The balance between industry and agriculture in economic development: the Indian experience

In India, the services sector has increased most rapidly in terms of growth rate. Indian planners have in the past aimed to achieve higher industrial growth targets than agricultural ones. With the progressive industrialization of the Indian economy came increased commercial activity and urbanization; however, it was not accompanied by any significant decrease in the agricultural population. As a result wage rates in the farm sector fell behind those in the industrial sector. With the higher income elastic demand for industrial products, agriculure's terms of trade fell. Agricultural products are much more price inelastic and less income elastic and supplies can not be easily expanded. Supply lagged behind demand and food prices and imports rose. To keep prices in check and balance the budget, public investment throughout the early 1970s was kept to a minimum. In response the industrial growth rate fell. With food aid and an agricultural policy concentrating on irrigated areas and the provision of high yielding seeds, fertilizer, credit, extension etc., by the mid-1970, India had met its food grains/marginal farmer needs improving with wider adoption of new technology; resources put into dry demand for many industrial goods will rise. Growth in the industrial sector then increases demand for their raw materials some of which the farm sector provides. In future agriculture and industry may clash in competition for scarce natural resources. c CAB International