The agricultural sector in India has moved from a traditional agriculture in the 1950s to the modern technologically dynamic high capital intensive agriculture, in which along with food and non-food crops, horticulture and other allied activities have also expanded.

A study of the economic framework within which traditionally low productivity agriculture is transformed into high productivity modem agriculture is important in policy formulation and planning for growth. Productivity here refers to the productivity of agricultural land, labour, and capital resources; and this involves the larger use of scarce resources like capital, foreign exchange, and expert personnel.


An absolute criterion cannot be laid down about the content and chronological order of such compositions, since agriculture varies vastly from area to area in terms of physical conditions (i.e. soil moisture, cropping pattern, responses, availability of labour, etc.), cultural factors (education, receptivity to innovations, consumption pattern, etc.), economic factors (prices of input and outputs) and institutional factors (nature of research, extension, marketing supply and other institutions).

Three Phases of Agricultural Transformation in India

Phase I: Traditional Agriculture:

This is a technologically stagnant phase in which a larger farm production becomes generally possible only through increased application of all three traditional inputs, viz. land, labour, and capital. The rate of increase of output is normally smaller than the rate of increase in inputs-revealing diminishing productivity of inputs, even at a low yield.

Even if some elements of dynamic agriculture like an application of fertilizer, improved seeds, and land reform are introduced, the increase in productivity is smaller.

Further, given their resources and knowledge, the traditional farmers cannot become any more efficient as both these factors strongly limit their participating actively in contributing to higher production. Till the mid-1960s, the Indian agriculture was typically embodied within the framework of traditional agriculture outlined above.

Phase II: Technologically Dynamic Agriculture with Low Capital Intensity:

The Indian agriculture entered the next phase after the 1960s. This is described as phase II marked for technologically dynamic agriculture with low capital intensity. This is the beginning of the process of transformation from traditional agriculture to modernisation. In this phase, agriculture still represents a large portion of the total economy.

But population and incomes would be rising, increasing the demand for agricultural products while the size of the average holding would be coming down. There is a scarcity of capital both in industry and agriculture. The farm sector tends to use more labour than capital, since labour, owned or hired, would be still, relatively cheaper than mechanization.

The distinguishing feature of phase II is the application of science and technology, evolved by research institutions, in a progressively large measure. This increases the productivity of farms when small capital additions are made in the form of improved seeds, fertilizers, and pesticides. The profitable innovations are accepted by the farmers despite imperfections in land tenure, marketing, and input supply system.

The stagnancy that had marked the agricultural sector during the early-1960s, had largely been overcome by the end of the decade. In the wake of the new agricultural strategy of growth (called the Borlaug seed-fertiliser-technology) that had been adopted, agricultural production especially food grains, began to increase sharply

The increase in agricultural production can be attributed either:

  1. To increase in area under cultivation (i.e. horizontal expansion), or
  2. To an improvement in yield per hectare (i.e. vertical expansion), or
  3. To both an increase in area under cultivation and an improvement in yield per hectare.


During this phase of transformation, significant contribution to improved agricultural output was achieved by way of improvement in agricultural productivity with little change in area under cultivation. The index number of an area under cultivation changed marginally from 96.3 in 1970-71 to 105.2 in 1990-91.

On the hand, the index number of agricultural production increased from 85.9 in 1970-71 to 148.4 in 1990-91 (Base: 1981-82 = 100). This phase of agriculture transformation came to be known as the period of Green Revolution. The green revolution was, however, confined to a few crops- wheat and rice, and to few regions.

Phase III: Technologically Dynamic Agriculture with High Capital Intensity

As phase 11 advances, more and more innovations giving small returns singly, but large returns jointly would be accepted leading to higher productivity. In order to expedite progress, there should be an extensive utilisation of available abundant factors. At the same time, relatively scarce infrastructural facilities like research, extension, marketing, etc. should be utilised optimally with efforts directed towards expanding the infrastructural resources.

Indian agriculture entered the third phase of technologically dynamic agriculture with high capital intensity towards the end of the decade of the 1980s. This was precisely the period when the non-agricultural sectors also began their march towards modernisation.

Non-agricultural sectors were facilitated in their move towards aggressive modernisation by the new policies of liberalisation, privatisation and globalisation. This phase of agricultural transformation is thus characterised by the substitution of labour by capital by way of large-scale farm machinery, and considerable competition between the sectors for capital.

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