Agricultural transformation and its role in economic development
The state of Manipur Economy
- Part 2 -

G Hiamguanglung *

2nd State Level Watermelon Festival, 2013 at Iboyaima Shanglen in June 2013 :: Pix - Shanta Nahakpam

Role of Agriculture in the Process of Economic Development;

The debate over the role of agriculture in the process of economic development extends at least as far back as the Physiocrats in the eighteenth century. The biblical advice to store during seven good years to be ready for seven lean years certainly reflects a concern for agricultural planning. Clark (1940) and Kuznets (1966) provided the general facts about the role of agriculture during the growth process available to economists and planners at the beginning of the drive for economic growth in the less-developed countries.

These facts formed the basis for the prevailing neoclassical view that agriculture was a declining sector, a "black box" in Little's phrase (1982), which contributed labour, food, and perhaps capital to the essential modernization efforts in industry. No policy efforts on behalf of agriculture's own modernization were needed because the sector declined naturally. Most interpretations of the Lewis model (1954), especially the Fei-Ranis versions (1964), which became the main teaching paradigms, ignored the factors needed to modernize traditional agricultural sectors so that they could play positive contributory roles in the development of the rest of the economy.

It is easy to see why agriculture was neglected as a source of growth in early strategies of economic development. The historical record shows that it always declines in relative importance in growing economies.

It is the home of traditional people, ways, and living standards- the antithesis of what nation builders in developing countries envisioned for their societies.

Moreover, agriculture was thought to provide the only source of productivity that could be tapped to fuel the drive for modernization. Surplus labour, surplus savings, and surplus expenditures to buy the products of urban industry, and even surplus foreign exchange to buy the machines to make them, could be had from an uncomplaining agricultural sector. Nor was it accepted that the development of a modern agriculture was necessary as a concomitant to development of the rest of the economy.

Some of these factors began to be recognized by the 1960s, and a more positive emphasis was placed on "role" of agriculture. The classic article by Johnston and Mellor (1961) listed five roles for agriculture in economic development:
(1) increase the supply of food for domestic consumption;
(2) release labour for industrial employment;
(3) enlarge the size of the market for industrial output;
(4) increase the supply of domestic savings; and (5) earn foreign exchange.

Although the second, fourth, and fifth roles are certainly consistent with the earlier "extractive" views of agriculture, Johnston and Mellor insisted that all five roles are equally important. Agriculture in the process of development is to provide increased food supplies and higher rural incomes to enlarge markets for urban output, as well as to provide resources to expand that urban output. It is our contention that "balanced growth" is needed in the sense of simultaneous efforts to promote agricultural and industrial development.

Others, especially Nichols (1963), Schultz (1953), and Jorgenson (1961), also emphasized this interdependence between a country's agriculture and its industry. Myint (1975) stressed a curious inconsistency between the "closed economy" model implicit in this domestic interdependence and the fifth role, earning foreign exchange, which obviously implies the country is open to international trade.

This trade perspective returns in the 1970s and 1980s to dominate thinking about appropriate development strategies, but it was largely ignored in the 1960s, perhaps because of the dominance of the "Indian model" in development thinking, in which sheer size keeps the importance of foreign trade quite small, even apart from the "inward looking" strategy being pursued.

Despite the early insistence by agricultural economists that the agricultural sector must be viewed as part of the overall economy and that the emphasis be placed on the sector's interdependence with the industrial and service sectors rather than on its forced contributions to them, the notion of agriculture as a resource reservoir has persisted in general development models.

Reynold state,
(1) It is one thing to assert that, in an economy where agricultural output is not rising, the agricultural sector contains potential surpluses of labour time, food output, and saving capacity requiring only appropriate public policies for their release. This we may term the static view of resource transfer.
(2) It is quite a different thing to assert that, in an economy where agricultural output is being raised by a combination of investment and technical progress, part of the increment in farm output and income is available for transfer to non-agriculture. This we may term the dynamic view of resource transfer.

Manipur State :

Coming to the state of Manipur, the role of agriculture in the state economy can be view from the structure of sectoral shares in NSDP and employment share in the three major sectors.

According to various estimate of NSDP by major sector from 1960-61 to 2008-09, the share of primary sector to NSDP drastically declines from 53.62 pc in 1960-61 to 24.79 pc in 2008-09.

Secondary sector increased from 6.26 pc in 1960-61 to 34.96 pc in 2008-09.

The tertiary sector ranges at 40.12 pc in 1960-61 to 40.25 pc in 2008-09.

In secondary sector, the share of construction records a sharp increased from 8.49 pc in 1990-91 to 27.37 pc in 2008-09. Therefore, the secondary sector growth in the economy is construction-led rather than manufactured propelled, thereby having very little impact on the production of the economy and industrailisation.

Moreover, the bulk of the services sectors share comes from public administration with 12.22 pc, other services with 11.74 pc and trade hotels with 7.83 pc in 2008-09. Thereby the increasing role of tertiary sector has not done much to the real growth of the economy of Manipur.

Again, though we observe a rise in the NSDP shares of secondary and tertiary sectors, there has been a role reversal of employment shares in the two sectors. During 1991 -2001, there is a declining trend — cultivator with 34.67 pc, agricultural labourer with 11.68 pc, manufacturing, processing, servicing and repairing with 24.84 pc.

A structural shift away from agriculture to the others two sectors is in general sure sign of an economy moving in the right direction. A closer looked at the sectoral allocation of the labour forces as revealed above give an entirely different feature of the structure of the economy.

The fall in workforce in the agricultural sector is not accompanied by rise in the secondary sector; the growing labour force in the primary sector is not absorbed by manufacturing sector rather the workforce engaged in the secondary sector also declines. Therefore, structural distortion in the economy of Manipur is visible from the sectoral shares in NSDP and sectoral allocation of labour forces. Since secondary sector growth in the state is construction led rather than manufacture propelled and tertiary sector is clearly government led rather than a true service sector boom.

Therefore, in our economy, since the share of agriculture in the total labour force doesnot declined as proportionate to declining share of NSDP. The obvious result was that labour productivity in agriculture decline more rapidly and places in the least productive. Therefore, the structural shift of our economy is very different from others and it has obviously led to rural poverty trapped.

Many experience shows that the declining share for agriculture in national employment and GDP is an inevitable consequence of economic progress. This is largely due to higher income elasticities of demand for non-agricultural goods and services. As their incomes grow, consumers increase their consumption of manufactured goods and services faster than their consumption of food. Paradoxically, the process is usually accompanied by rising incomes and a lower incidence of poverty among those who depend on agriculture for a living.

Concluded ...