Global Investor

A continued reliance on agriculture

Arvind Jayaram | Updated on November 30, 2014 Published on November 23, 2014


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Agriculture output outstrips manufacturing production in India

The state of development of an economy can be discerned from the contribution of manufacturing and agriculture to overall economic output. Greater reliance on agriculture is typical of emerging economies and higher factory production denotes greater advancement along the path of industrialisation.

In this regard, World Bank data shows that India still has a long way to go before it can count itself among the ranks of the leading economies of the world.

Agrarian mainstay

India has the distinction of being the only trillion-dollar economy worldwide where agrarian output constituted a whopping 18.2 per cent of total gross domestic product in 2013, compared to 28.3 per cent in 1994.

In contrast, agriculture accounts for 10 per cent of GDP in arch-rival China and just 1.2 per cent in developed economies such as the US and Japan at present.

Even two of India’s other partners in the BRICS grouping, Brazil and Russia, attribute less than 10 per cent of their GDP to agriculture.

The world’s most agriculture-dependent economies, of course, remain the under-developed nations of the African continent, including Chad, Ethiopia and Niger.

Manufacturing minnow

But if one looks at manufacturing’s contribution, with factory output making up only 12.9 per cent of India’s GDP, the country lags far behind China, where 31.8 per cent of GDP is made up by manufacturing activities.

What’s more, the contribution of manufacturing to India’s gross domestic product has come down from 16.2 per cent in 1994. Japan too is more industrialised, with manufacturing contributing 18.2 per cent to GDP. It does come as a surprise that the contribution of manufacturing to GDP is identical in the US to India, though the contribution in monetary terms clearly differs vastly on account of the sheer difference in the size of the world’s largest economy and one of its fastest growing.

That said, India is on an almost even footing with two of its other partners in the BRICS grouping, Brazil and Russia, in manufacturing output, at 13.1 per cent and 14.8 per cent of GDP, respectively.

The engine of India’s economy is the services sector, contributing 57 per cent to GDP. However, it’s not as big a driver as in the US (78.6 per cent of GDP) and UK (79 per cent).

Published on November 23, 2014
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