Agriculture, for decades, had been associated with the production of basic food crops. Agriculture and farming were synonymous so long as farming was not commercialized. But as the process of economic development accelerated, many more other occupations allied to farming came to be recognized as a part of agriculture.

At present, agriculture besides farming includes forestry, fruit cultivation, dairy, poultry, mushroom, bee keeping, arbitrary, etc. Today, marketing, processing, distribution of agricultural products etc. are all accepted as a part of modern agriculture.

Thus, agriculture may be defined as the production, processing, marketing and distribution of crops and livestock products. According to Webster’s Dictionary, “agriculture is the art or science of production of crops and livestock on farm.”

Importance of Agriculture


Agriculture plays a crucial role in the life of an economy. It is the backbone of our economic system. Agriculture not only provides food and raw material but also employment opportunities to a very large proportion of population. The following facts clearly highlight the importance of agriculture in this country.

1. Source of Livelihood:

In India the main occupation of our working population is agriculture. About 70 per cent of our population is directly engaged in agriculture. In advanced countries, this ratio is very small being 5 per cent in U.K., 4 per cent in USA., 16 per cent in Australia, 14 per cent in France, 21 per cent in Japan and 32 per cent in USSR.

This high proportion in agriculture is due to the fact that the non-agricultural activities have not been developed to absorb the rapidly growing population.


2. Contribution to National Income:

Agriculture is the premier source of our national income. According to National Income Committee and C.S.O., in 1960-61, 52 per cent of national income was contributed by agriculture and allied occupations. In 1976-77, this sector alone contributed 42.2 per cent while in 1981-82, its contribution was to the tune of 41.8 per cent.

In 2001-02, it contributed around 32.4 per cent of national income. This was further reduced to 28 per cent in 1999-2000. Contrary to this, the proportion of agriculture in U.K. is only 3.1, in USA it is 3 percent, 2.5 per cent in Canada, 6 per cent in Japan, 7.6 per cent in Australia.

The mere conclusion of all this is that more developed a country the smaller is the contribution of agriculture in national output.


3. Supply of Food and Fodder:

Agriculture sector also provides fodder for livestock (35.33 crores). Cow and buffalo provide protective food in the form of milk and they also provide draught power for farm operations. Moreover, it also meets the food requirements of the people. Import of food grains has been very small in recent years, rather export avenues are being looked for.

4. Importance in International Trade:

It is the agricultural sector that feeds country’s trade. Agricultural products like tea, sugar, rice, tobacco, spices etc. constitute the main items of exports of India. If the development process of agriculture is smooth, export increases and imports are reduced considerably.


Thus, it helps to reduce the adverse balance of payments and save our foreign exchange. This amount can be well utilized to import other necessary inputs, raw-material, machinery and other infra-structure which is otherwise useful for the promotion of economic development of the country.

5. Marketable Surplus:

The development of agricultural sector leads to marketable surplus. As country develops more and more people are to be engaged in mining, manufacturing and other non- agricultural sector. All these people depend upon the food production which they can meet from the marketable surplus.

As agricultural development takes place, output increases and marketable surplus expands. This can be sold to other countries. Here, it is worth mentioning that the development of Japan and other countries were made possible by the surplus of agriculture. There is no reason why this could not be done in our own case.


6. Source of Raw Material:

Agriculture has been the source of raw materials to the leading industries like cotton and jute textiles, sugar, tobacco, edible and non-edible oils etc. All these depend directly on agriculture.

Apart from this, many others like processing of fruits and vegetables, dal milling, rice husking, gur making also depend on agriculture for their raw material. According to United Nations Survey, the industries with raw material of agricultural origin accounted for 50 per cent of the value added and 64 per cent of all jobs in the industrial sector.

7. Importance in Transport:


Agriculture is the main support for railways and roadways which transport bulk of agricultural produce from farm to the mandies and factories. Internal trade is mostly in agricultural products. Besides, the finance of the govt, also, to the large extent, depends upon the prosperity of agricultural sector.

8. Contribution to Foreign Exchange Resources:

Agricultural sector constitutes an important place in the country’s export trade. According to an estimate, agricultural commodities like jute, tobacco, oilseeds, spices, raw cotton, tea and coffee accounted for about 18 per cent of the total value of exports in India. This shows that agriculture products still continue to be significant source of earning foreign exchange.

9. Vast Employment Opportunities:

The agricultural sector is significant as it provides greater employment opportunities in the construction of irrigation projects, drainage system and other such activities.

With the fast growing population and high incidence of unemployment and disguised unemployment in backward countries, it is only agriculture sector which provides more employment chances to the labour force. In this way, significance of agriculture emerges more and more.

10. Overall Economic Development:

In the course of economic development, agriculture employs majority of people. This means raising the level of the national income and standard of living of the common man.

The rapid” rate of growth in agriculture sector gives progressive outlook and further motivation for development. As a result, it helps to create proper atmosphere for general economic development of the economy. Thus, economic development depends on the rate at which agriculture grows.

11. Source of Saving:

Improvement in agriculture can go a long way in increasing savings. It is seen that rich farmers have started saving especially after green revolution in the country.

This surplus amount can be invested in agriculture sector for further; development of the sector. Saving potentials are large in agriculture sector which can be properly tapped for the development of the country.

12. Source of Government Income:

In India, many state governments get sizeable revenue from the agriculture sector. Land revenue, agricultural income tax, irrigation tax and some other types of taxes are being levied on agriculture by the state governments.

Moreover, considerably revenue is earned by way of excise duty and export duty on agricultural products. Raj committee on Agricultural Taxation has suggested imposition of taxation on agricultural income for raising revenue.

13. Basis of Economic Development:

Prof. Nurkse has laid sufficient emphasis on the improvement of agriculture for a balanced growth of an economy. The development of agriculture provides necessary capital for the development of other sectors like industry, transport and foreign trade. In fact, a balanced development of agriculture and industry is the need of the day.

From the above, explanation it may be concluded that agriculture occupies an important place in the development of an economy. It is in fact, a pre-condition for economic up liftment.