15 Top Importance of Agriculture in Developing Countries

Importance of Agriculture in Developing Countries

Agricultural progress is essential to provide food for growing non-agricultural labour force, raw materials for industrial production and saving and tax revenue to support development of the rest of the economy, to earn foreign exchange and to provide a growing market for domestic manufactures.

In this article, it is equally pertinent to address Importance of Agriculture in Developing Countries. Agriculture plays a vital role in economic development of developing countries. 

The role of agriculture in economic development is crucial because majority of the population of developing countries make their living from agriculture. 

We explain below the Importance of Agriculture in Developing Countries. This post is set to address this very crucial aspect of agricultural development.


Read: Meaning, Nature and Scope of Agriculture

Importance of Agriculture in Developing Countries  

Importance of Agriculture in Developing Countries

The role of agriculture in economic development is crucial because majority of the population of developing countries make their living from agriculture.

Agriculture plays the following important in economic development of developing countries:

1. Contribution to National Income

2. Source of Food Supply

3. Provision of Surplus

4. The Shift of Manpower from Agriculture to Non-agricultural Sector

5. Creation of Infrastructure

6. Relief from Shortage of Capital

7. Helpful to Reduce Inequality

8. Helpful in minimizing political and social tensions

9. Helpful in stimulating the growth of the non-agricultural sector  

10. Helpful in Phasing out Economic Depression

11. Source of Foreign Exchange for the Country

12. Contribution to Capital Formation

13. Employment Opportunities for Rural People

14. Improving the Welfare of the Rural Dwellers

15. Extension of Market for Industrial Output

Let us look into detailed

1. Contribution to National Income: The lessons drawn from the economic history of many advanced countries tell us that agricultural prosperity contributed considerably to fostering economic advancement. It is correctly observed that, the leading industrialized countries of today were once predominantly agricultural while the developing economies still have the dominance of agriculture and it largely contributes to the national income.

2. Source of Food Supply: Agriculture is the basic source of the food supply of all the countries of the world, whether underdeveloped, developing or even developed. Due to the heavy pressure of population in underdeveloped and developing countries and its rapid increase, the demand for food is increasing at a fast rate.

If agriculture fails to meet the rising demand for food products, it is found to affect adversely the growth rate of the economy. Raising supply of food by the agricultural sector has, therefore, great importance for the economic growth of a country.

Increase in demand for food in an economy is determined by the following equation: D = P + 2g Where: D stands for Annual Rate of Growth in demand for food. P stands for Population Growth Rate. g stands for Rate of Increase in Per Capita Income. 2 stand for Income Elasticity of Demand for Agricultural Products.

3. Provision of Raw Materials for Agro-allied industries: Agricultural advancement is necessary for improving the supply of raw materials for the agro-allied industries, especially in developing countries. The shortage of agricultural goods has its impact on industrial production and a consequent increase in the general price level. It will impede the growth of the country‘s economy. The flour mills, rice shellers, oil mills, bread, meat, milk products, sugar factories, wineries, jute mills, textile mills and numerous other industries are based on agricultural products.

4. Provision of Surplus: The progress in the agricultural sector provides a surplus for increasing the exports of agricultural products. In the earlier stages of development, an increase in the exports earning is more desirable because of the greater strains on the foreign exchange situation needed for the financing of imports of basic and essential capital goods. Johnson and Mellor are of the opinion, Given the urgent need for enlarged foreign exchange earnings and the lack of alternative opportunities, a substantial expansion of agricultural export production is frequently a rational policy even though the world supply-demand situation for a commodity is unfavorable.‖

5. The Shift of Manpower from Agriculture to Non-agricultural Sector: Initially, agriculture absorbs a large quantity of labour force. In Nigeria still, about 70% labour is absorbed in this sector. Agricultural progress permits the shift of manpower from agricultural to non-agricultural sector.

In the initial stages, the diversion of labour from agricultural to the non-agricultural sector is more important for economic development as it eases the burden of the surplus labour force over the limited land.

Thus, the release of surplus manpower from the agricultural sector is necessary for the progress of the agricultural sector and for expanding the non-agricultural sector. Development of agriculture in modern times would bring about a decline in the percentages of the labour force engaged in agriculture and release some to industry.

6. Creation of Infrastructure: The development of agriculture requires roads, markets, storage facilities, transportation railways, postal services and many others for an infrastructure creating demand for industrial products and the development of the commercial sector.

7. Relief from Shortage of Capital: The development of the agricultural sector has minimized the burden of several developed countries that were facing the shortage of foreign capital. If foreign capital is available with the strings ‘attached to it, it will create another significant problem. Agriculture sector requires less capital for its development.

Thus it minimizes growth problem of foreign capital.

8. Helpful to Reduce Inequality: In a country which is predominantly agricultural and overpopulated, there is greater inequality of income between the rural and urban areas of the country. To reduce this inequality of income, it is necessary to accord higher priority to agriculture. The prosperity of agriculture would raise the income of the majority of the rural population and thus the disparity in income may be reduced to a certain extent.

9. Helpful in minimizing political and social tensions: If the agricultural sector does not grow at a faster rate, it may result in the growing discontentment amongst the masses which is never healthy for the smooth running of democratic governments. For economic development, it is necessary to minimize political as well as social tensions.

In case the majority of the people have to be kindled with the hopes of prosperity, this can be attained with the help of agricultural progress. Thus the development of the agriculture sector is also relevant on political and social grounds.

10. Helpful in stimulating the growth of the non-agricultural sector: The development of the agricultural sector would tend to increase the purchasing power of agriculturists which will help the growth of the non-agricultural sector of the country. It will provide a market for increased production.

In underdeveloped countries, it is well known that the majority of people depend upon agriculture and it is they who must be able to afford to consume the goods produced. Therefore, it will be helpful in stimulating the growth of the non- agricultural sector.

Similarly, improvement in the productivity of cash crops may pave the way for the promotion of exchange economy which may help the growth of the nonagricultural sector. Purchase of industrial products such as pesticides, farm machinery, etc. also provides a boost to industrial dead out.

Read: Problems of Agriculture in Developing Countries

11. Helpful in Phasing out Economic Depression: During the economic depression, industrial production can be stopped or reduced but agricultural production continues as it produces necessities of life. Thus it continues to create effective demand even during adverse conditions of the economy.

12. Source of Foreign Exchange for the Country: Most of the developing countries of the world are exporters of primary products. These products contribute 60 to 70 percent of their total export earnings. Thus, the capacity to import capital goods and machinery for industrial development depends crucially on the export earning of the agriculture sector. If exports of agricultural goods fail to increase at a sufficiently high rate, these countries are forced to incur a heavy deficit in the balance of payments resulting in a serious foreign exchange problem.

However, primary goods face declining prices in the international market and the prospects of increasing export earnings through them are limited. Due to this, large developing countries like India (having potentialities of industrial development) are trying to diversify their production structure and promote the exports of manufactured goods even though this requires the adoption of protective measures in the initial period of planning.

13. Contribution to Capital Formation: Underdeveloped and developing countries need a huge amount of capital for its economic development. In the initial stages of economic development, it is agriculture that constitutes a significant source of capital formation.

14. Employment Opportunities for Rural People: Agriculture provides employment opportunities for rural people on a large scale in underdeveloped and developing countries. It is an important source of livelihood. Generally, landless workers and marginal farmers are engaged in non-agricultural jobs like handicrafts, furniture, textiles, leather, metal work, processing industries, and in other service sectors. These rural units fulfill merely local demands. In Nigeria and even India, about 70% of total labour force depends upon agriculture.

15. Improving the Welfare of the Rural Dwellers: It is time that rural economy depends on agriculture and allied occupations in an underdeveloped country. The rising agricultural surplus caused by increasing agricultural production and productivity tends to improve welfare, particularly in rural areas. The living standard of rural masses rises and they start consuming a nutritious diet including eggs, milk and fruits. They lead a comfortable life having all modern amenities, a better house, motorcycle, radio, television and use of better clothes.

16. Extension of Market for Industrial Output: As a result of agricultural progress, there will be an extension of the market for industrial products. Increase in agricultural productivity leads to an increase in the income of rural population which in turn, leads to more demand for industrial products, thus the development of the industrial.

Increase in agricultural production and the rise in the per-capita income of the rural community, together with the industrialization and urbanization, lead to increased demand in industrial production. In this way, the agricultural sector helps promote economic growth by securing as a supplement to the industrial sector.  

There are four possible types of contribution that the agricultural sector is capable of making for overall economic development, namely:

1. Product contribution, i.e., making available food and raw materials.

2. Market contribution, i.e., providing the market for producer goods and consumer goods produced in the non-agricultural sector.

3. Factor contribution, i.e., making available labour and capital to the non-agricultural sector.

4. Foreign Exchange contribution.

Read: Top Solutions to the Problems of Agriculture

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