CHAPTER – I INTRODUCTION 1.1 Growth of agriculture Agricultural progress has emerged as a potential strategy to economic progress in most developing countries for which India cannot be exceptional. Failures on agricultural front would create formidable problems for future development of any country. China gave priority to agriculture in order to absorb the surplus rural population and use its growing productivity for local diversification. All people realized the importance of the agricultural sector, particularly in the context of the growing rural population. Agricultural development should receive top priority because cost effective production can be raised more easily in this sector than in any other sectors. A country cannot think of a large-scale transfer of the farming population to non-farming sectors without sufficient food surpluses or considerable reduction in food deficits. A rise in agricultural productivity precedes or accompanies economic development. 1 Extensive use of modern inputs gradually leads to greater commercialization and increased levels of agricultural produce. This would help farmers not only to produce more output per unit area, but also to generate surplus crop which would contribute to economic development, raise of income levels of farmers and meet the food requirements of the ever- increasing population. An increased market surplus resulting from commercialization of agriculture would help in releasing labour force from agricultural sector to non-agricultural sector without causing a decline in agricultural output. The boost in agricultural exports would enable the country to import the much needed capital goods and other raw materials required for rapid industrialization. Four main stages in the agricultural development process in the rural sectors are (i) Traditional subsistence agriculture (ii) Institution- building development (iii) Institution-based development and (iv) Capital intensive development. Although the share of agriculture in national income declines over the long run, this trend should occur naturally, neglecting agriculture and forcing its share to go down faster depresses economic growth. The reasons for growing importance of the agricultural sector in most developing countries are not far to seek. It is the agricultural 2 sector which supplies basic goods like food grains and cereals. The demand for food products is bound to go up with the population levels going up and the per capita incomes in these countries, if food grain output is not satisfactory, food prices go up affecting the rural population to a great extent the poor, besides raising the prices of industrial goods, in other words, the general price level largely depends on the availability of agricultural goods. Also, food shortage would force a country to resort to food import on which a poor country cannot afford to spend its precious foreign exchange. Agricultural prosperity certainly exercises a positive impact on poverty situation. The interdependence of agriculture and industry is well known. The agricultural sector supplies raw materials and labour force to the industrial sectors which could be met only through utilization of surplus labour in the agricultural sector. Agricultural prosperity provides considerable demand for industrial goods; industrialists get worried in a drought year not only because of fall in the supply of raw materials but also fall in demand for their products from the farming community. Also, the foreign exchange earned through agricultural exports would enable a country to import machinery and equipment required for industrialization. Agricultural sector plays a strategic role in the process of economic development of a country. It has already made a significant 3 contribution to the economic prosperity of advanced countries and its role in the economic development of less developed countries is of vital importance. In U.S.A. and Japan agricultural development has helped to a greater extent in the process of their industrialization. Similarly various under-developed countries of the world now engaged in the process of economic development have by now learnt the limitations of putting over-emphasis on industrialization as a means to attain higher per capita real income. It is seen that increased agricultural output and productivity tend to contribute substantially to an overall economic development of a predominantly agricultural and over-populated country. In the early stage of the economic development of the country, it will be rational and appropriate to place greater emphasis on further development of the agricultural sector. Agricultural production can be raised more rapidly with lesser amount of capital investment. To a certain extent, productivity can be increased even without additional capital. The increasing agricultural productivity will make substantial contributions to the general economic development of the country. In economic growth of a country, agriculture literally feeds the process of development. It meets the needs for food grains on account of rise in incomes, as also of increase in population. Self-sufficiency in food gives greater confidence and freedom to a country than in any 4 other commodity. The health and nutrition of a vast multitude of population also depends on the development of agriculture. Jacob Viner once wrote that, “It is not a case of ‘agriculture versus industrialization’ but of ‘poverty and poverty’ is due to both poor agriculture and poor industrialization. The path to economic development is through making the population literate, healthy and well fed. No nation can develop if its population is not receiving adequate nutrition”. Development of agriculture provides not only cheap food and raw materials but also helps in keeping the wages down. This checks cost-push inflation. When in due course of time industries develop they do not find lack of purchasing power for their goods. It also contributes to development through the supply of labour. An agricultural country by definition provides work to almost the entire labour force of the country. In the under-developed countries, quite a significant proportion of the labour force remains in disguised unemployment as agriculture, being unprogressive and subject to constraints like the given supply of land, is not able to absorb all the increase in the labourers productively. Agriculture can contribute a great deal in earning foreign currencies. The export requirements can be easily met by adding a crop or two within existing crop-pattern and that too with little incentives and with perhaps no additional capital investments. Further, since such 5 exports have to cater to the existing and familiar international markets, no additional costs are involved to discover or nurse new markets. Since exports from any single country constitute a small fraction of the total world supplies, such goods face a fairly elastic demand schedule. India has all such advantages. So there is a need to pursue a consistent policy of export promotion in this field, and for this purpose it is necessary to integrate domestic production with the requirements of the international market, something which was neglected in the past. It also contributes to a growing country’s needs for large capital resources. This is all the more important because with the existing modern capitalist sector being small, the little that can come from this sector by way of surpluses or profits for investments. On the other hand, agriculture is a big-sized industry. In the cases of successful development of major countries, a rise in agricultural productivity has either proceeded or accompanied industrial development. When agriculture is well developed through commercialization, farming communities’ incomes will go up as a result of enhanced market and surplus. This provides stimulus to demand for industrial goods and raises the profits of capitalists, savings and capital formation. The significance of agriculture in India rises also from the fact that the development in agriculture is an essential condition for the development of the national economy. Thus agricultural development 6 should be given greater emphasis in India. The capital output ratio is very high in agriculture. A small input of capital will bring in a large output of agricultural goods. To achieve a rapid increase in incomes a greater proportion of investment should be made in agriculture. It is the life line of the National Economy and its growth is very vital for sustainable food security and well being of its citizen. The foremost priority of the Government is to ensure adequate availability of food to all. The food crisis that had occurred in the previous years due to floods and drought had been managed on account of due importance given to Agricultural sector through various interventions made in increasing the area, production and productivity of crops that are used as raw materials for agro based industries such as textiles, sugar and edible oils besides major food crops. Over the time, contribution of agricultural sector to the national GDP as well as to the State GDP has been steadily declining. The share of agricultural sector in Gross State Domestic Product which was about 45.9% during 1970-71 has come down to 24.7% in 2000-01 and further it has fall down to 14.1% in 2011-12. Agriculture would continue to be a key sector in the economic development of a State. The table 1.1 shows the slow growth rate of agricultural sector in Indian economy. 7 TABLE - 1.1 GROWTH RATE OF AGRICULTURE FROM 2005-2006 TO 2011-2012 Growth rate (in GDP Year %) 2005-06 18.3 2006-07 17.4 2007-08 16.8 2008-09 15.8 2009-10 15.7 2010-11 14.5 2011-12 14.1 Source: CSO and Economic survey In order to increase the share of agriculture, sustainable agricultural system should be followed. Sustainable agriculture system refers the system which can be followed for long time to improve production and productivity of this sector. This should also helpful to increase the income of farmers. This system includes crop rotation, crop residue, improving soil nutrients, appropriate mechanical cultivation, organic farming etc.