CHAPTER-I

INTRODUCTION
THE PLACE OF AGRICULTURE IN THE NATIONAL ECONOMY:
Agriculture forms the backbone of the Indian economy and despite concerted
industrialisation in the last five decades, agriculture occupies a place of pride. Being the
largest industry in the country, agriculture provides employment to around 65 per cent of the
total work force in the country. The significance of agriculture in the national economy can
be best explained by considering the role of agriculture under different heads.
i)

Share of Agriculture in the National Income.

TABLE 1 Share of Agricultural Sector in Total Gross Domestic Product at Factor Cost
Year

GDP at (Factor cost)

Agricultur
e

1950-51

140470

83150

55.4

1970-71

296280

142580

44.5

1990-91

692870

242010

30.9

2003-04

1424500

315800

22.1

Note

2as% of 1

Agriculture includes agriculture, forestry and fishing

Source Compiled Economic Survey 2003-04 Table 1.1

Figures provided by the Central statistical Organisation (Refer table 1) reveal that between
1950-51 to 1960-61, the share of agriculture in GDP has been in the range of 55 to 52 per
cent, though it was declining but as the process of industrialisation and economic growth
gathered momentum, the share of agriculture indicated a sharp decline and reached a level of
22 per cent in 2003- 04.
Two important facts must be emphasised here:
a)

Agriculture contributes even now a major share of the national income in India.

b)
The share of agriculture in national income, however has decreasing continuously and
the shares of the manufacturing and service sectors are increasing. In a rapidly developing
country, this is as it should be.
Comparison can be made between the positions of agriculture in India with that in the other
countries as regards the share of agriculture in national income. In the United Kingdom,
agriculture contributes only 2 per cent of the national income; in U.S.A. it is 3 per cent, in
Canada it is 4 per cent; in Australia it is 5 per cent; and so on. The more developed a country,
the smaller is the share of agriculture in national output. India having not yet reached the

stage of an advanced economy, has an agriculture sector which is still the dominant one in the
country.
(ii) Indian Agriculture and pattern of Employment in the Country:
Agriculture dominates the economy to such an extent that a very high proportion of working
population in India is engaged in agriculture

TABLE - 2
EMPLOYMENT OF MAIN WORKERS IN AGRICULTURE (in million)
1951
361
299
70
27
43

Total population
Rural Population
Cultivators
Agriculture laborers
Other workers
Total
Working
Population
140
Note

-8.3
-50
-20
-30

2001
1027
742
128
107
167

-72
-32
-27
-41

-100

402

-100

Figures in brackets are percentage to the.

SOURCE: Agriculture Statistics at a Glance (2002).

Data provided by the Census of India reveals that in absolute terms, agriculture provided
employment to 97 million persons in 1951, the number of people working on land
(cultivators and agriculture labourers) increased to 23.5 million in 2001. in terms of
percentage, however people working on land came down from 70 to 59 (57% according to
the Tenth
Plan) during the five decades between 1951 and 2001. It is, however, really disturbing that
the proportion of agricultural labourers has increased from 20 to 27 per cent between 1951
and 2001 but that of cultivators has indicated a decline from 50 per cent to 32 per cent.
In the United Kingdom and United States, only 2 to 3 per cent of the working population is
engaged in agriculture; in France, the proportion is about 7 per cent; and in Australia, this is
about 6 per cent. It is only in backward and less developed countries that the working
population engaged in agriculture is quite high. For instance, it is 35 per cent in Egypt, 59 per
cent in Bangladesh, 50 per cent in Indonesia and 68 per cent in China in 1997, according to
the FAO Production Year book (1997).
iii) Importance of Agriculture for Industrial Development:
Indian agriculture has been the source of supply of raw materials to our leading industries.
Cotton and jute textile industries, sugar, vanaspati and plantations, all these depend on
agriculture directly. There are many other industries which depend on agriculture in an
indirect manner. Many of our small scale and cottage industries like handloom weaving, oil
crushing, rice husking etc., depend upon agriculture for their raw materials- together they
account for 50 per cent of income generated in the manufacturing sector in India.

But then, in recent Years, the significance of agriculture to industries is going down as many
more industries have come up which are not dependent on agriculture. Under the Five Year
Plans, iron and steel industry, Chemicals, machine tools and engineering industries aircraft
etc. have been started.
However, in recent years, the importance of food processing industries is being increasingly
recognised both for generation of income and for generation of employment.
iv) Role of Agriculture in the Field of International
Trade:
Importance of Indian agricultural also arise from the role it plays in India's trade, agriculture
products-Tea, Sugar, Oilseeds, Tobacco, Spices, etc. constituted the main items of exports of
India. Broadly speaking, the proportion of agricultural goods which were exported came to
50 per cent of our exports, and manufactures with agriculture content (such goods as
manufactured jute cloth and sugar) contribute another 20 per cent or so; and total comes to 70
per cent of India's exports. The Tenth plan estimates that agriculture contributes 14.7 per cent
of total export earnings. This has great significance for economic development. For increased
exports help the country to pay for the increased imports of machinery and raw materials.
v) Role of Agricultural Sector in Economic Planning:
Importance of agriculture in the national economy is indicated by many facts. For example,
agriculture is the main support for Indias transport system, since railways and roadways
secure bulk of their business from the movement of agricultural goods. Internal trade is
mostly in agricultural products. Further, good crop implying large purchasing power with the
farmers lead to greater demand for manufactures and, therefore, better prices. In other words,
prosperity of the farmers is also the prosperity of industries. Likewise, bad crop lead to a
depression in business. Generally, it is the failure in the agricultural front that has led to
failure of economic planning in particular periods. Agricultural growth has direct impact on
poverty eradication. It is also an important factor in containing inflation, raising agricultural
wages and for employment generation.
It is clear, therefore, that agriculture is the back bone of the Indian economy and prosperity of
agriculture can also largely stand for the prosperity of the Indian economy. At the same time,
it is true that per capita productivity in agriculture is less than in industry. Naturally, most
scholars of developing economies observe that this dominance of agriculture in India's
economy is responsible for the low per capita income in the country. In their opinion, so long
as the Indian economy is dominated by agricultural activity, per capita income will not rise to
an extent which is necessary and desirable.
AGRICULTURAL DEVELOPMENT ESSENTIAL FOR ECONOMIC GROWTH:
The Significance of agriculture in India arise also from the fact that the development in
agriculture is an essential condition for the development of the national economy. Ragnar
Nurkse argues that the surplus population in agriculture should be shifted to the newly started
industries. Nurkse's thesis is that agricultural productivity will be increased on the one hand
and on the other new industrial units would be setup with the use surplus labour.

The Nurksian thesis, though widely welcomed at one time, has been questioned recently.
Firstly, industrialisation dose not consist only of transference of worker form agriculture to
industries. Industrialisation requires a particular set of motives and values which an
agriculture economy cannot supply. A change in agriculture itself is essential before such
motivations and values are evolved. Secondly, the marketable agricultural surplus will have
to be increased considerably to feed the growing urban population and to provide raw
materials to industries. Thirdly, the new industries and the fast growing services sector
however, fast they may develop, will not be able to provide adequate employment for the
ever growing millions in India. There is a limit to the capacity of employment in industries in
the short period. Necessarily, therefore, increased employment will have to be found, not in
the new industries, but in agriculture or in rural industries this will, then, necessitate
improvement in agriculture.
In other words general economic development will require rapid agricultural development
either to precede or to go hand in hand with it. Indian planners learnt a bitter lesson during
the Second and Third Five Year Plan periods and in recent years during 2002-03, for
example, when failure of the agricultural sector spelt disaster to the entire planning process.
Thus, any change in the agriculture sector -positive or negative- has a multiplier effect on the
entire economy. The agricultural sector acts as a bulwark in maintaining food security and in
the process, national security as well. To maintain the ecological balance there is need for
sustainable and balanced development of the agriculture and allied sectors. Recognising the
crucial role played by this sector in enabling the widest dispersal of economic benefits, the
Tenth Plan has emphasised that agricultural development is central to rapid economic
development of the country.
WTO (World Trade Organisation):
The WTO came into existence to replace General Agreement on Tariffs and Trade (GATT)
which was in existence from 1948 to 1994. India along with 23 countries was founder
member of the GATT. It was aimed at reshaping the world economy which was shattered by
the World War II. Over a period of four decades, the GATT provided a forum for international
bargaining on reducing the barriers and remove unnecessary controls restrictions to
multilateral trade. Under the GATT agreement, it was expected from the member countries to
regard the trade provisions so that promotion of multilateral trading system could be
encouraged. Unfortunately, some of the developed countries did not follow the provisions and
started violation by providing subsides to their exports and domestic support to agricultural
trade without keeping in view the interest of the developing and poor countries.
Such discriminatory and trade distorting measure not only prevented the growth of small
economies but multilateral trade among countries also. Consequently, the need was felt to
initiate negotiations for organizing rule- based World Trade promoting non-discriminatory
multilateral trading system which could provide an integrated predictable market access.
Multilateral trade negotiation were going on even after the creation of the GATT. Many such
rounds remained successful. The last 8th round which is popularly known as the Uruguay
Round took place in 1987 at Marakesh paved way for the establishment of WTO. It replaced
the GATT and started functioning from January 1, 1995 in order to enable the members to
participate in international competitiveness in a free and fair trading system. It aimed at strict
adherence to Most Favoured Nations (MFNs) clause, certain concessions during transition

period and free access to market. The WTO is expected to dismantle the Trade distortions in
the international
OBJECTIVE OF THE STUDY:
The main purpose of the present study entitled "STATE OF INDIAN AGRICULTURE IN
THE CONTEXT OF WORLD TRADE ORGANISATION (WTO) - A CRITICAL
EVALUATION" is to analyse the likely impact of trade Liberalisation and the WTO
Agreement on Indian agriculture. The study is a modest attempt to understand the
implications of multilateral trade liberalisation on Indian agriculture and to carefully assess
the likely costs and benefits of globalisation to the consumers and the producers in India. In
particular, the focus of the study is to examine in what way the establishment of a free and
liberalised trade regime under the WTO would affect the living standards and the fortunes of
the Indian Farmer.
The study has the following objectives in mind:
*

To study the pre-emergence scenario of the WTO.

To analyse the structure and functions of the World Trade organization.

*
To evaluate the agenda of WTO and examine its impact on various sectors of Indian
economy such as industrial sector service sector, research and development, issues related
with environment, technology and knowledge based industry and issues related with labour
standards.
i)
To closely examine the impact of WTO agreement on Indian agriculture. This
segment shall be divided into various sections such as issues related with -TRIPs, quantitative
restrictions, tariffs, market access, farmer's rights, export subsidies, export competitiveness,
reduction in AMS, domestic support, sanitary and phytosanitary measures.
ii)
To understand the hidden motives of developed countries in the background of WTO
provisions.
iii)
To suggest some ways and means to protect our economy from the new situation
arose after the establishment of WTO.
RESEARCH METHODOLOGY:
With the introduction of research problem, now the researcher may devote his attention to the
research methodology which consists of making decision with respect to the nature of the
study, type of data needed, subject matter of the study, type of material needed and techniques
of gathering data to be adopted. As already discussed in the preceding lines, the present study
is about emergence of the WTO and its impact on Indian Economy. So seeing the wide range
and extensive nature of the problem, this study will mainly cover the state of Indian
Agriculture in the context of WTO.

Secondary data has been used for research work which has been extracted from Agriculture
and processed. Food product Export Development Authority (APEDA), Confederation of
Indian Industry (CM), Federation of Indian Chamber of Commerce and Industry (FICCI),
Association of Chamber of Commerce and Industry (ASSOCHAM), United Nation's
Conference on Trade and Development (UNCTAD), WTO, Food and Agricultural
Organisation (FAO), International Bank for Reconstruction and Development (IBRD),
Commonwealth Secretariat etc. Important and necessary facts have been extracted by study
in different types of books, magazines, newspapers, reports etc. Which have been included in
research work.
The Precious knowledge available in different libraries has also been used while keeping in
mind the contents and nature of research work various tables and charts are also used in
research work. So that the research work should has the scientific and more effective base.
In the field of knowledge and science the internet has an important role by using it various
type of information and data can be achieved easily by studying various website related to
research work this is ascertained that latter material and data is included in research work.
To fulfil all the objective of research work the researcher visited various government & nongovernment organization & tried to collect all the information & facts.