in hand. This situation
continued till the middle of 18th century. The interference from the alien British government
and its deliberate policy of throttling the village handicrafts and cottage industries destroyed
the fibre of balance and the economy of the country was badly shattered. British pursued a
typical colonial policy in India and did nothing to develop agriculture. Instead they created a
class of intermediaries known as Zamindars who sucked the blood of the rural poor. The
parasitic class took a substantial part of the produce away and the actual cultivators were left
only with subsistence income. The cultivators had neither the resources nor the incentive to
invest in agriculture. Therefore, Indian agriculture in the pre independence period
can be correctly described as a subsistence occupation which yielded too little to live on and
too much to die on. The Zamindars and money lenders grated a large part of land on the
pretext of settlement for debt taken by cultivators and a number of cultivators were thus left
landless. This created a class of landless labourers or agriculture workers who worked on the
land of others for wage which was often too meagre to keep the body and soul together. A
majority of farmers were just able to take out few leaves of subsistence from agricultural
activities, it was only after the advent of planning (and more precisely after the advent
of green revolution in 1966) that some farmers started adopting agriculture on a commercial
basis.

1. Share of Agriculture in National Income

At the time of First World War, agriculture contributed two third of national income.
However, after the initiation of planned economic development, the share of agriculture has
gradually and regularly declined on account of the development of the secondary and tertiary
sectors of economy. The share of agriculture in GDP at factor cost was 56.5 percent in 1950-
51 declined steadily to 13.94 percent in 2013-14. The share of gross value added (GVA) of
agriculture and allied sector in total GVA at2011-12 prices is estimated to be 15.4 per cent in
the year 2015-16. The declining share of agriculture in national income is often taken as an
indicator of economic development. Normally in developed countries the economy is less
dependent on agriculture as compared to under-developed countries.

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2. Largest Employment Providing Sector

One of the important roles of agriculture sector is to provide employment to large section of
society in India. In 1951, 69.5 percent of the working population was engaged in agriculture.
The percentage has fallen marginally to 62 percent in 1995and around 49 per cent in 2010-11.
However, there is large and rapid increase in the absolute number of people engaged in
agriculture. Development of other sectors of the economy has not been sufficient to provide
employment to the ever rising addition to working population who are, therefore, forced to
fall back upon agriculture even if their marginal productivity is almost zero.

3. Other Roles Played by Agriculture

i. Remove poverty and hunger

ii. Providing food and nutrition

iii. Get rid of imports

iv. Best possible utilization of resources

v. Development of horticulture, animal husbandry and fisheries

vi. Saving of foreign exchange

vii. Improving purchasing power of entire population.

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 IMPORTANCE OF AGRICULTURE IN INDIAN ECONOMY

Indian agriculture is incomparable in Indian economy. Though its contribution is diminishing

due to higher growth in secondary and tertiary sectors, yet, more than
50 per cent working population is engaged mostly in agriculture. We get raw materialfrom
our agriculture for industries. Agriculture provides food to the entire population and feed and
fodder to livestock. Agriculture is also an important source of finance of central and state
governments. Indian agriculture has an honourable place in international field earning
valuable foreign exchange for the country.

 Importance in Industrial Development

In India, agriculture plays an important role in industrial development. Agriculture provides

raw material to the industries like cotton textiles, Jute, Sugar and Vanaspati etc. which are of
basic importance to national economy. Not only this, all workers engaged in industries
depend for their consumption requirements on agriculture. Agriculture also provides market
for industrial products. However, the level of income of farmers and landless labourers is
very low in India. In spite of low level of income, markets for industrial products in
agricultural sector is considerable on account of largest size of population residing in rural
area.

 Importance in International Trade

Agriculture sector in India has occupied an important place in the export of the country. The
Agricultural imports amounting Rs.1205.86 crores was 2.79 percent of total national imports
in 1990-91, it rose to Rs.12086 crores in 2000-01, it was 5.29 percent
of total national imports. In the year 2013-14 it became Rs. 85727.30 crores which was 3.16
per cent of the total national imports. In the year 2015-16, the provisional
estimate of agricultural import is Rs. 140288.69 crores which is 5.63 percent of total national
import. Thus it can be concluded that though in absolute terms the imports amount has
increased since 1990-91 to 2015-16 however the year-wise percentage of agricultural imports
found fluctuating.

The agricultural export which was Rs.6012.76 crores i.e. 18.49 percent of the total national
exports in 1990-91 came down to 113.79 percent in 2013-14 and in absolute terms the
agricultural export was Rs. 262778.54 crores. As per the provisional estimate for the year
2015-16, agricultural export is Rs. 215395.68 crores which is12.55 per cent of total national

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import. The Keeping agricultural imports and export sin to consideration, agricultural exports
have been always higher than the imports showing a positive trade balance.

 Contribution of Agriculture in Capital Formation

The Gross capital formation in agriculture and allied section was Rs.187 crores in1950-51
which increase to Rs.1752 crores in 1974-75 and Rs. 197364 crores in 2010-11 (Source:
Central Statistical Organization, New Delhi and www.agricoop.nic.in).This includes both
public sector & private sector. But there is decreasing trend of capital formation
through agriculture to total grass capital formation. In 1950-51 the share of agriculture and
allied sector in gross capital formation was 19 per cent which decreased to 11 per cent in
1974-75 and 7.4 per cent in 2010-11 (Central Statistical Organization, New Delhi and
www.agricoop.nic.in).At current price series, 2011-12 series, the gross capital formation in
agriculture and allied sector was 314639 crore in 2014-15 which is 7.7 per cent of total gross
capital formation in the country. The decline in agriculture sector capital formulation may be
due to declining share of public sector over years, low level of domestic savings, lack of
entrepreneurship, weak inducement to invest etc.

 Importance of Agricultural Products in Consumption

The per capita income of India is very low, consequently, a large part of this income is spent
on fulfilling the basic consumption requirements of the people. It has been estimated that, in
India rural population spends 48.6 per cent of income on food, whereas the urban population
spends about 38.6 per cent of income on the food expenditure. Thus, food dominates
the household budget. Keepingin viewthe possibilities of increase in population and per capit
a consumer expenditure the planning commission has estimated that demand for agricultural
commodities is likely to increase at the rate of 4.7 per cent per annum. Accordingly,
the nation can remain self reliant in agriculture only if, agricultural out put rises at least at the
rate of 5 percent per annum.

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 SHARE OF AGRICULTURE IN INDIAN ECONOMY

1. Share in GDP

Some broad estimates of the share of agriculture in GDP of India suggest that in the first
quarter of the twentieth century (1901-1925) the share of agriculture in GDP was about two-
third. At the time of Independence (1947) this share declined to nearly one-half. As expected,
this share has steadily declined to about 24 per cent in 2000-01.

2. Share in Workforce

Agriculture in India absorbs a very large proportion of the labour-force. The proportion of
workforce engaged in agriculture in India even in the 1990s is more than 60 per cent.
According to the 1991 population census 67 per cent of the workforce was engaged in
agriculture. This proportion was marginally lower than the earlier census figure which was 72
per cent. We have given in Table 5.1 the figures relating to the percentage share of workforce
engaged in agriculture in different countries. The table shows that in the year 1990 this
proportion was only 2 to 3 per cent in industrially developed economies like UK and USA. It
was 7 per cent in Japan and about 6 per cent in Australia. Among the low income economies
Nepal had nearly 95 per cent of its workforce engaged agricultural activities in while China
had nearly 72 per cent and Pakistan about 52 per cent. The average share of agriculture in the
workforce in the year 1990 for the world as a whole was around 49 per cent. Once again it is
evident that with industrial development of an economy, the proportion of workforce engaged
in agriculture declines. In the case of Indian economy however, there is only a weak
indication of such a tendency.

3. Share in Exports

Agricultural sector has been a major contributor to India’s export earnings. For a long time
the agro-based products namely tea, cotton textiles and jute textiles accounted for more than
50 per cent of the export earnings of the country. By adding to the list other products like
spices, coffee, tobacco, cashew, sugar, etc., the share of agriculture in total exports was
almost 70 per cent. This share has, however, declined over time with economic growth and
diversification of the economy. For example, the share of agriculture and allied products in
the total exports in 1960-61 was nearly 44 per cent. It has continued to decline and for the
year 2000-01 this share was only 13.5 per cent.

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 IMPORTANT FEATURES OF INDIAN AGRICULTURE

1. Uncertainties and Fluctuations in Agricultural Production

Agriculture in India continues to remain predominantly rainfed. The total area irrigated as a
percentage of the gross cropped area (GCA) was only about 17 per cent at the beginning of
the 1950s. It has gradually increased to around one third of the GCA in the decade of nineties.
Thus, nearly two third of the cultivated area continue to depend upon rainfall for irrigation
purposes. Fluctuation in the quantity, frequency and timing of rainfall from year to year is a
common feature in India. Thus there is some uncertainty in the availability of an essential
input, i.e., water. The fluctuation in rainfall causes fluctuations in agricultural production and
thereby in the GDP of India. Uneven spread of rainfall across regions further adds to these
fluctuations. The economy often witnesses drought conditions in some regions while some
other regions are devastated by floods in the same year.

2. Wide Diversities

Indian agriculture is characterised by large diversities across regions. The climatic and soil
conditions vary from the arid desert in Rajasthan to the high rainfall and extremely wet
conditions in Assam and Meghalaya. There is, therefore, a multiplicity of crops and some
degree of inter-regional specialisation in agricultural production. Furthermore, there are
diversities in the productivity of land not only between regions but also within a region. Hill
districts of Uttar Pradesh have agro-climatic conditions which are very different from that in
the plains of the same state. Even within the plains there are wide differences in fertility and
soil conditions between the eastern and the western parts of the state.

3. Predominance of Small Farmers

A large number of cultivators are operating on very small or tiny farms. In the year 1990-91,
about 60 per cent of the farms were of less than one hectare in size and almost 78 per cent of
the farms were of 2 hectares or less in area. This is primarily attributed to the pressure of
growing population on agriculture which causes subdivision and fragmentation of the farms.
Many of these farms are inadequate to provide even subsistence to a small family.

4. Predominance of Subsistence Farming

A large number of small and marginal farmers do not produce enough for the needs of the
families working on them. They are known as subsistence farmers. Production for sale in the

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market is confined only to larger farms. There is, thus, a mixture of subsistence farming and
commercial farming. Benefits of state policies like price support and subsidies are available
to the large farmers who are engaged in commercial farming and not to the small farmers
who are engaged in subsistence farming.

5. Inequalities in Agricultural Sector

There are wide disparities in the size of farms. In India, almost 78 per cent of the farms are
less than two hectares in area. Such farms constitute about 32 per cent of the total cultivated
area. At the other end of the spectrum, large farms of size ten hectares and above constitute
only 1.2 per cent of the total number of farms but operate as much as 17 per cent of the
cultivated area. Large farmers are able to get access to the financial and irrigation resources.
They are, therefore, able to obtain much higher income than the small and marginal farmers.

6. Low Level of Productivity

Low level of productivity has been one of the symbols of backwardness of Indian agriculture.
Despite several technological improvements and spread of new agricultural technology the
overall level of productivity has remained low. Compared to developed countries productivity
per worker as well as per hectare in India is very low. For instance productivity per hectare in
the case of rice, which is a major crop of India, was only 29 quintals in India as compared to
63 quintals in USA, 62 quintals in Japan, 61 quintals in China in the year 1998. For other
major crops like wheat, groundnut and cotton, the situation is very much similar. Low
productivity not only aggravates the pressure on land but also keeps the cost of production
very high.

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 CONCLUSION

In conclusion, agriculture remains an indispensable part of India's economy, influencing not

only economic metrics but also social structures and cultural practices. Its multifaceted
importance necessitates continuous investment in modernization and sustainability efforts to
ensure that it can meet future demands while supporting the livelihoods of millions. As India
progresses towards a more industrialized economy, recognizing and reinforcing the role of
agriculture will be crucial for balanced economic growth and social stability.

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 BIBLIOGRAPHY

1. https://egyankosh.ac.in/bitstream/123456789/19605/1/Unit-5.pdf
2. https://www.scribd.com/document/736148385/Role-of-Agriculture-in-Indian-Economy
3. http://www.lscollege.ac.in/sites/default/files/ECONOMICS%2CBA-II%20-Role%20of
%20Agriculture%20in%20Indian%20Economy.pdf

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