What is The Approximate Share Of Agriculture in The Gross Domestic Product (GDP) In India?

India is an agriculture centric economy. Since 70% of the country’s population lives in rural areas, agriculture has historically been their primary source of income. It forms the basis of livelihood for a major fraction of the entire rural population.

Although the sheer size of the agricultural economy is fascinating, the sector has only contributed about 16% of India’s GDP, as per an economic survey conducted in 2017-2018. The YoY growth in the agricultural sector stands at a mere 2.1%-2.3%, which is relatively lower than other sectors operating in the economy.

Factors Resulting in the Low GDP of the Agricultural Economy

The state and central government apathies and their lax economic policies have severely affected the output of the agricultural sector of our nation. Along with the disparity in an uneven monsoon season, and the pressure on farmers to sell their crops at a lower price point, the situation couldn’t be better. 

Let’s have a look at the various reasons that result in a low GDP figure for the agricultural sector and how deeply these affect the agricultural economy in rural India.

• Income denial for farmers: Farmers are paid lower than the actual worth of their products. The middle-man system in India is deeply integrated within the agricultural economy and leads to a direct income cut for farmers. 

• Dwindling private investment: In India, agriculture has been primarily a people’s enterprise. This has resulted in a low capital injection from major private players that hinders the innovation in the sector. 

• Limited options for long term credit: Farmers have little to low options for getting long term credits. Moreover, if their produce gets destroyed by the weather or they face any other economic hardships, they are on their own. Banks and NBFC’s too shy away from offering credit options to disgruntled farmers as they fear of their loans turning into NPA’s.

• Low impact government policies: The government has certainly been lax in its policies. The farmers are at the pittance of middlemen and are bound to sell their produce at a price dictated by them. This creates a shadow effect where these middle-men gain at the expense of a farmer’s income.

• Ever-increasing price gap: There is a huge price disparity between the price that we pay for the product and the price that farmers get for their produce. As long as this price gap exists, the possibility of farmers having a greater economic impact is drastically reduced.

• Using legacy technology: Agriculture is possibly the last sector in India that is still untouched by the technological revolution. As long as we depend on the conventional methods of farming and agriculture, there would be very less, or incremental growth to the farming sector.

Agriculture is said to be the backbone of our economy but still, an erratic monsoon season or a shift in seasons breaks this backbone easily. The above-mentioned points lay out a brief picture of the reasons that affect the GDP contribution of the agricultural sector in the Indian economy.

Conclusion

In India, more than 50% of households are directly or indirectly involved in the agricultural sector. Still, the economic impact of this sector is low and extreme measures need to be taken for strengthening this sector. 

Not only does the agricultural sector helps build rural India, but the food security of our nation is also deeply strengthened by deploying appropriate economic measure. It’s about time now that we start taking the agricultural sector seriously and implement a measure that leads to its increasing share in the overall growth of the nation’s GDP.