The contribution of the agricultural sector to Gross Domestic Product (GDP) is determined using different methods and approaches. One such method is the Gross Agriculture Product (GAP) model, which was developed by the United Nations Food and Agriculture Organization (FAO). The other method is by analyzing national income accounts. In addition, the contribution of the agricultural sector to the Gross Domestic Product (GDP) is determined using the concept of diversification. The analysis mainly focuses on the farming industry since it is the only industry that can significantly affect the overall economic performance.
The concepts and methods used in determining the contribution of the agricultural sector to economic growth are broadly similar to those used in the economic development studies. Major contributor is a function of land size, which is consistent across all land class. A major effect of the large scale farming is the reduction of rural poverty, which is more prevalent in developing countries. The analysis presented below explains and interprets the impact of the agricultural sector in relation to other economic indicators.
Labor force The labor supply is primarily dependent on the size of the agricultural sector and the human capital of rural residents. Increases in population size leads to an increase in demand for skilled labor as well as opportunities for capital investment. As a result of these factors the labor productivity increases which results in improved overall economic growth.
Enhanced irrigation and improved transportation infrastructure The size of the agricultural sector has a direct impact on the level of development of the overall economy. The improved transportation infrastructure facilitates the flow of raw materials and labor thus improving overall infrastructure. This enhances improved infrastructural development resulting in enhanced infrastructural development. These results in improved agricultural productivity, higher levels of output and ability to finance economic growth.
Improved agricultural and Livestock production With an increase in the size of the agricultural sector there is an increase in the volume and quality of agricultural production. Increased production leads to improvement in living standards and the ability to export goods to the global market increasing the income and share of the country in the global market. It also leads to the employment generation resulting in an increase in the level of industrialization of the overall economy. The agricultural value added products like machinery, chemicals and fertilizers are vital to the overall progress of the economy in all African countries. The fertilizer industry for example has been developed by major players in the world over the period of time.
Improving infrastructure This results in better distribution of basic resources and a better utilization of these resources. The improvement in the infrastructural infrastructure facilitates the inflow of capital required for investment in the agricultural and manufacturing sectors of the country. Some of the infrastructural improvements include electrification of roads, better water and gas distribution, information technology etc. There has been a marked improvement in communications and internet connectivity has also seen significant improvements.
Better Agriculture The primary reason for the improvement in the agricultural sector in many of the African countries is that the yields have increased substantially. This has led to an increased demand for food and agricultural produce in the country. This has lead to the growth of the middlemen who then engage in the sale of the produce on behalf of the farmers. The fruits and vegetables are selling at a reasonable price thus leading to a boom in the agricultural production. These middlemen who are commonly known as agents have enabled the access of the products directly to the consumers which have seen major changes in the eating habits of the people in the country.
Technological Development With the advent of technology there have been great changes in the way that the industries function. This has also facilitated the inflow of capital and finance to the different enterprises. The inflow of finance means that there is a greater possibility of the businesses being successful in bringing out their products to the market. Also the agricultural surplus has helped in the modernization of the tools used in the agricultural sectors and the increase in the productivity levels in the industrial sector has also been facilitated by this factor.