Why the shrinking share of agriculture in India’s GDP is a good thing

After the release of latest economic statistics last week, many in development sector circles raised concerns about the rapidly declining share of agriculture in the country’s GDP and rural to urban migration.

But none of these laments make sense, and worse, they are not based on facts.

According to Planning Commission data (from their website), in the last 10 years, the total GDP of the country has more than tripled. Even with the decline in Agricultural share of GDP from 21% to 18.5% (at current prices), agriculture GDP has increased by 2.8x.  This  is a good thing and an expected development on the path to economic development.

Similarly, while the % of population engaged in agriculture may be going down as % of population, in absolute numbers, it is still increasing.

These macro-economic trends are part of the long-term structural transformation of the Indian economy.

In fact, the percent of population engaged in agriculture must go down much more dramatically to increase overall agricultural productivity even further and bring average farming incomes above the poverty line.  [More on this in a later post.]

The development sector should stop doing itself and its target populations disservice by promoting poorly-informed ideas and knee-jerk reactions, and think more deeply about the social and economic direction in which the country needs to go.

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