In more recent contributions there has been a

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In more recent contributions, there has been a discussion, for example of large capital inflows into India on private account and their impact on Indian agriculture. Have huge inflows of speculative capital in the post-reform period affected the role of development institutions and banks like the National Bank for Agriculture and Rural Development, the apex bank for institutional credit in rural India? In order to prevent a possible appreciation of the currency, which would have had an adverse effect on the real sector of the economy, the 5
Reserve Bank of India resorted to market intervention and the increase in the foreign exchange reserves, which would have caused a possible increase, in the money supply, was neutralized by undertaking a “sterilization” process. In the process the RBI suffered a huge loss in its potential income and had to resort to a smaller transfer of funds to Nabard. On the other hand, Nabard, faced with an increasing demand for loans turned to open market borrowings at a higher interest rate, which ultimately led to a huge loss in its potential income. A study (Sauvik Chakravarty, Zico Dasgupta, 2010) suggests that with the ongoing reforms, the banking system has not only sacrificed developmental aspects, but also failed to satisfy the profit norms of banking. 6
Importance of Agriculture Agriculture plays a crucial role in the life of an economy. It is the backbone of our economic system. Agriculture not only provides food and raw material but also employment opportunities to a very large proportion of population. The following facts clearly highlight the importance of agriculture in this country. 1. Source of Livelihood: In India the main occupation of our working population is agriculture. About 70 per cent of our population is directly engaged in agriculture. In advanced countries, this ratio is very small being 5 per cent in U.K., 4 per cent in USA., 16 per cent in Australia, 14 per cent in France, 21 per cent in Japan and 32 per cent in USSR. This high proportion in agriculture is due to the fact that the non-agricultural activities have not been developed to absorb the rapidly growing population. 2. Contribution to National Income: Agriculture is the premier source of our national income. According to National Income Committee and C.S.O., in 1960-61, 52 per cent of national income 7
was contributed by agriculture and allied occupations. In 1976-77, this sector alone contributed 42.2 per cent while in 1981-82, its contribution was to the tune of 41.8 per cent. In 2001-02, it contributed around 32.4 per cent of national income. This was further reduced to 28 per cent in 1999-2000. Contrary to this, the proportion of agriculture in U.K. is only 3.1, in USA it is 3 percent, 2.5 per cent in Canada, 6 per cent in Japan, 7.6 per cent in Australia. The mere conclusion of all this is that more developed a country the smaller is the contribution of agriculture in national output.

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