Role of Agriculture in India and its Economy

Agriculture is an important part in the Indian Economy. Recently, the contribution of Agriculture as a percentage to GDP rose from 17% in 2019-20 to 19.9% in 2020-21. More than 70% of the rural households depend on Agriculture for their livelihood. The food grain production has increased to the current 315 metric ton in 2021-20, higher by 100 metric ton since the last decade.

Agriculture also plays an important role in industrial development. The raw supplies required in industries, like cotton, seeds, sugarcane for the textile, oil and sugar industry respectively, is provided by Agriculture.

An increase in farmer’s income over the years, owing to the increased production has helped in increasing the purchasing power of farmers, which in turn has contributed to the development of the industrial sector in the country.

Further, agriculture also plays an important role in international trade. Some well known conventional exports, including fertilizers, harvesters and thrashers, and plantation items like tea, coffee, jute and spices, bring us the much need foreign exchange through exports.

Significance of Agriculture in Economy

  • Generating employment
    • More than 2/3rd of the Indian working population earns their living out of an agriculture related work.
  • Food coverage for the ever increasing population
    • An increasing population puts a lot of stress on food demand, which has to be met by an increased rate of food production.
    • With an increase in per capita income of the population, the demand for food consumption has only increased.
    • Thus, it is necessary to market surplus food grains with an increasing trend. A lack of food production levels leads to worse conditions.
  • As a source to National Income
    • Agriculture contributed 48-60% of the Indian economy, two decades after independence.
    • The current contribution of Agriculture is only 19%.
  • Helps in Capital Formation
    • Agriculture is the largest industry in India, and hence it can play an important role in Capital formation.
  • Supply of raw material to agro-based industries:
    • Agriculture supplies raw materials to agro-based industries like jute, cotton, textile, Vanaspati, and other such food processing industries.
  • Market for industrial products:
    • An increasing in purchasing power of the rural agriculture dependent population due to increasing developments in agriculture increase the demand for industrial items, which in turn helps in improvement of the Economy.
  • Influence on internal and external trade and commerce:
    • An improvement in the external sector helps in increasing food demand trends in internal sector, which in turn helps in the expansion of the service economy.
  • Contributes to Indian Government Budget:
    • Agriculture and its allied activities like poultry farming, cattle rearing, fishing, animal husbandry helps the government earn huge revenues.
    • Along with this, the Indian Railways also get a revenue from the freight charges on agricultural products.

Some facts about Indian Agriculture

  • India is the biggest exporter of cotton in the world.
  • India is the largest producer of potatoes, onions, brinjal, okra, ginger.
  • India is ranked 2nd in the world in agricultural production.
  • India’s state of Sikkim was the first state in the world to become a 100% organic farming state.
  • India ranks 9th for agricultural exports.

Recent contribution of Agriculture to Indian Economy

  • India produced 310 MT of Horticultural products in 2019-20.
  • India produced 24 MT of onion, and exported 2 MT of the same in 2019-20.
  • India produced 51 MT of potatoes in 2019-20.
  • India produced 19 MT of tomatoes in 2019-20.
  • India produced a total of 97 MT fresh vegetables, of which 16 MT fresh vegetables was exported.
  • India produced 1.9 MT of grapes in 2019-20.
  • India produced 40 MT of mangoes in 2019-20.
  • India’s livestock production rose to 530 MT in 2019-20.
    • Livestock production includes cattle, buffaloes, sheeps, goats, pigs and poultry.
  • India is the world’s largest milk producer.
    • India exports milk to neighboring countries like Bhutan, Nepal, Afghanistan, Bangladesh, UAE.
  • India produces 190 MT milk in 2019-20.
  • India accounted for 4 MT poultry mean in 2019-20.
  • India accounted for 1.5 MT buffalo meat in 2019-20.
  • India produced 13,000 MT of fish in 2019-20.

Some Characteristic features of Indian Agriculture

  • Monsoon Dependent: India’s agriculture is majorly dependent on rainfall. While sometimes low rainfall may lead to a less than average crop production, a higher than expected rainfall may destroy the crop as well. A proper irrigation facility in the form of drip irrigation, fertigation practices are employed to reduce dependency on monsoons.
  • Source of livelihood: About 2/3rd of the Indian population is dependent on agriculture and its allied activities for their livelihood. Agriculture contributes 25% of the national income.
  • Disguised Employment: A lot more people are involved in agriculture, which makes the involvement redundant.
  • Labor intensive cultivation: An increase in population puts pressure on land holding, as over the generations, the size of land gets fragmented and hence production plantation crops reduces.
  • Under employment: Farmers only find work for a few months due to the inadequate irrigation facilities.
  • Small size of holdings: Due to large scale fragmentation of land holdings, the average size of land holding was 2.3 hectares, which is 1993 hectares in Australia.
  • Traditional methods of production: Due to illiteracy and poverty, most of the rural farmers use traditional methods of agriculture production.
  • Low Agricultural Output: While agricultural production has increased over the years, compared to countries like France and Britain, the production is low. Example, France produces 71.2 Qtls per hectare, Britain measures 80 Qtls, while India produces 27 Qtls.
  • Dominance of food crops: 75% of the cultivated area is under food crops like Wheat, Rice and Bajra, while 25% of cultivated area is under commercial crops.

What are the challenges faced by Indian Agriculture?

  • Dependence of Monsoon and Instability: Due to the high dependence of Indian agriculture on monsoons, the production of food keeps on fluctuating each year. An year of abundant output of cereals leads to an year of acute shortage.
  • Land Ownership: While ownership of agricultural land in India is widely distributed, some of the land holdings continue to be held by powerful people. Hence, an inequal distribution of land leads to frequent changes in land ownership.
    • A relatively small number of rich landowners are believed to be benefitting from all the government subsidies, and in a way killing the lowest strata of the agricultural community.
  • Land Tenure: Most tenants pre-independence suffered from insecurity to tenancy, but post-independence, tenancy laws were passed to diminish this. However, the system remains far from perfect.
  • Fragmentation of land-holdings: Due to the growing population, the size of land-holding keeps on getting divided to the newer generations. Hence, plantation crops, which have greater economic value, are seldom grown in such areas, leaving most farmers poor and destitute.
  • Cropping Pattern: Two category of crops are grown in India – Food Crops and Non-Food crops. More than 70% of the lands grow food crops, which has a lesser economical value.
  • Agricultural Laborers: The conditions of the laborers working in agricultural fields is even poor, with the population facing underemployment and disguised unemployment.
  • Usage of excessive manures and fertilizers: Indian soils have grown over the years without caring about the underground water replenishment. Due to excessive churning and usage of land resources, the soil has been depleted, leading to lower productivity. Hence, the average yields in India is one of the lowest in the world.
  • Lack of Irrigation facilities: Due to poverty, a lot of farmers depend only on rain. Lack of institutional support from the government means only about 1/3rd of the cropped area is under irrigation.
  • Lack of mechanization: Most of the Indian agriculture is non-mechanized, with usage of wooden plough, sickle etc. requiring human resource. Further, non-mechanization pushes away any scope of scaling production, which means farmers produce mostly for their own consumption.
  • Lack of Agricultural Marketing: Indian rural economy, mostly dependent on agricultural, lacks a mechanism for proper marketing facilities. Thus, farmers depends on local traders, bazaar and haats, and middlemen to send their produce into bigger markets.
  • Lack of connectivity: Road or transport facilities are in bad shape, because of which it is not possible to transport most of their produce, leading to rotting and large scale losses of smaller farmers.

What are some of the important Government Initiatives and Policies taken by Government for the benefit of Indian Agriculture?

1. Paramparagat Krishi Vikas Yojana (PKVY)

The Paramparagat Krishi Vikas Yojana (PKVY) was an initiative to promote organic farming in the country.

The scheme encourages farmers to form groups or clusters and take to organic farming methods.


  • Promotion of commercial organic production through certified organic farming.
  • Produce pesticide residue free.
  • Raise farmer’s income and create potential market for traders.
  • Motivate the farmers for natural resource mobilization for input production.

2. Pradhan Mantri Fasal Bima Yojana (PMFBY)

Pradhan Mantri Fasal Bima Yojana (PMFBY) is the government sponsored crop insurance scheme that integrates multiple stakeholders on a single platform.


  • To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests & diseases.
  • To stabilise the income of farmers to ensure their continuance in farming.
  • To encourage farmers to adopt innovative and modern agricultural practices.
  • To ensure flow of credit to the agriculture sector.

3. Pradhan Mantri Krishi Sinchai Yojana (PMKSY)

Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) was formulated to extend irrigation coverage to all farmers in the country. It was focused on ‘Har Khet ko pani’ and improving water use efficiency ‘More crop per drop’ with end-to-end solution on source creation, distribution, management, field application and extension activities.


  • Achieve convergence of investments in irrigation at the field level (preparation of district level and, if required, sub district level water use plans).
  • Enhance the physical access of water on the farm and expand cultivable area under assured irrigation (Har Khet ko pani).
  • Integration of water source, distribution and its efficient use, to make best use of water through appropriate technologies and practices.
  • Improve on – farm water use efficiency to reduce wastage and increase availability both in duration and extent.
  • Enhance the adoption of precision – irrigation and other water saving technologies (More crop per drop).
  • Enhance recharge of aquifers and introduce sustainable water conservation practices.

4. National Agriculture Market (eNAM)

National Agriculture Market (eNAM) is a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities.

Small Farmers Agribusiness Consortium (SFAC) is the lead agency for implementing eNAM under the aegis of Ministry of Agriculture and Farmers’ Welfare, Government of India.


  • To promote uniformity in agriculture marketing by streamlining of procedures across the integrated markets,
  • Removing information asymmetry between buyers and sellers promoting real time price discovery based on actual demand and supply.

5. National Mission for Sustainable Agriculture (NMSA)

National Mission for Sustainable Agriculture (NMSA) has been formulated for enhancing agricultural productivity especially in rainfed areas focusing on integrated farming, water use efficiency, soil health management and synergizing resource conservation.

Schemes under NMSA

  • Rainfed Area Development (RAD)
  • Soil Health Management (SHM)
  • Sub Mission on Agro Forestry (SMAF)
  • Paramparagat Krishi Vikas Yojana (PKVY)
  • Soil and Land Use Survey of India (SLUSI)
  • National Rainfed Area Authority (NRAA)
  • Mission Organic Value Chain Development in North Eastern Region (MOVCDNER)
  • National Centre of Organic Farming (NCOF)
  • Central Fertilizer Quality Control and Training Institute (CFQC&TI)

6. Soil Health Card Scheme

  • Launched in 2015
  • the scheme has been introduced to assist State Governments to issue Soil Health Cards to all farmers in the country.
  • The Soil Health Cards provide information to farmers on nutrient status of their soil along with recommendation on appropriate dosage of nutrients to be applied for improving soil health and its fertility.

7. Livestock insurance Scheme

This scheme aims to provide protection mechanism to the farmers and cattle rearers against any eventual loss of their animals due to death and to demonstrate the benefit of the insurance of livestock to the people and popularize it with the ultimate goal of attaining qualitative improvement in livestock and their products.


  • The rural insurance policy is designed to offer insurance cover to indigenous cattle owned by farmers, cooperative societies, dairy farms and the like.
  • Security in case of death of cattle shall be provided for the following: –
  • Natural accidents. (Flood, famine, earthquake, etc.)
  • Unpredictable circumstances. (Accidental in Origin.)
  • Surgical Operations.
  • Terrorist Act.
  • Strikes and Riots
  • Civil Commotion risk

8. Micro Irrigation Fund

The government approved a dedicated Rs 5,000 crore fund to bring more land area under micro-irrigation as part of its objective to boost agriculture production and farmers income.

The fund has been set up under NABARD, which will provide this amount to states on concessional rate of interest to promote micro-irrigation, which currently has a coverage of only 10 million hectares as against the potential of 70 million hectares.

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