Agricultural Production and Economic Growth in India: An Econometric Analysis
Despite increasing contribution of services sector to India’s economic growth helping the country to grow at a rate of 7.1 per cent annually, the fact that agriculture is still continuing to be the backbone of the economy is hardly exaggerated. The sector, though contributes 13.7 percent to total GDP it provides employment to 51.8 percent of the total population and constitutes the major source of their livelihood. It has a 10 per cent share in the total exports and is the fourth largest contributor. It is well understood that “with 75 percent of the World’s poor in rural areas and most of them dependent on farming, agriculture must be part of world economic growth, poverty reduction and environmental sustainability (UNDP, 2012)”.
The main objective of this study is to examine how agricultural production contributes to the economic growth in India during 1991-2012. The log linear regression growth model is used where gross domestic product is the dependent variable and the explanatory variables are the five major crops i.e. cereals, tobacco, tea, coffee and sugarcane. The regression analysis is performed using E-views-7. It is found that production of tea, cereals and tobacco are positively affecting the GDP growth in India whereas the coffee and sugarcane production is having inverse relationship with economic growth though not insignificant. Therefore, a decline in agricultural production has been accompanied by declines in GDP growth. Therefore it is suggested that, proper training to farmers, adequate storing marketing and insurance and irrigation facilities should be provided to encourage them to increase production.
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