Farm and Non-farm Sector Linkages and Future of Agriculture

Agriculture development is crucial for raising incomes of population dependent on agriculture and for growth of non-agriculture. There are significant linkages between farm and non-farm sectors. The concept of ‘sectoral linkages’ was first introduced by Hirschman’s (1958) theory of ‘unbalanced growth’. He argued that the expansion of sectors with larger linkage measures can increase growth faster through their interdependence with other sectors than by alternative means. It is also pointed out that agriculture could not become a leading sector due to its weak backward linkages. In contrast to Hirschman’s views, Kalecki (1960) and Kuznets (1968) emphasise that agricultural development is essential for improving industrialisation. Lewis (1954) discusses the role of terms of trade in the context of agriculture-industrial linkages. According to him, increase in terms of trade in agriculture would reduce profits for industry. In contrast, Kaldor (1967) emphasises that rise in terms of trade for agriculture would improve demand for industrialisation. Johsnston and Mellor (1961) and Mellor (1976) discuss the importance of agriculture on nonagricultural sector. Later, studies by Mellor (1976), Liedholm and Kilby (1989), Ranis and Stewart (1993) stressed the importance of rural non-farm sector. Recent book by McMillan et al. (2017) examined structural change and focused on change in terms of shifting from low-productive to high-productive sectors and change in terms of raising human capital.