LINKAGES BETWEEN AGRICULTURE AND INDUSTRY
We will discuss the how agriculture & industry is linked – in this article. It’s one of the important topics of CAIIB 2022 Exams.
The Certified Associate of the Indian Institute of Bankers Exam are going to begin from November end & the CAIIB elective paper of Rural Banking is due on 10-Dec-2022.
So, it’s important that as the Exam candidate you start your preparations right away to ensure your success in the exams.
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RURAL BANKING | AGRICULTURE-INDUSTRY LINKAGES
Agriculture & Industry sectors are not in competition with one another. Though these two sectors do complement each other.
Agricultural and industrial futures are intertwined in the sense that the expansion of agriculture depends on the supply of industrial inputs and the expansion of industry is dependent on the development of agriculture.
Agriculture must be sound, stable, and progressive for industry to advance. Having such a strong interdependence makes these sectors complementary rather than competitive. As such, agricultural and industrial development do not conflict in an underdeveloped economy.
The most important linkages are listed below:
- Production Linkages,
- Demand Linkages, And
- Saving-Investment Linkages.
Interdependence between agriculture and industry is the basis of production linkages. Raw materials that are used for agriculture also come from the industry such as chemical fertilizers, pesticides, agricultural machinery, electricity, and implements. Additionally, agriculture relies on industry for materials to build up social & economic overheads.
Further, there are many Raw Materials and inputs that are used in industrial production are supplied by the agricultural sector e.g., cotton, jute, sugarcane, tobacco, etc.
The linkage between demand for one sector’s product and demand for the other sector suggests that demand for one sector’s product drives demand for the other. Industrialization and urbanization go hand in hand. Agriculturalists are now experiencing rising rural incomes due to the Green Revolution, which has resulted in a change in their preferences and tastes. Increased rural income will result in an entry of industrial consumer goods such as refrigerator, modem, TV, cars, footwear, refined sugar, motorbikes, edible oils, etc.
As urban incomes rise and industrialization takes hold, they lead to an increase in demand for food, vegetables, fruits, and agricultural raw materials.
Traditionally, India has believed that the demand stimulus for industrial expansion will come largely from agriculture at low social and economic costs.
Agriculture which is capable of exporting surplus food-grains i.e. self-reliant – helps in saving scarce forex resources of the country which then can be better utilised to import capital goods & crucial raw materials – that are needed for industrialization effort.
- With the rise in agricultural production and productivity, the marketable surplus also increases leading to rural industrialisation.
- Which again results in raising the rising volume of savings and helps in capital formation as the farm incomes rises. It gives strong stimulus to demand for manufactured goods in return. So, basically the investment in 1 sector pulls investment of other sectors & thereby accelerating overall growth rate of the economy.
- The rise in non-farm incomes again – lead to an increase in the demand for various agricultural products making the agricultural sector more diversified & modernised.
- On a crucial level, the relative terms of the business or trade between agriculture & industry affect the flow of resources from one sector to another sector. Terms of the business or trade will improve for agricultural sector if over a period of time, the agricultural commodities’ prices move at a rate > the prices of manufactured articles.
Thus, the terms of business or trade favouring agriculture results in an increased real income and therefore, the results in increased private saving & investment. These terms also influence government saving and investment in these two sectors.
Now let us discuss how the 2 sectors are dependent on one another to understand their importance:
DEPENDENCE OF INDUSTRY ON AGRICULTURE:
- Agriculture is the regular supplier of raw materials such as sugarcane, oilseeds, jute cotton, tea, wheat, spices, paddy etc. to the consumer goods industries.
- It also supplies food items on a regular basis for the domestic animals in the dairy industries such as cereals & vegetables to the industrial labourers and fodders.
- Farmers-households, when save their money in the bank & other financial institutions ultimately lead to use of the saved money by the industry owners in the form of investment.
- Agriculture sector gives a ready market for the finished products of both consumer and capital goods Industries.
- It is also a regular supplier of manpower to the industries
DEPENDENCE OF AGRICULTURE ON INDUSTRY
- Industry also regularly supplies scientific tools & equipment’s such as tractors, pump-sets chemical fertilizers, harvesters etc. to agricultural sector which leads to increase the per hectare production.
- To increase the finished agricultural goods market, some infrastructural development such as roads, railway, storage facilities etc. are very essential which are developed by the industry.
- Industries are a huge source of employment opportunities and therefore, helps in absorbing all the surplus labour of agriculture.
- Agricultural sector also depends on the industry for various consumer goods auch as bi-cycle, torch & radio etc.
So, this was all about the linkages of Agriculture & industry with one another. If you liked our notes, then we are sure you will love our Rural Banking Classes for your Certified Associate of the Indian Institute of Bankers Exams. As the CAIIB 2022 December attempt is due in the last of November, you must be looking for the best Study Material that can help you pass this CAIIB 2022.
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