Investigating the Impact of Agriculture and Industrial Sector on Economic Growth of India

12 Pages Posted: 5 Dec 2012

See all articles by Kalpana Sahoo

Kalpana Sahoo

National Institute of Technology (NIT) - Department of Humanities and Social Sciences

Narayan Sethi

University of Hyderabad - School of Economics

Date Written: December 5, 2012

Abstract

Agriculture and Industry both are considered as two basic pillars of a developing economy like India. Without development of agriculture, no country can exist and without industrialization no country can develop. Both agriculture and industry play vital role in the balanced economic development of an economy. The share of agriculture and industry is 14.6% and 28.6% respectively to India’s GDP, but their importance in the country’s economic, social, and political structure goes well beyond this indicator. Both the sector hold the key of overall development of the economy by creating employment, generating income, ensuring self-reliance in food production and food security, providing tools and equipment to other sectors and foreign exchange earnings. The present study tries to examine the contribution of both agriculture and industrial sector to Indian economy by considering the variables like Gross Domestic Product (GDP), Per-capita Gross National Income (PcGNI), Gross Domestic Saving (GDS), Gross Domestic Capital Formation (GDCF), and Production of both agriculture and industrial sector. In this paper GDP and PcGNI are used as the proxy of economic growth and economic development respectively. The whole study is based on the secondary data which is collected from the Handbook of Statistics on Indian Economy published by Reserve Bank of India. First this study has test the stability of the variables by using the Phillips-Perron test. The study employ Ordinary Least Square (OLS) test by using the statistical package E-view 5.0 to examine the impact of both sectors on economic growth and development of India using the annual time series data from 1950-51 to 2009-10. The simple OLS test results find that both agriculture and industry have significant positive impact on both economic growth and development in India. But the result indicates that agriculture has shown more significant positive impact on economic development whereas, industry has on economic growth of India during the study period. The study concludes that agriculture is the backbone of industry as well as for the economy. Agriculture and industry are like two hands of the India economy, without which the economy neither can be functioned nor can be survived. So it’s necessary for a developing country to give importance to both agriculture as well as industry particularly in the initial stages of economic development. To attend a higher level of growth with desire level of development in India, industry as well as agriculture should develop simultaneously. An industry without compromising agriculture and vice-versa should be the main agenda of the Indian policy to attend a balanced economic growth with sustainable development in the economy. Both the sectors should be considered as they are complementary to each other rather substitute. The issue should be handled by considering industry and agriculture rather industry vs. agriculture.

Keywords: Agriculture, Industry, OLS test, India

Suggested Citation

Sahoo, Kalpana and Sethi, Narayan, Investigating the Impact of Agriculture and Industrial Sector on Economic Growth of India (December 5, 2012). OIDA International Journal of Sustainable Development, Vol. 5, No. 5, pp. 11-21, 2012. Available at SSRN: https://ssrn.com/abstract=2185418

Kalpana Sahoo (Contact Author)

National Institute of Technology (NIT) - Department of Humanities and Social Sciences ( email )

Rourkela
Rourkela, OR Odisha
India

Narayan Sethi

University of Hyderabad - School of Economics ( email )

Gachibowli
Hyderabad, Andhra Pradesh 500046
India

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