26 November 2010

Agriculture and Industrialisation in India

Earlier I had said that development of agriculture is a pre-requisite for industrialisation. Let us look at this claim in more detail.

What are the requirements of industry?
1. Capital
2. Labour
3. Market

1. Capital: Improvement of agriculture increases output and thus creates the capital needed for industries. This is particularly important in the initial stages of industrialisation, when the industrial sector is small and the economy is pre-dominantly agricultural.

2. Labour: Industry needs literate workers unlike agriculture, which can manage with illiterate labourers. In an agricultural country, a vast majority of people are illiterate (40 crore in India). Education depends on income. So to turn the illiterate agricultural labourers into literate workers for industry, we must first increase their incomes. That is, we must increase the productivity of agriculture (Wage = marginal productivity of labour).

3. Market: The purchasing power of people must be increased so that they can buy the products made by industry. Most of the people are employed in agriculture (50% in India today). Hence we must increase agricultural incomes by improving agricultural productivity.

One can argue that requirements 1 and 3 are not absolute. Capital can be got from other countries (foreign investment). Goods can also be sold in other countries (exports).

But requirement 2 still remains. If nothing else, agriculture must be improved to raise the income, education and health of the majority of the people – who work in the agricultural sector. By the way, this is not just to make people eligible workers for industry. This is also why we are industrialising in the first place. In other words: health, education and income are both the ends and the means of development/industrialisation.

That is why development of agriculture is a must for India to industrialise.

1 comment:

preeti said...

Nice Post, In India 70% of population leaves in Villages and mostly depends upon agriculture. Now India farmer are using agriculture products in their farming business. That is why standard of Agriculture up day by day.

Best Regards
Nano Fertilizer