Agriculture Vs Manufacturing Industry in India - priorities for future

Agriculture and manufacturing industry are drivers of growth for any economy. To help the participants tackle this topic of great significance in the context of Indian economy in GD round, MBAUniverse.com has prepared and shares the key facts about the role of agriculture and manufacturing Industry in Indian economy, the constraints in these sectors & policy suggestions to enhance their role.

Background

  • The transition of any nation from developing to developed nation is marked by a move from traditional sector (agriculture) to modern sector (services and manufacturing)
  • Modernization was first initiated under the II Five Year Plan, famously known as the Nehru-Mahalanobis plan which focused on pushing up the heavy and basic goods industry to build local capacity and reduce reliance on foreign goods. This was thought to be a policy impetus to absorb the surplus laborers in agriculture and counter disguised unemployment in the sector.

Key Facts about the state of Indian Economy

  1. In India, agriculture contributes around 15% to the GDP and absorbs a little more than 49% of the labor force. The manufacturing sector contributes around 19% to the GDP and absorbs around 27% of the labor force.
  2. International comparisons with China, South Korea and Taiwan show the sluggish growth of Indian manufacturing sector due to the rigid labor market
  3. South East nations have grown and become the global manufacturing hubs despite being at comparable GDP levels to India in 1970s and 1980s as they focused on building local manufacturing units through both public and private investment.

Group Discussion Topics & Tips: Learn the Facts

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Agriculture Backbone of Indian Economy and Manufacturing Industry

  • Generates Trade Surplus: India’s share in global agriculture produce is 7.68%.  India has maintained an overall trade surplus in agriculture since 2000s. The overall trade (exports+ imports) has also grown. India’s relative comparative advantage in agriculture is greater than that in manufacturing and commercial activities.
  • Generates greater investible surplus & savings: The rise in agriculture output and income can expand the market for manufacturing sector. The migration of surplus labor from agriculture to manufacturing. This supports urbanization and industrialization as it did in England in 19th century.
  • Provides raw materials and wage goods for manufacturing industry like textile, Sugar, packaged food among others

Constraints in Agriculture Sector
The low contribution of agriculture to GDP despite 49% of the labor force in the sector shows the inefficiencies in the sector as seen by:

  • Agriculture Bias: Farmers have not been able to fully exploit the comparative advantage in agriculture exports due to overvalued exchange rate, tariffs and quota restrictions on trade of agriculture products.
  • Decline in per capita availability: Despite an increase in yield, the per capita availability of agriculture output has fallen due to excessive diversion of stock in silos and procurement and release was ill timed. It has also put inflationary pressure during draughts.

 Policy Suggestions to enhance the role of agriculture:

  • Technological reforms to improve efficiency and to reduce dependence on monsoon as still around 53% agricultural land is rain fed.
  • Rationalize food and fertilizer subsidies to circumvent inefficient resource allocation towards certain crops like wheat and rice.

 Role of Manufacturing Industry in India:

  • Manufacturing has the highest multiplier effect (backward linkage) on economic growth. 
  • Provides modern inputs and implements for other sectors like fertilizers for agriculture.
  • Manufacturing has immense potential for job creation which can help in reducing poverty
  • The GVA  by Automobile Industry is around 6% as of 2017. India is among the leading automobile manufacturers and can emerge as global market leader in other segments. Automobile sector’s employment multiplier value of five which is indicative of its large employment generation capacity.

Constraints in Indian manufacturing sector:

  1. Supply side bottlenecks like power supply and demand mismatch, infrastructural bottlenecks leading to capacity underutilization;
  2. Demand side constraints: India is a low income nation so large income inequalities skew the demand of  capital intensive goods
  3. The growth of capital intensive industries due to more export demand has either taken down the labor intensive firms or forced them to downsize to circumvent the stiff labor laws

Policy Suggestions to enhance the role of Manufacturing Industry:

  1. The rising inequalities and unemployment can be tackled by absorbing labor in manufacturing sector especially in labor intensive sectors like textile. It can act as a driving force in India’s growth trajectory through capital accumulation and better capacity utilization which currently is at 70%.
  2. Make in India needs both public and private investment to make India a manufacturing powerhouse which will increase its export demand and GDP by creating new job opportunities.
  3. The value added by MSMEs to manufacturing is more than 30%. They require more credit and better ease of doing business to allow greater financial inclusion, encourage entrepreneurship and gender equality.

Conclude with a balanced approach:

  • Agriculture and Industry are complementary and not competitive in nature due to demand, production and savings- investment linkages.
  • India needs to revamp its manufacturing sector and agriculture sector by using scientific methods of production which are economically feasible and practical, environmentally sustainable and globally competitive to exploit the gains from trade, increase output &s employment and reduce inequalities.

Tips to crack GD round
The above discussed topic is one of the most talked about issue and has been carefully chosen and solved with the sole aim to help you succeed in GD round. If you follow a few key tips, you can improve your participation and scores on this GD topic and others:

  • Initiate the group discussion only if you are well versed with the facts and information on the GD Topic.
  • If you are not well versed with the topic and feel a bit low on content, try to gather information from first 1-2 speakers and then participate.
  • Quote facts and figures, if you are sure of the authenticity. You may encounter volley of counter questions on the facts and statistics from your fellow participants. Unless very sure, don’t use it.
  • Make multiple entries using the opportunity to speak. Note down important information from other participants and turn it to your benefit.
  • Since GD is a sort of debate, you should have a clear view point on the topic - either for or against. Do not switch viewpoints. However, if you have points for both for and against the topic, substantiate your viewpoint with well qualified data, examples or exceptions.
  • Even if you agree or disagree to the view point of other participant, add value by giving reasons for it when you speak but don’t simply say I agree or disagree.
  • Ou can conclude above topic by summarizing key facts on both point of views and conclude with the majority opinion, while respecting the minority viewpoint

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