Decoding Agricultural Growth: The Influence of Public Capital Expenditure, Productivity and Employment on Sectoral GVA

Abstract

Agriculture’s share to the GVA has been on a declining trajectory for the last decade. However, agriculture remains a vital part of the economy, employing a significant portion of the workforce. As of FY 2022-23, agriculture contributed approximately 15% to India’s GVA, down from 35% in 1990-91, illustrating the ongoing structural transformation of the economy toward industrial and service sectors. Despite this, the sector still employed about 45% of the total workforce in 2022, highlighting its pivotal role in rural livelihood. This paper aims to analyze the direct effect of agricultural productivity on the contribution of agricultural sector to the Gross Value Added (GVA). It also studies the relationship between agricultural productivity and employment share in the agriculture sector, challenging the conventional assumption that a higher percentage of working population in any sector correlates with its economic output. Besides, it investigates the role of, employment share in influencing the relationship between agricultural productivity and its contribution to GVA. This study provides valuable insights into the evolving role of agriculture in transforming the economy as well emphasizes on the need of balanced economic policies which can ensure the sector’s sustainability, equity in workforce distribution and its contribution to the national economy in the future.