2c) Agriculture has a multitude of functions in the development process

Within the interrelated system of elements in the development process, agriculture has a number of very important functions: The most basic one is the production of food and raw materials for its own consumption, for the non-agricultural population, and for the developing industry. The increase in agricultural productivity sets the whole development process into motion. At the start, the increase of soil productivity is of the greatest importance, but, soon, it must be followed by growing labour productivity to increase the incomes of agricultural labour and free manpower for the secondary and tertiary sectors. The high population increase in many countries, for some time, makes it imperative for agriculture to absorb the surplus population for which there is no ether alternative, but, sooner or later, the other sectors will develop and draw on the human resources in agriculture.

This process is related with the transformation of subsistence agriculture into market-integrated agriculture, which not only sells its products, but requires non-agricultural goods and services. With this process, agriculture fulfils its third function, the creation of demand for non-agricultural goods which is a precondition for the expansion of the secondary and tertiary sectors. On the one hand, this demand meets the requirements of market-integrated agriculture, such as fertilizer, machinery and tools, etc.; on the other hand, an increase in farmers' income results in a demand for consumption goods on the part of the rural population.

In order to fulfil the fourth function of agriculture, part of the increased agricultural income has to be skimmed off,this leading to capital formation in various forms. This may take place in monetary form through taxes, rents or prices. Especially for agriculture, two other forms play a great role. The upbringing of children, who, later on, leave agriculture, is an important form of creating human capital. Agriculture also creates physical capital in the form of infrastructure and means of production. Especially the numerous small increments of capital stock through fencing, planting of trees, improvement of livestock, levelling of land, etc., in time and on thousands of farms contribute greatly to the capital stock of a society.

It may be added that, in some countries, agriculture has the tasks of contributing towards improving the situation of the balance of payments by providing export goods or substitution for imports. Likewise, in recent times, the function of preservation, careful handling and protection of environment has been gaining importance.