M.B.A. Ist sem Economy is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek for oikos ("house") and nomos ("custom" or "law"), hence "rules of the house(hold)". Three major theoretical approaches explain the role of agriculture in economic growth
1.The theories that stress the passive role of
agriculture as supplier of resources to the economy (Lewis, Fei-Ranis, Jorgenson; 1950- 60) 2.The theories that stress the active role of agriculture as a sector that is able to promote economic growth due to specific actions and behaviour (Mellor; 1970-90) 3.The theories that stress the active role of agriculture as a sector that is able to promote sustainable economic growth (FAO, 2000) 4. FAO (2000) stresses two major categories of roles of agriculture Economic roles underestimated by the market ◦ Income generation ◦ Poverty reduction ◦ Food security Non-economic roles neglected by the market ◦ Management and conservation of natural resources ◦ Social cohesion and stability ◦ Preservation of culture Contribution of Agriculture Backbone for country’s economic development It contribute to economic development
in atleast four ways:
1)Product contribution 2)Market contribution 3)Factor contribution 4)Foreign exchange contribution Source of livelihood Working population of more than 70%. Agriculture in international trade The main commodities are tea oil cakes, fruits and vegetables, spices , tobacco, animal hair and vegetable oils. Its export is now expected to $95.7billion a 10.3% increase from the last year. Other factors Rural consumption is three times that of urban consumption As per the J.K.Galberth, the most
significant development that took
place in our economy during the past four decades relates to farm sector. Agriculture produces a surplus that needs to be transferred to the economy • Food and primary goods • Labour-force • Capital and foreign exchange Need of extraction of surplus Agriculture produces as surplus in relation to its internal needs In agriculture there exists non- productive labour-force (non necessary to the sector) that is free to move among sectors Peasants are in condition to save, then they can supply savings to the economy Agriculture produces goods that are internationally tradable The extraction of agricultural surplus has created many problems
It has reduced the incentives to
farmers It has increased the pace of the decline of agriculture with serious consequences on environment and society It has increased rural poverty and food insecurity Also a ‘weak’ version of the approach exists Agriculture is a surplus supplier Yet ‘traditional’ agriculture might not be able to produce surpluses and then might not be able to transfer them to the economy It follows that surpluses need to be produced first in order to be transferred Only a ‘modern’ agriculture can produce surpluses The ‘modernisation’ of agriculture implies a transfer of resources from the economy to agriculture The aims are ◦ To increase resource productivity ◦ To introduce technical change ◦ To orient production to market ‘Modern’ agriculture is in condition to produce surpluses in order to enhance economic growth J. Mellor (1976) introduces his theory of growth linkages taking as an example the case of the Green Revolution in India The public intervention to ‘modernise’ agriculture increases farmers’ incomes Farmers increase their consumption, both of production means and consumption goods The increased demand leads to the emergence of local firms producing the newly demanded goods The final result is that, due to the initial intervention in agriculture, the rural economy develops in a balanced manner The growth of rural industry is a major factor for a balanced growth It increases non-farm employment providing work opportunities for the labour-force that leaves the primary sector or is underemployed in it It reduces the pressure on towns and metropolises, keeping under control the level of pollution It exploits ‘traditional skills’ that are typical to each area It exploit the competitive advantages of rural areas in terms of costs (labour-force and infrastructures) Agricultural modernisation has raised some problems On environment ◦ Industrial pollution ◦ Misuse of natural resources On society ◦ Pressure on families and communities ◦ Migration from rural to urban areas On the economy ◦ Food insecurity ◦ Food dependency Agenda for action If agriculture is to record abundance; if poverty is to be abolished quickly and if the chasm between rural – urban divide is to be curtailed, agriculture must grow at a good rate. This needs action on the following lines:
1.Building institutions for People’s
participation Continued … 2. Freeing up agricultural markets 3. Carving an investment policy