Role of Agriculture in the Economy
                     ROLE OF AGRICULTURE IN THE 
ECONOMY
Contribution to National Income
The leading industrialized 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. In India, 
still 28% of national income comes from this sector.
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Source of Food Supply
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 a country.
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Pre-Requisite for Raw Material
Agricultural advancement is necessary for improving 
the supply of raw materials for the agro-based 
industries especially in developing countries. 
The shortage of agricultural goods has its impact upon 
on industrial production and a consequent increase in 
the general price level. It will impede the growth of the 
country’s economy. 
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Provision of Surplus
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.
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 Shift of Manpower
Initially, agriculture absorbs a large quantity of labour 
force. In India still about 62% labour is absorbed in this 
sector. Agricultural progress permits the shift of 
manpower from agricultural to non-agricultural sector. 
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Creation of Infrastructure
The development of agriculture requires roads, market 
yards, storage, transportation railways, postal services 
and many others for an infrastructure creating demand 
for industrial products and the development of 
commercial sector.
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Relief from Shortage of Capital
The development of agricultural sector has minimized 
the burden of several developed countries who were 
facing the shortage of foreign capital. 
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Helpful to Reduce Inequality
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.
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Create Effective Demand
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. 
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Helpful in Phasing out Economic 
Depression
During depression, industrial production can be 
stopped or reduced but agricultural production 
continues as it produces basic necessities of life. Thus it 
continues to create effective demand even during 
adverse conditions of the economy.
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