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Agricultural development: A macro perspective

Mirza Azizul Islam
PRACTICALLY all countries of the world attach great importance to the development of agriculture. The most eloquent expression of this importance is to be found in the huge amount of subsidies. The developed countries pump in hundreds of billions of dollars as subsidies to sustain the growth of agricultural output. They also spend a significant amount of budgetary resources for the same purpose. This is done partly for egalitarian reasons, partly because of sentimental attachment to agriculture as a way of life.
Nevertheless, the fact remains that the growth of output in the agricultural sector is considerably lower than in manufacturing and sendee sectors. Relevant data are presented below.
In consequence, the share of agriculture in GDP has been falling all over the world. There are some inherent reasons which explain the declining importance of agriculture. These are briefly noted below:
i)The growth of population has slowed down globally. This, in combination with low income elasticity of demand for food and most other agricultural products beyond a certain threshold level of income, constrains the growth of demand and, therefore, output;
ii)Land is more or less a fixed factor of production. Agricultural output is therefore susceptible to quick diminishing returns;
iii)Productivity increase through technological change is usually slower in agricultural sector compared to manufacturing and modern services sectors;
iv)Adverse side effects of improved productivity-enhancing technologies are generally stronger in agriculture. For example, prolonged use of fertilizer may erode the natural fertility of land, irrigation may cause subsidence of subsoil water;
v)Agricultural sector is highly vulnerable to adverse weather and climate changes such as drought, flood, cyclone etc.;
vi)Both exporting and importing countries frequently employ restrictive measures in the area of international trade in agriculture;
Despite the above limitations, policy makers cannot help paying considerable attention to sustained growth of agriculture due to several important considerations.
First, food is the first basic need for human existence.
Domestic production of food is critical for ensuring food security, especially because of uncertainties caused by frequently restrictive international trade practices which may limit access to import and/or impose high cost.
Second, despite decline in the share of agriculture in GDP, the sector remains a large source of employment. Data from India, Indonesia, Pakistan, Philippines and Thailand and Vietnam show that as of 2010, the contribution of agriculture to GDP ranged from about 10% to 20%, but its contribution to employment ranged from 23% to 56%. In Bangladesh, the corresponding figures were 19% and 50%. And, of course, employment is the most potent instrument for alleviating poverty and improving income distribution.
Third, agricultural sector often provides raw materials for manufacturing, plays significant role in export earning and supplies labour for the non-agricultural sectors.
In light of the above discussion, 1 venture to suggest the following for attention by policy makers of Bangladesh.
• There is very little scope for augmenting the supply of land, especially because of the increasing use of land for non-agricultural purpose such as housing, construction of factories, infrastructural development etc. In Bangladesh, the availability of land for agriculture is also limited by soil erosion caused by rivers, increasing intrusion of salinity, and other natural calamities. Consequently, research for enhancing the productivity of increasingly scarce land has to be given high priority. In this context, mention could be made of continuous efforts to improve the performance of drought resistant, salinity resistant and deep water varieties of rice;
• Farmers in Bangladesh have become remarkably pricesensitive. Policy makers, therefore, have to balance the interests of the producers with those of consumers through appropriate fiscal measures relating to both outputs and inputs:
• With increasing exodus of the rural elite to urban areas, farmers who do not own any land or very little land are getting greater access to cultivable land as the incidence of cultivation by the owners themselves is falling. The rights of non-owning farmers deserve legal protection. In addition, their access to credit in times of need at reasonable cost has to be ensured;
• Food security for the poor cannot be guaranteed simply through increased food production. Their entitlement to food largely depends on their ability to purchase food from the market. Hence, social safety net measures that enhance income of the poor will remain a priority concern for many years to come.
Policies for agricultural development in Bangladesh are already generally geared to the afore-mentioned direction. What is urgently needed is to undertake continuous evaluation of the impact of the relevant measures, identify gaps and implement appropriate corrective actions.