Importance of agricultural sector in a country’s economic development

02Dec 2016
Muharram Macatta
The Guardian
Importance of agricultural sector in a country’s economic development

Agricultural sector plays a strategic role in the process of economic development of a country. It has already made a significant contribution to the economic prosperity of advanced countries and its role in the economic development of less developed countries is of vital importance.

In Tanzania still about 70 to 80 per cent labour is absorbed in this sector. Agricultural progress permits the shift of manpower from agricultural to non-agricultural sector.

In other words, where per capita real income is low, emphasis is being laid on agriculture and other primary industries. Increase in agricultural production and the rise in the per-capita income of the rural community, together with the industrialisation and urbanisation, lead to an increased demand in industrial production.

Various under-developed countries of the world engaged in the process of economic development have by now learnt the limitations of putting over-emphasis on industrialisation as a means to attain higher per capita real income.

Thus industrial and agricultural developments are not alternatives but are complementary and are mutually supporting with respect to both inputs and outputs.

It is seen that increased agricultural output and productivity tend to contribute substantially to an overall economic development of the country; it will be rational and appropriate to place greater emphasis on further development of the agricultural sector.

Agriculture makes its contribution to economic development in following ways: By providing food and raw material to non-agricultural sectors of the economy, by creating demand for goods produced in non-agricultural sectors, by the rural people on the strength of the purchasing power, earned by them on selling the marketable surplus, by providing investable surplus in the form of savings and taxes to be invested in non-agricultural sector, earning valuable foreign exchange through the export of agricultural products, and by providing employment to a vast army of uneducated, backward and unskilled labour.

As a matter of fact, if the process of economic development is to be initiated and made self-sustaining, it must begin with agricultural sector.

The agriculture sector is the backbone of an economy which provides the basic ingredients to mankind and now raw material for industrialisation.

Lessons drawn from the economic history of many advanced countries tell us that agricultural prosperity contributed considerably in fostering economic advancement.

It is correctly observed that the leading industrialised countries of today were once predominantly agricultural while the developing economies still have the dominance of agriculture and it largely contributes to the national income. For example in India, “still 28 per cent of national income comes from this sector.”

Agriculture is the basic source of food supply of all the countries of the world—whether underdeveloped, developing or even developed. Due to heavy pressure of population in underdeveloped and developing countries and its rapid increase, the demand for food is increasing at a fast rate.

If agriculture fails to meet the rising demand of food products, it is found to affect adversely the growth rate of the economy. Raising supply of food by agricultural sector has, therefore, great importance for economic growth of our country.

Agricultural advancement is necessary for improving the supply of raw materials for the agro-based industries especially in our developing country.

The shortage of agricultural goods has its impact upon industrial production and a consequent increase in the general price level. It will impede the growth of the country’s economy.

The flour mills, rice shellers, oil and similar mills, bread, meat, milk products sugar factories, wineries, jute mills, textile, leather mills including pharmaceutical and numerous other industries are based on agricultural products.

The progress in agricultural sector provides surplus for increasing the exports of agricultural products. In the earlier stages of development, an increase in the exports earning is more desirable because of the greater strains on the foreign exchange situation needed for the financing of imports of basic and essential capital goods.

We are of the opinion that in view of the urgent need for enlarged foreign exchange earnings and the lack of alternative opportunities, substantial expansion of agricultural export production is frequently a rational policy even though the world supply—demand situation for a commodity is unfavourable.

Initially, agriculture absorbs a large quantity of labour force. In Tanzania still about 70 to 80 per cent labour is absorbed in this sector. Agricultural progress permits the shift of manpower from agricultural to non-agricultural sector.

In the initial stages, the diversion of labour from agricultural to non-agricultural sector is more important from the point of view of economic development as it eases the burden of surplus labour force over the limited land.

Thus, the release of surplus manpower from the agricultural sector is necessary for the progress of agricultural sector and for expanding the non-agricultural sector, i.e. industrialisation and tourism.

The development of agriculture requires roads, market yards, storage, transportation railways, airways, ships, postal services and many others for an infrastructure creating demand for industrial products and the development of commercial sector.

The development of agricultural sector has minimised the burden of several developed countries that were facing the shortage of foreign capital.

If foreign capital is available with the ‘strings’ attached to it, it will create another significant problem. Agriculture sector requires less capital for its development thus it minimises growth problem of foreign capital.

In a country which is predominantly agricultural and overpopulated, there is greater inequality of income between the rural and urban areas of the country. To reduce this inequality of income, it is necessary to accord higher priority to agriculture.

The prosperity of agriculture would raise the income of the majority of the rural population and thus the disparity in income may be reduced to a certain extent.

If the agricultural sector does not grow at a faster rate, it may result in the growing discontentment amongst the masses which is never healthy for the smooth running of our democratic government.

For economic development, it is necessary to minimise political as well as social tensions. In case the majority of the people have to be kindled with the hopes of prosperity, this can be attained with the help of agricultural progress. Thus development of agriculture sector is also relevant on political and social grounds.

The development of agricultural sector would tend to increase the purchasing power of agriculturists which will help the growth of the non-agricultural sector of the country. It will provide a market for increased production.

In underdeveloped countries, it is well known that the majority of people depend upon agriculture and it is they who must be able to afford to consume the goods produced. Therefore, it will be helpful in stimulating the growth of the non- agricultural sector.

Similarly improvement in the productivity of cash crops may pave the way for the promotion of exchange economy which may help the growth of non-agricultural sector. Purchase of industrial products such as pesticides, various farm machineries etc. also provide boost to industrial dead out.

Most of the developing countries of the world are exporters of primary products. These products contribute 60 to 70 per cent of their total export earnings.

Thus, the capacity to import capital goods and machinery for industrial development depends crucially on the export earning of the agriculture sector.

If exports of agricultural goods fail to increase at a sufficiently high rate, these countries are forced to incur heavy deficit in the balance of payments resulting in a serious foreign exchange problem.

However, primary goods face declining prices in international market and the prospects of increasing export earnings through them are limited.

Due to this, large developing countries like Tanzania (having potentialities of industrial development) are trying to diversify their production structure and promote the exports of manufactured goods even though this requires the adoption of protective measures in the initial period of planning.

Agriculture provides employment opportunities for rural people on a large scale in underdeveloped and developing countries. It is an important source of livelihood.

Generally, landless workers and marginal farmers are engaged in non-agricultural jobs like handicrafts, furniture, textiles, leather, metal work, processing industries, and in other service sectors. These rural units fulfill merely local demands.

It is time that rural economy depends on agriculture and allied occupations in an underdeveloped country. The rising agricultural surplus caused by increasing agricultural production and productivity tends to improve social welfare, particularly in rural areas.

The living standard of rural masses rises and they start consuming nutritious diet including eggs, milk, ghee and fruits. They lead a comfortable life having all modern amenities—a better house, motor-cycle, Bajaj, radio, television and wearing of better clothes.

As a result of agricultural progress, there will be extension of market for industrial products. Increase in agricultural productivity leads to increase in the income of rural population which in turn leads to more demand for industrial products, thus development of industrial sector.

From the above cited explanation we conclude that agricultural development is a must for the economic development of a country. Even developed countries lay emphasis on agricultural development.

According to our current 5th phase and the previous governments “Agricultural progress is essential to provide food for growing non-agricultural labour force, raw materials for industrial production and saving and tax revenue to support development of the rest of the economy, to earn foreign exchange and to provide a growing market for domestic manufactures.”

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