The development of any poor and backward economy can be brought by promoting
its agri. sector. It is evident from the following arguments:
(1) Availability Of Food:
In case of UDCs the production of food stuff plays an important role. As a
result of land reforms or increase in productivity due to better use of inputs
etc. the incomes of the farmers may increase. The increase in incomes of the
farmers result in increasing the demand for foodstuff. It so happens that in
case of UDCs the income elasticity of demand for foodstuff is very high (ranging
between 0.6 to 0.8%). Moreover, due to provision of public health services in
UDCs the death rate declines while birth rate does not fall. With this the
demand for food stuff goes on to increase. Again, due to industrialization, the
mobility of labor to cities increases leading to increase the incomes of people.
As a result, they increase the demand for consumables. In such state of affairs,
if agri. sector remains passive and agri. production fails to respond the prices
of food stuff will increase. Therefore, they will have to be imported from other
countries having a pressure on the foreign exchange reserves of the country.
Hence, to avoid such all, agri. sector will have to play it role by enhancing
(2) Increase in Demand for Industrial Products:
When surplus is generated in agri. sector the purchasing power of the farmers will increase which will lead
to increase the demand for industrial goods. In case of UDCs the market is
limited as the incomes of farmers and the labor are limited. Therefore, the
demand for manufactured goods remains limited. But when the agri. productivity
increases the incomes of farmers etc., with increase leading to expand the demand
for manufactured goods. In this way, the market will be extended. The
manufactured sector will gain momentum. Moreover, in such, situation the demand
for agri. inputs like fertilizers, tractors and harvesters will increase. This
will also provide a stimulus to industrial sector. The expansion of industrial
sector will have the effects on the means of transportation and communication.
Following Prof. Harischman, so many forward and backwash effects will come into
being. So many sectors of the economy will grow and producers profits will
increase leading to enhance capital formation. This is the contribution of agri,
sector to the other sectors of the economy when it trades with other sectors,
according to Prof. Kuznets.
(3) Foreign Exchange Earnings:
The developing countries specialize in certain
products which are to .be exported. As the production and productivity of these
goods increases their exports increase. With this the foreign exchange earnings
of such countries increase which can be utilized to import the capital goods.
Such capital goods can be used for industrialization. In this way, the domestic
use of raw material will increase leading to reduce the export surplus. But the
domestic industrialization will become helpful in the production of
import-substitutes. In this way, the foreign exchange could be saved. Thus, it
is the agri. Development which results in foreign exchange earnings. The capital
goods could be imported and industrialization process will be started. In this
way, not only foreign exchange will be saved, but foreign exchange will also be
earned when the manufactured exports increase. This is called 'Production
Contribution' of agriculture sector, according to Prof Kuznets. As a result of
this effect, in the first phase the production of the economy increases, while
in the second phase the per capita output rises.
(4) Mobilization of Capital by State:
In the initial stage of economic
development the capital accumulation can be made with the help of agri. surplus.
As Prof. Johnson and Mellor Write:
"When the productivity increases in agri.
sector, it means that either inputs are being used in lesser amount or agri.
yields have been increased".
It is the labor which is the biggest input in the agri. sector which can be
used for capital formation. If laborers are withdrawn from farms and they are
utilized in the constructional fields the capital mobilization can be increased.
Again capital mobilization from agri. sector can be made by imposing land tax, agri. income tax, educational and land cesses etc. But this is not possible
because of political reasons. Thus when agri. sector contributes to other sectors of the economy and shifts
resources to other sectors of the economy it is called Factor Contribution of
agri. sector, according to Prof. Kuznets.
(5) Employment Opportunities:
It is the agri. sector which not only provides
employment opportunities, but it also gives rise to diversification in such job
opportunities. Whenever, the agri. productivity and incomes increase the demand
in the rural sector increases. For example, the demands for small farmers,
weavers, cobblers, carpenters, plumbers, masons, black smiths and machinists
etc. will increase. In this way, the agri. development will promote the
development of other sectors.
(6) Increase in the Welfare of the Rural People:
When agri. surplus increases
the welfare of rural people will increase. On the basis of increased income the
peasants will be able to consume those goods which have more calories like eggs,
fish, ghee, butter and meat etc. They will improve their standard of living;
will build good houses; will acquire luxuries of life like radio, television,
dish antenna, motor-cycles, ready made garments, shoes and even cosmetics. Thus
we simply say that growth of agri. sector will lead to uplift the life-standard
of the people.