Agriculture, Industry and Services:

Relative Contribution
Lecture 3
q GDP calculation Methods
● Income Method → Based on factor cost → WIPR
Factor cost = Labor (Wages) + Capital (Interest) + Entrepreneurship (Profit) + Land (Rent)
GDP @ Current Market Price = GDP @ Factor cost + Taxes – Subsidies
GDP @ Current Market Price when adjusted for inflation → GDP @ Constant market prices

Labour Wages
Factors

Land Rent
Capital Interest
Entrepreneur Profit

GDP @Factor Cost

q GDP calculation Methods
● Income Method → Based on factor cost → WIPR
Factor cost = Labor (Wages) + Capital (Interest) + Entrepreneurship (Profit) + Land (Rent)
GDP @ Current Market Price = GDP @ Factor cost + Taxes – Subsidies
GDP @ Current Market Price when adjusted for inflation → GDP @ Constant market prices

Labour Wages
Factors

Land Rent
Capital Interest
Entrepreneur Profit
Subsidies Taxes GDP @Factor Cost
● Parle G Cost
Factor Cost Rs. 4 + Taxes 1.25 – Subsidies .25 P = Market Price Rs. 5.
q Expenditure Method → Private Consumption + Investment +
Government + Foreign Expenditure
● GDP will be calculated as → C + I + G + (X – M)
● Consumption + Investment + Govt Purchases + Foreign exp.
Where C → Private Consumption; I → Investment; G → Purchase; X-
M → Foreign Expenditure.
• Explanation:
Private Consumption:
Only final consumption is counted
• New Car Purchased → Will be counted as Consumption
• Existing House → Will be calculated as owner paying “rent” to himself
• Intermediate consumption is not counted
• Steel, Rubber, Plastic used to make product → Will not be counted
• New house purchased → Will be counted in investment (not as Private Consumption)
● Investment:
• New house purchased will be counted
• Purchase of goods that will be used in future production will be counted
• Capital goods, Heavy Machinery, Building, Structure will be counted
• Leftover Inventory [Rubber, steel, car] will be counted
• Share, Bond, Debenture will be counted.

• Govt Purchases:
• Salary to employees will be counted
• FCI food grain purchase will be counted
• Transfer Payments viz. LPG-DBT, Pension, Scholarship, food coupons etc → → gets
counted in Private consumption
● Economic progress of a country is generally assessed either from the level of per capita
income or by the percentage of contribution of the different sectors to the national income.

● In general, the underdeveloped countries have low level of per capita incomes. Further the
share of secondary and tertiary sectors in developed countries is greater than the share of
the Agricultural sector.

● On the other hand, there is a predominance of agricultural sector in most under-developed

countries.

● To understand the contribution and dominance of various sectors in Indian economy, we

would have to read about the evolution of Indian economy especially since independence.
 Economy on the eve of independence

● Indian economy was in complete distress at the time of Independence. India was serving
the cause of development not for herself but for the British.
● Both agriculture and industry were in an infant stage while the state was playing not even
a marginal role.
● At the advent of 20th century, the world was having accelerated development and
expansion in agriculture and industry due to active role played by the states.
● In the UK, there was not only the unilateral transfer of capital to Britain by India (the
‘drain of wealth’), but it was also crippling India’s commerce, trade and the thriving
handloom industry, too.
● The imperial powers practiced policies which were great impediments in the process of
development in the country. Throughout the colonial rule, India was exporting primary
products, and had to purchase/import the British manufactured goods at high prices.

● The social sectors like health and education were neglected by the British rulers which had
a negative impact on the production and productivity of the economy.

● India remained a continent of illiterate peasants under British rule. At the time of
Independence, its literacy was only 17 per cent with 32.5 years of life expectancy at birth.

● Industrialisation of India was also neglected by the colonisers—the infrastructure was not
built to industrialise India but to exploit its raw materials.
● Indian capitalists who did emerge were highly dependent on British commercial capital
and many sectors of the industry were dominated by British firms, e.g., shipping, banking,
insurance, coal, plantation crops and jute.

● The pre-independence period was altogether a period of near stagnation showing almost
no change in the structure of production or in the levels of productivity. The overall
economic performance of India under the British rule was very low.

● According to economic statistician Angus Maddison, there was no per capita growth in
India from 1600 to 1870—per capita growth was a meagre 0.2 per cent from 1870 to 1947,
compared with 1 per cent in the UK.

● The per capita incomes of Rs. 18 for 1899 and Rs. 39.5 for 1895 in current prices say the
true story of the abject poverty Indian masses were faced with.
● The repeated famines and disease epidemics during the second half of the nineteenth
century and the first half of the twentieth century show the greatest socio-economic
irresponsibility and neglect of the British government in India at one hand and the
wretchedness of the masses at the other.

● The political leaders and the industrialists both were very much aware and conscious about
the economic inheritance once India became independent. Somehow, there emerged a
consensus on many major strategic issues:

1. State/governments should be given a direct responsibility for development.

2. An ambitious and vital role to be assigned to the public sector.
3. Necessity for the development of heavy industries.
4. Discouragement to foreign investment.
5. The need for economic planning.
 PRIME MOVING FORCE: AGRICULTURE VS. INDUSTRY

● A topical issue of the debate regarding India has been the choice for the sector which will
lead the process of development.

● The government of the time opted for industry to be India’s prime moving force of the
economy. Whether India should have gone for agriculture as its prime moving force for
better prospects of development, is a highly debatable issue even today among experts.

● Every economy has to go for its development through exploitation of its natural and
human resources.

● The availability and non-availability of resources (natural as well as human) are not the
only issues which make an economy decide whether to opt for agriculture or industry as its
prime moving force.
 ● The political leadership selected industry as the leading force of the economy after
Independence—this was already decided by the dominant group of the nationalist leaders
way back in the mid-1930s when they felt the need for economic planning in India before
setting up the National Planning Committee in 1938.

● Given the available resource base it seems an illogical decision as India lacked all those
prerequisites which could suggest the declaration of industry as its prime mover:

(i) Almost no presence of infrastructure sector, i.e., power, transportation and communication.
(ii) Negligible presence of the infrastructure industries, i.e., iron and steel, cement, coal, crude
oil, oil refining and electricity.
(iii) Lack of investible capital—either by the government or the private sector.
(iv) Absence of required technology to support the process of industrialisation and no research
and development.
(v) Lack of skilled manpower.
(vi) Absence of entrepreneurship among the people.
(vii) Absence of a market for industrial goods.
(viii) Many other socio-psychological factors which acted as negative forces for the proper
industrialisation of the economy.

● The obvious choice for India would have been the agriculture sector as the prime moving
force of the economy because:

(i) The country was having the natural resource of fertile land which was fit for cultivation.

(ii) Human capital did not require any kind of higher training.
● By only organising our land ownership, irrigation and other inputs to agriculture, India
could have gone for better prospects of development.

● Once there was no crises of food, shelter, basic healthcare, etc., to the masses, one goal of
development could have been realised—a general welfare of the people.

● Once the masses were able to achieve a level of purchasing capacity, India could have
gone for the expansion of industries.

● India was capable of generating as much surplus income for its masses as was required by
the emerging industries for a market success.
● The People’s Republic of China did the same in 1949—taking a realistic evaluation of its
resources, it declared agriculture as its prime moving force for the economy.

● The surplus generated out of agriculture was suitably invested to develop the pre-
requisites for industrialisation and the country went for it in the 1970s.

● The emergence of industrial China was so vibrant that its impact was felt in the so-called
highly developed and industrialised economies of the world— the industrial homework of
China catapulted it into a giant.

● Was the political leadership of independent India not able to analyse the realities as we did
above and conclude that agriculture should have been the moving force of the economy in
place of industry? How India could have not opted for agriculture as its prime moving
force whose leadership had fought the nationalist movement on the Gandhian fervour of
villages, agriculture and rural development.
● There were many decisions which were taken under the influence of the main political
leadership of the times, mainly under J. L. Nehru. This is why the economic thinking of
independent India is considered and said to be nurtured by Nehruvian Economics even
today.
● If we go through the major literatures on the Indian economic history, we may be able to
analyse why India went for industry as its prime moving force in place of an obvious and
logical choice of agriculture:
1. Indian agriculture was using traditional tools and technology. Its modernisation as well as
future mechanisation would have been blocked due to the lack of indigenous industrial
support.
2. If India would have gone for import this would have required enough foreign reserves and
a natural dependence on foreign countries. By choosing industry as the prime moving
force, India opted to industrialise the economy as well as modernise the traditional mode
of farming.
3. The dominant ideology around the world as well as in the WB and the IMF was in favour
of industrialisation as a means to faster growth and development. Their support was vital
and it was not offered to an economy that opted for agriculture as the prime moving force.

4. Basically, going for the agriculture sector was considered a symbol of ‘backwardness’ at
that time. It was only in the 1990s that the world and the WB/IMF changed its opinion
regarding the agriculture sector. After the 1990s emphasis on this sector by an economy
was no more considered a sign of backwardness.

5. The second World War had proved the supremacy of defence power. For defence a
country needs not only the support of science and technology, but also an industrial base.
India also required a powerful defence base for herself as a deterrent force.
6. Even before Independence, there was a socio-economic consensus that a break from the
traditional and outmoded way of life and cultivation of a scientific outlook was a must for
the country. Such feelings also made the political leadership of the time go in favour of
wholehearted industrialisation.

● The last decade of the 20th century (i.e., the decade of the 1990s) saw major changes
taking place in the world economic idea about the agriculture sector. It was no more a
symbol of backwardness for an economy that emphasises on the agriculture sector as the
engine of growth and development.

● China had proved to the world how agriculture could be made the prime moving force of
an economy and generate internal as well as external strength to emerge as an industrial
economy.
 Changing perception: Agriculture as PMF
● A major shift took place in the Indian economic thinking when the government announced
in 2002 that from now onwards, in place of industry, agriculture will be the prime moving
force of the economy.
● This was a policy shift of historic importance which was announced by the erstwhile
Planning commission as the economy commenced the Tenth Plan (2002–07). Such a
policy shift was intended to solve the three major challenges faced by the economy:

1. Economy will be able to achieve food security with the increase in agricultural production.
Besides, the agricultural surplus will generate exports in the globalising world economy
benefiting out of the WTO regime.
2. The challenge of poverty alleviation will be solved to a great extent as the emphasis will
make agriculture a higher income-generating occupation and induce growth in the rural
economy by generating more gainful employment.
3. The situation of India as an example of ‘market failure’ will cease.
 ● Mahatma Gandhi believed that India lives in villages and agriculture is the soul of Indian
economy. Agriculture and allied activities remained the major source of livelihood for
nearly half of the Indian population—its share in employment being 48.7 percent, with
17.4 percent contribution in the GDP.

● In the agriculture sector reforms were initiated a bit late—better say by early 2000s. Three
major reasons may be cited for this delay:

(i) Agriculture being always open for the private sector, it was now difficult to go for further
privatisation for encouraging investments. The need was for ‘corporate’ and ‘contract’ farming
under the leadership of the corporate world.
(ii) Lack of awareness about the contours of the economic reforms among the farm community.
(iii) The heavy dependency of population on agriculture for livelihood could not permit the
government to go for the right kind of agricultural reforms at the right time— the industrial
sector (via manufacturing) needed expansion to lessen the population’s dependency on the
agriculture sector.
● Indian agriculture has come a long way since independence, with chronic food scarcity
giving way to grain self-sufficiency despite a two-and-a-half fold increase in population.

● In 1966-67, just before India’s Green and White Revolutions, Indian wheat and milk
production were just about one-third of US output. By 2013-14, Indian wheat output was
60 per cent higher than America’s, while Indian milk output was 50 per cent higher.
However, agriculture today also sees some disquieting trends.

● Indian agriculture, is in a way, a victim of its own success, which over time is posing to be
a major threat. Indian agriculture has become cereal-centric and as a result, regionally-
biased and input-intensive, consuming generous amounts of land, water, and fertiliser.
● Encouraging other crops, notably pulses (via a Rainbow Revolution to follow the Green
and White Revolutions) will be necessary to match supply with evolving dietary patterns
that favor greater proteins consumption.

● At the same time, rapid industrialization and climate change will require economizing on
land and water, respectively—getting “more from less” of these inputs.

● There is a sharp decline in cultivable land per person in India—much sharper than in other
countries. Similarly, India has much lower levels of water per capita than Brazil, one of
the world’s leading agricultural countries. While Brazil and China use approximately 60
percent of their renewable freshwater resources for agriculture, India uses a little over 90
per cent.
The major reform needs and the hurdles being faced may be summed up in the following
points:

(i) A national agri-market is the need of the hour, but there lacks a political will among the
majority of states to put in place a right kind of Agricultural Produce Market Committees.

(ii) The need of promoting corporate investment in the farm sector is hurdled by the lack of an
effective and transparent land acquisition law.

(iii) Labour reforms needs fine-tuning to promote industrial farming, which is hurdled by a long
tradition of complex kind of labour laws of the country.

(iv) Farm mechanisation is hindered by the lack of investment in industries.

(vi) Research and development needs huge investment from the private sector, but there lacks a
conducive atmosphere for it.
(vii) Right kind of ‘downstream and upstream requirements’ together with a proper kind of
‘supply chain management’ is required in the area of agri-goods.

(viii) Expansion of the right kind of commodity trading in—agri commodities.

(ix) Strengthening the farm sector to face the competition posed by the agricultural sector of the
developed world, with regard subsidies and prices, in wake of the globalising world economy.

(x) Making farming remunerative to check farm crisis of contemporary times.

 Industrial sector: Background

● Independent India needed to rejuvenate its economy from a completely dilapidated state.
The country had many tasks in front of it—the abject mass poverty, shortage of
foodgrains, industry, infrastructure, science and technology and higher education, to name
a few.

● Looking at the pros and cons of the available options, as we have already discussed, India
decided that the industrial sector should be the ‘prime moving force’ (PMF) of the
economy.

● As the government of the time had decided upon an active role for the governments in the
economy, naturally, the government-owned companies (i.e., the PSUs) had a major role to
play.
Brief review of the various industrial policies of India till date.

Industrial Policy Resolution, 1948

● It was the first economic policy of the country. India was decided to be a mixed economy
and important industries were put under the Central List, medium category industries
under State List and rest were left open for private sector

Industrial Policy Resolution, 1956

● Under it a clear-cut classification of industries (also known as the Reservation of

Industries) were affected. Central Public Sector Undertakings (CPSUs)/ PSUs were set up
where centre had the monopoly.
● It was this industrial policy in which the then PM Pandit Jawaharlal Nehru had termed the
PSUs the ‘temples of modern India’.
● One of the most important developments of independent India, the provision of
compulsory licensing (‘Licence-Quota-Permit’ regime (raj)) for industries, was cemented
in this policy.

● To tackle the widening regional disparity, the policy committed to set up the upcoming
PSUs in the comparatively backward and underdeveloped regions/areas in the economy.

● This is considered as the most important industrial policy of India by the experts as it
decided not only the industrial expansion but structured the very nature and scope of the
economy till 1991 with minor modifications.
NEW INDUSTRIAL POLICY, 1991
In early 1990s, there were interconnected set of events, which were growing unfavourable for
the Indian economy:
(i) Due to the Gulf War (1990–91), the higher oil prices were fastly depleting India’s foreign
reserves.
(ii) Sharp decline in the private remittances from the overseas Indian workers in the wake of the
Gulf War, especially from the Gulf region.
(iii) Inflation peaking at nearly 17 per cent.
(iv) The gross fiscal deficit of the Central Government reaching 8.4 per cent of the GDP.
(v) By the month of June 1991, India’s foreign exchange had declined to just two weeks of
import coverage.
India’s near miss with a serious balance of payments crisis was the proximate cause that started
India’s market liberalisation measures in 1991.
The major highlights of the policy are as follows:

1. De-reservation of the Industries: Only eight industries were now reserved for the Central
Government. At present only railways and atomic energy and related activities are fully or
partially reserved for the Central Government.

2. De-licensing of the Industries: Presently there are only five industries which carry the burden
of compulsory licensing:

(i) Aerospace and defence related electronics

(ii) Gunpowder, industrial explosives and detonating fuse

(iii) Dangerous chemicals

(iv) Tobacco, cigarette and related products

(v) Alcoholic drinks

3. Abolition of the MRTP Limit: Later, in 2002, a competition Act was passed which has
replaced the MRTP Act. In place of the MRTP commission, the Competition Commission has
started functioning.

4. Promotion to Foreign Investment: Not only the draconian FERA was diluted, but the
government started encouraging foreign investment (FI) in both its forms—direct (FDI) and
indirect (FII).

5. FERA Replaced by FEMA

6. Location of Industries: Industries were classified into ‘polluting’ and ‘non-polluting’

categories and a highly simple provision deciding their location was announced:

(i) Non-polluting industries might be set up anywhere.

(ii) Polluting industries to be set up at least 25 kms away from the million cities.
7. Compulsion of Phased Production Abolished: With the compulsion of phased production
abolished, now the private firms could go for producing as many goods and models
simultaneously.

MAKE IN INDIA

● Next big step to give a boost to industrial sector was Make in India. It was launched in
September 2014 by the GoI to encourage multinational as well as domestic companies to
manufacture their products in India.

● The initiative is set to boost entrepreneurship, not only in manufacturing but in relevant
infrastructure and service sectors as well.

● Key policies to be followed are: ease of doing business, getting away with archaic laws,
100 Smart Cities, disinvestment of the PSUs, skills and jobs for the youth, etc.
The major steps taken by the government in this regard are as summed-up below:

● An interactive portal for dissemination of information and interaction with investors

● Invest India set up as the national investment promotion and facilitation agency.

● As envisaged by the National Manufacturing Policy 2011, Make in India seeks to enable
the sector to contribute 25 percent to the GDP and create 100 million additional jobs by
2022.

● A number of steps to enhance the skills of workers/the unemployed in India in order to

improve their employability.

● In order to tap the creative potential and boost entrepreneurship in India, the Start-up India
and Stand-up India campaign has been announced.
● An innovation promotion platform called AIM (Atal Innovation Mission) and a techno-
financial, incubation and facilitation programme called SETU (Self-Employment and
Talent Utilization) are being implemented to encourage innovation and start-ups in India.

● For supporting the financial needs of the small and medium enterprise sector and promote
start-ups and entrepreneurship, various steps taken through Make in India –

● The India Aspiration Fund has also been set up under the SIDBI for venture capital
financing to the MSME sector

● A Micro Units Development Refinance Agency (MUDRA) Bank set up to provide

development and refinance to commercial banks/NBFCs/cooperative banks for loans
given to micro-units.
 START-UP INDIA

The Start-up India scheme was launched by the GoI in January 2016 with a slogan, Start-up
India and Stand-up India. The mission/scheme aims to build a strong ecosystem for nurturing
innovation, driving sustainable economic growth and generating large-scale employment
opportunities.

The proposed action plan for the firms is as given below:

• Creating a compliance regime based on self-certification to reduce the regulatory burden

• Setting up Start-up India hub to create a single point of contact for the entire Start-up
ecosystem

• Rolling out of mobile app and portal to serve as the single platform for start-ups to interact
with government and regulatory institutions
• Faster and easier exit norms.

• Providing funding support through a fund of funds with a corpus of Rs. 10,000 crore.

• Tax exemption on capital gains.

• Income Tax exemption for three years.

• Launch of AIM (Atal Innovation Mission) with the SETU (Self Employment and Talent
Utilisation) programme to serve as a platform for promotion of world-class innovation hubs,
start-up businesses and other self-employment activities, particularly in technology-driven
areas.

• Building innovation centres at national institutes to propel successful innovation through

augmentation of incubation and R&D efforts.
• Setting up of 7 new research parks (modelled on the research park at IIT Madras).
• Promoting start-ups in the biotechnology sector.
• Launching of innovation-focused programmes for students to foster a culture of innovation in
the field of science and technology
Start-up India will turn Indian youths from job seekers into job creators. It will encourage
entrepreneurship, innovation and creation of revolutionary new products in India, that will be
used by people around the world.
Road ahead:
The Indian Manufacturing sector currently contributes 16-17% to GDP and gives employment
to around 12% of the country’s workforce. Every job created in manufacturing has a multiplier
effect in creating 2–3 jobs in the services sector. Therefore, this sector a critical one to achieve
inclusive growth and is thus rightfully at the center-place of the Hon’ble Prime Minister’s
Vision for Make In India (MII)
 Services sector

● The services sector is not only the dominant sector in India’s GDP, but has also attracted
significant foreign investment flows, contributed significantly to exports as well as
provided large-scale employment.

● India’s services sector covers a wide variety of activities such as trade, hotel and
restaurants, transport, storage and communication, financing, insurance, real estate,
business services, community, social and personal services, and services associated with
construction.

● The sector contributed around 53.8 per cent of its Gross Value Added in 2016-17 and
employed 28.6 per cent of the total population. Net services exports from India reached
US$ 67.5 billion in 2016-17 while the sector attracted 60.7 per cent of India’s total FDI
inflows.
● Services sector has not only outperformed other sectors of the Indian economy, but has
also played an important role in India’s integration with world trade and capital markets.

● The prevailing view is that for services growth to be sustained, the sector cannot remain
dependent on external demand. It must also be driven by internal demand.

● More broad-based growth within the services is also required to ensure balanced, equitable
and employment-oriented growth, with backward and forward linkages to the rest of the
economy.

● In this regard further infrastructural and regulatory reforms and FDI liberalisation in
services can help diversify the sources of growth within India’s services sector and
provide the required momentum.
 OUTLINING FUTURE OF SERVICES SECTOR

● With plenty of opportunities, the services sector is like an uncharted sea. As yet, its
potential has not been tapped fully by India.

● A targeted policy of removing bottlenecks in major and potential services can result in
large dividends in the form of higher services growth and services exports, which in turn
can help in pulling up the economy to higher growth levels.

● In future, government’s focus on the following are expected to provide impetus to logistics
services— (a) infrastructure development, (b) favourable regulatory policies like
liberalisation of FDI norms, (c) increasing number of multimodal logistics service
providers, (d) growing trend of outsourcing logistics to third party service providers, and
(e) entry of global players.
● Though shipping services are at a low key at present, with increased imports of POL
(petroleum, oil and lubricants) for stocks build up to take advantage of low crude oil
prices, containerisation of export and import cargo and modernisation of ports with private
sector participation, recovery of the shipping and port services sector can be expected.

● The prospects for Indian aviation services have improved following— (a) the fall in prices
of aviation fuel, which accounts for nearly 40 per cent of the operating expenses of airlines
in India; (b) liberalisation of FDI policies in civil aviation; and (c) strong growth in
passenger traffic – expected to continue in the near future.

● Following initiatives are expected to give a fillip to the retail sector— (a) allocation of Rs.
1000 crore to technology and start-up sectors, (b) promotion of cashless transactions via
RUPay debit cards, and (c) growth of e-commerce.
● Government’s focus on the tourism sector including easing visas by eTV and building
tourism infrastructure could help in the recovery of the tourism sector.

● Despite challenges in the global market, the Indian IT industry is expected to maintain
double or near-double- digit growth as India offers depth and breadth across different
segments of this industry, such as, IT services, BPM, ER&D, internet & mobility and
software products.

● In the telecom sector, the introduction of 4G which could be a game changer and inclusion
of fibre optic connectivity which will tremendously increase the reach and bandwidth
along with greater use of mobiles in government’s social sector programmes could give a
further boost to this fast growing sector.
 Mains Q & A

Q) Manufacturing output grew 7%–8% annually since 1991, with a marked

improvement in the variety and quality of goods produced. Yet, its share in gross
domestic product has practically stagnated, with a sharp rise in import intensity.
Examine why. (200 Words)

Introduction

Though India has avoided deindustrialization— defined as a decline in the

manufacturing (industrial) sector’s share in GDP, or share in workforce—it stares at a
quarter century of stagnation, in contrast to many Asian economies that have moved
up the technology ladder with a rising share of manufacturing in domestic output and
global trade.
Reasons-
● Lack of investment- Manufacturing industries requires huge investments from the
state as well as private investors. Indian manufacturing sector did not get as much
capital in the form of investment as required.
● Rise of services sector– Indian services sector, which mainly revolves around IT
and banking, grew at a much faster pace. This led to diversion of people’s interest
from secondary to tertiary sector.
● Ineffective labor laws- The labor laws became stringent and fair much later than
expected. This acted as a discouragement for entrepreneurs to establish
manufacturing industries which are generally labor intensive.
● Impacts of other economies- Despite being a stable economy, the rise and fall of
consumption of other countries affected the Indian production.
● Poor growth of the primary sector- The primary sector which mainly includes
agriculture and mining did not grow as expected due to lack of technological
advancements. This sector feeds the manufacturing sector and thus, in spite of
growth, the share remained constant.
 ● High input cost- need of importing raw materials, cascading effect of indirect
taxes, labor wages, transportation cost have lower down the profitability.
● Poor infrastructure- lack of electricity, roads, water supply etc have hampered the
growth of manufacturing sector in tier II and III cities particularly.
● Government Policies- delay in land acquisition, fluctuating market prices, lack of
coherent policies, interference in functioning and management, inherent
nepotism, corruption etc are creating challenges for the new players.
Conclusion
● The National Manufacturing Policy of 2011 aims at increasing the share of
manufacturing sector in GDP to 25% by 2022. Initiatives like ‘Make in India’
would also prove effective in increasing the share of manufacturing industries in
the GDP. The state is busy publicizing the same as it would not only create a lot of
jobs but would also result in increased exports and long term stability of the
economy.
Q) More than half of India’s labour force is still connected directly or indirectly to
agriculture for its livelihood. Policymakers face the the dual challenge is of increasing
income share of labour force, and increasing the rate of employment absorption into
industry and services. Examine how these two challenges can be addressed. (250
Words)

Introduction:-

Agriculture sector receives around one seventh of national income. But due to the
unique disguised unemployment phenomenon of Indian agriculture and low capacity
of jobs in industry, service sector following steps are required to address this
challenge:-

● Diversification: Farmers should be encouraged to invest in allied activities like

horticulture, bee keeping , which would augment their income.
● Rainfed farming: Agriculture needs to climate resilient through initiatives like
national missions for sustainable agriculture
● Cropping pattern:-The more market oriented farming focusing on best cultivation
of crops, choosing the crops in demands can boost income rather than practicing
only the subsistence agriculture.
● Scientific farming methods- Training farmers in scientific cultivation practices
such as inter-cropping, organic farming, use of HYV/GM seeds and fertilizers.
● Extension of Minimum Support Price: One of the drawbacks of MSP is that it is
provided on crops like wheat, rice ignoring other crops, hence a diversification is
required .
● Addressing loopholes in credit: Restructuring of loans and access to financial
institution would help farmers in increasing their share.
● Strengthen agriculture-industry linkage- Enable corporates to directly procure
from farmers, eliminating middlemen.
● Implementation of social security schemes: Initiatives like Pradhan Mantri Fasal
Bima Yojana needs to implement in a transparent manner.
● Public private partnership:-PPP should be encouraged for building infrastructures
such as warehouses, grain stores, financing agriculture sector through Corporate
Social Responsibility.
● Sustainable agriculture:- by using micro irrigation techniques, water harvesting,
sprinkler method, promoting organic farming etc
HOW TO INCREASE RATE OF EMPLOYMENT:

● Skill development- under Skill India mission, training of rural youth for
employability in all the sectors of the economy.
● Security exchange for agriculture markets- training farmers to trade in
agricultural securities, forward contracts, futures trading.
● Credit facilities:- by encouraging entrepreneurship spirit among young people.
Schemes like MUDRA can be a game changer
 ● Vocational training :-at the school level and more focus on skill based education
● Attracting FDI to support rural infrastructure such as constructing BPOs for rural
youth
● Creating awareness:-Awareness about of different government policies like Make
in India, Start up India, Stand up India and programs through DIGITAL INDIA
● Rural entrepreneurship- integrating Startup India, Skill India, Rashtriya Krishi
Vikas Yojana etc. to support rural population in setting up startups in rural areas.
Conclusion:-

● According to the PM, agriculture has to stand on three pillars — paramparagat

kheti (traditional agriculture), diversification into agro-forestry by planting trees
on the boundaries of farmers’ fields, and encouraging livestock and bee-keeping,
duly supported by food processing. These pillars need to strengthened and
supported.
Thank You