Agriculture
dominates change in India through its causal links with factor and product
markets. It employs 60 per cent of the labour force and contributes 26 per cent
of the gross domestic product. In the poorer states, its contribution to the
domestic product is close to 40 per cent. Low productivity in agriculture has
led to the concentration of the poor in this sector. Due to the sheer size of
the agricultural economy and the importance of its major products (cereals) in
the diets of the poor, gains in agricultural productivity have significant
potential impact on poverty.
Theoretically, it is possible to reduce poverty as well as expand the domestic
market for industry by raising labour productivity in agriculture and spreading
its gains among the low-income groups. Modelling of the linkages between
agricultural and industrial growth has shown that a 10 per cent increase in
agricultural output would increase industrial output by 5 per cent and urban
workers would benefit by both increased industrial employment and price
deflation. However, there is an asymmetry of adjustments in the demand and
supply of agricultural goods. An increase in non-agricultural production would
lead to an immediate increase in demand for intermediate and final agricultural
goods, whereas supply-side adjustments involving reallocation of resources and
net additional investment for capacity expansion take a much longer period.
There is a widely held view that in a large country like India, the demand
stimulus for industrialisation would come mainly from agriculture with less
social and economic costs.
Interdependencies in food and labour market
are important for the development process. An upward shift in the food supply
curve would simultaneously result in an upward shift in the labour demand
curve. The magnitude of the interdependence depends on the technique of
production causing the shifts in the food supply curve. Similarly, an upward
shift in the labour supply curve shifts up the food demand curve. The extent of
interdependence between the forces of labour supply and food demand depends on
the employment-output elasticity and the income elasticity of demand for food.
The recent estimate of the employment-output elasticity in agriculture is
around 0.5, income elasticity of food is in the range of 0.55-0.60 and that for
cereals is 0.25-0.30. The other important inter-dependency, which plays a
crucial role in inducing indirect employment, is that between food and other
sectors through demand linkages. Since food accounts for a major share in the
budget of the poor and any reduction in the food price leaves a significant
proportion of income for other items, a lower food price stimulates employment
in industrial and service sectors. On the other hand, an increase in the food
price would increase the wage costs of industrial products and hence the prices
of industrial products. In the absence of adjustments through exports, it would
result in demand deficiency. Clearly, the most favourable situation in India is
one in which labour demand outpaces its supply and food supply outpaces its
demand.
Wage rates
cannot fall below a certain minimum determined by the costs of subsistence
living and the labour supply curve turns elastic at the subsistence wage rate.
Demographic pressure cannot push the wage rate below the subsistence level.
People would be willing to starve rather than work unless the energy expended
in physical work is compensated by the energy provided by food. Foodgrain price
usually determines the subsistence wage rate in agricultural as well as in the
urban informal sector since foodgrains account for about four-fifth of the
calorie intake of the poor.
Q1. Which of
the following, according to the passage, signifies influence of agricultural
products on poverty? (I) Higher labour productivity in agriculture reduces
poverty. (II) Agricultural product is the main constituent of the food of the
poor. (III) Agriculture output spurs industrial growth which ultimately helps
the poor.
(a) (I) and (II) only (b) (II) and (III) only
(c) (I) and (III) only (d) All (I), (II) and (III) e)None
Q2. Which of
the following, according to the passage, benefits the urban workers get from
increased agricultural production? (I) Urban workers get agricultural products
at a cheaper rate. (II) Urban workers get more job offers in the agricultural
sectors. (III) Urban workers get more job offers in the industrial sectors. (a)
None (b) (I) and (II) only (c) (II) and (III) only (d) (I) and (III) only (e)
All (I), (II) and (III)
Q3. Which of
the following is meant by "the labour supply curve turns elastic at the
subsistence wage rate" as used in the passage? (a) People refuse to work
at the minimum wage rate (b) People still work at the minimum wage rate (c)
People are eager to work at the minimum wage rate (d) People have no option but
to work at the minimum wage rate (e) None of these
Q4. Which of
the following statements is not true in the context of the passage? (a)
Increase in labour productivity in agriculture can reduce poverty (b)
Agricultural sector can provide the impetus for greater industrialization at
lower cost (c) Increase in food supply will increase the demand for labour
forces (d) Concentration of low income group people is relatively higher in the
non-agricultural sector (e) All are true
Q5. Which of
the following in addition to employment-output elasticity, according to the
passage, creates indirect employment? (a) Inter-linkage of demand of food and
other sectors. (b) Inter-dependence of forces of labour supply and food demand.
(c) Income elasticity of demand for food. (d) All of these (e) None of these
Q6. Which of
the following, according to the passage, can lead to demand deficiency in
India? (a) Widespread import of food grains (b) Oversupply of agricultural
products (c) Increase in prices of industrial products (d) Foresight in gauging
the demand-supply of labour (e) None of these
Q7. Which of
the following, according to the passage, is the cause for increase in food
supply? (a) Less demand by the industrial sector. (b) Bumper food production
due to adequate monsoon. (c) Change in technique of food production. (d) Not
mentioned in the passage. (e) None of these
Q8. Which of the following has the same
meaning as the word 'sheer' as used in the passage? (a) simple (b) undiluted
(c) mere (d) outright (e) unassisted
Q9. Which of
the following has the same meaning as the word 'deflation' as used in the
passage? (a) reduction (b) index (c) inflation (d) improvement (e) diffusion
Q10. Which
of the following is most opposite in meaning of the word 'interdependence' as
used in the passage? (a) correlated (b) dependence (c) independence (d)
relativity (e) interrelated
