AgriNext Awards, Conference & Expo

Investors

The Economic Impact of Agriculture on India’s GDP

Introduction

The Indian economy ranks as the sixth largest in the world, with agriculture serving as a backbone for the livelihood of a majority of the population. Despite contributing approximately 14% to the country’s total GDP, the agriculture sector faces a continuous decline in its share, while the service sector shows remarkable growth. This paradox highlights the need to explore agriculture’s current challenges, its pivotal role in the economy, and opportunities for revitalization.

Significant Role in Rural Economy

Agriculture not only contributes to GDP but also plays a pivotal role in shaping rural India. With over 45% of the workforce employed in agriculture, the sector underpins rural livelihoods and drives the development of allied industries such as dairy, poultry, and fisheries. Prosperity in agriculture translates directly into enhanced rural infrastructure, better income levels, and improved quality of life in villages.

Factors Contributing to the Decline in Agriculture’s GDP Share

1.Shift to Other Sectors:

The rapid growth of the industrial and service sectors has reduced agriculture’s share in GDP, as these sectors contribute higher value addition and attract more investment.

2. Stagnant Productivity Growth:

Despite some advancements, agriculture in India has struggled to achieve significant productivity improvements due to limited adoption of advanced technologies and scientific farming practices.

3. Fragmentation of Landholdings:

With rising population and inheritance laws, agricultural lands are increasingly fragmented, making it difficult to implement large-scale farming techniques and mechanization.

4. Climate Vulnerability:

The sector is highly susceptible to climate change, with erratic rainfall, prolonged droughts, and extreme weather events frequently disrupting agricultural productivity and incomes.

5. Water Scarcity and Outdated Practices:

Increasing water scarcity and reliance on traditional farming methods further constrain productivity.

Contribution of Agriculture to India’s GDP

Agriculture remains a cornerstone of India’s economy, contributing 18.3% to the country’s Gross Value Added (GVA) in 2022-23, as reported by the Ministry of Agriculture and Farmers’ Welfare. While its share has declined from 35% in 1990-91 to around 15% in recent years, it continues to be one of the most vital sectors in the Indian economy, supporting livelihoods and food security.

In contrast, developed countries like the UK and USA see agriculture contributing only about 3% to their total GDP, reflecting a shift towards industrial and service sectors. This comparison underscores the unique role agriculture plays in sustaining India’s rural economy and its overall economic structure.

1. Share in GDP:

Agriculture’s declining share in GDP reflects the rapid growth of industrial and service sectors. Yet, its substantial contribution to rural incomes highlights its enduring importance in India’s economic landscape.

2. Employment:

With over 45% of India’s workforce engaged in agriculture and allied activities, the sector remains a critical source of livelihoods, especially in rural areas.

3. Export Earnings:

Agriculture significantly supports India’s foreign trade, contributing $50 billion to exports in 2022-23, or approximately 13% of the country’s total exports.

4. Value Addition:

The sector supports the cultivation of high-value crops like fruits, vegetables, and spices, which enhance food security, improve nutrition levels, and provide opportunities for income diversification.

5.Raw materials for industries: Agriculture provides raw materials for various industries, such as textiles, food processing, and pharmaceuticals.

Learning from the Past

The Green Revolution of the 1960s serves as a landmark example of agriculture’s transformative role in India’s economy. By introducing high-yielding variety (HYV) seeds, chemical fertilizers, and modern irrigation techniques, India significantly increased its agricultural output. This period not only alleviated the nation’s dependency on food imports but also boosted rural incomes and contributed substantially to GDP growth. The Green Revolution highlights the potential of technological interventions to revitalize agriculture and ensure food security.

Government Initiatives Boosting Agriculture

1.Pradhan Mantri Fasal Bima Yojana (PMFBY)

 A crop insurance scheme aimed at providing financial protection to farmers against crop failures.

2. Pradhan Mantri Krishi Sinchayee Yojana (PMKSY)

A scheme aimed at improving irrigation infrastructure and promoting efficient water management practices to ensure “Har Khet Ko Pani” (Water for Every Field).

3. National Mission for Sustainable Agriculture (NMSA)

Focuses on promoting sustainable agricultural practices, such as soil health management and organic farming, while improving farmer livelihoods.

4. PM-KISAN Scheme(PM-KISAN Scheme

Provides direct income support to small and marginal farmers, boosting rural spending and enhancing economic stability in agricultural communities.

5. Digital Agriculture Mission

Encourages the adoption of digital technologies like AI, IoT, and blockchain to increase productivity, reduce costs, and modernize Indian agriculture.

6. Agri Infrastructure Fund

Aims to strengthen agricultural infrastructure by building warehouses, cold storage facilities, and supply chain systems, enhancing market access for farmers.

Challenges Facing Indian Agriculture

Indian agriculture faces multifaceted challenges that hinder its potential. Addressing these barriers is essential to ensure its sustainable growth and contribution to the economy:

Fragmented Landholdings: Encouraging the consolidation of farms through FPOs and cooperative models can improve economies of scale.

Water Scarcity:Promoting water-efficient technologies like micro-irrigation is critical to conserve resources and adapt to changing climatic conditions.

Climate Change: Integrating climate-resilient crops and practices into farming systems can mitigate adverse impacts.

Market Access: Strengthening digital marketplaces and cooperative networks can help farmers secure better prices and reduce market inefficiencies.

Future Outlook

The future of Indian agriculture looks promising, with advancements in precision farming, vertical farming, AI, IoT, and blockchain driving efficiency and sustainability. These innovations hold the potential to tackle productivity challenges, boost agricultural exports, and ensure long-term food security.

Opportunities for Growth

1. Advanced Irrigation Systems

Investments in modern irrigation systems, such as precision and drip irrigation, can enhance resource efficiency, address water scarcity, and increase agricultural productivity.

2. Crop Diversification

Promoting crop diversification can help farmers adapt to climate change, improve soil health, and diversify income sources, fostering resilience and sustainability.

3. Agricultural Technology

Adoption of cutting-edge technologies like precision farming, drones, and smart sensors can improve crop yields, reduce waste, and enhance farmer livelihoods, revolutionizing agricultural practices.

Conclusion

Overall, while the share of agriculture in India’s GDP has been declining, it remains a vital sector for the country’s economy, ensuring food security, providing employment, and contributing to rural development. Addressing challenges and implementing effective policies are crucial for the sustainable growth of this sector. By leveraging advancements in agricultural technology and fostering sustainable practices, India can unlock the immense potential of its agricultural industry.

Upcoming Event: AgriNext Awards, Conference & Expo in London and Dubai

The AgriNext conferences in London and Dubai will showcase cutting-edge innovations and sustainable practices in agriculture. These events will bring together global experts, technology providers, and policymakers to discuss vertical farming, digital agriculture, and climate-smart solutions. With their focus on driving the future of farming, these conferences are pivotal in shaping the next phase of agricultural growth.

Signup For AgriNext Conference Newsletter

Contact Us

+91 8130128432

+1 702 551 9568

Need Email Support ?

Download Our App

Listen On Spotify

Follow Us

Request a call back

    Reach us on WhatsApp
    1

    AgriNext Conference website uses cookies. We use cookies to enhance your browsing experience, serve personalised ads or content, and analyse our traffic. We need your consent to our use of cookies. You can read more about our Privacy Policy