Factors of production

Factors of production 

The factors of production viz. land, labour, capital and management when combined in proper proportion and then used wisely can help to achieve higher level of efficiency in farming business. Use of any resource beyond its capacity can result in its rapid depletion and deterioration which may cause severe damage to sustainability of farming. Similarly, under utilization of resources or misutilization of resources may result in high cost of production and thus lower the efficiency of agriculture. 

Contribution of Land in agricultural development

Land in agriculture may  be used in a restricted sense though is complex and affects agriculture in several ways. It is essential for the habilitation of human beings and other living creatures. It is required for agricultural operation ,development of industries, growth of forest, building, road and rail transportation system on its surface. The contribution of land in agricultural development can be judged by following points.

1. Food and Fibre Production: Land serves as the key resource in food production. A significant land area is, therefore, devoted to the production of food crops. It is resource for fibre production and also in providing space for man to build his shelter.

2. Pastures and Grazing Lands: Land is again a key resource for pastures and grazing lands which feed a growing livestock ahd help improve the supply of food to man. Since grazing lands do not fall under private ownership, the productivity of such lands is low.

3. Forests: Land under forests serves man in several ways, in general and agriculture in particular. Forests contribute to the development of a region in three important ways:

a. As a source of timber, firewood, medicinal herbs and aroma-chemicals minor forest produce and charcoal. There can also be the source of energy in terms of wind-velocity an hydrodynamic pressure, 

b. Forest areas can also be developed a scenic tourist resorts. Forests are, in particular, important to agricultural development as these help in maintaining the ecological balance, soil moisture and perennial water supply.

c. Forests also offer scope for horticulture, plantation orchards' inter-culture,floriculture and pasture development and as such help directly and indirectly the development of agriculture in the region.

4. Extensive use of factors of production. Agriculture is the only industry which requires the extensive use of land as a factor of production. The Force of nature which are associated with different parts of the earth's surface are active partner in the process of crop-production.

5. Source of Increasing Income. Farmers in low income countries consider land as the best source to increase their income. They thought that additional doses of labour to the existing land will only diminish the returns. Therefore,they often remain eager to bring more land under cultivation, which inturn would increase the return to labour input.

6. Basis of economic development. All natural resources which are the core of land, play an pioneer role in the economic development of a country.Prosperity of gulf countries lies in the oil well found in those regions.

7. Basis of human life. All human beings depend for their livelihood,residence and other necessities of life on land. Land provides food and healthy climate. In this regard, it can be called basis of human beings.

The role of land in agriculture may also be examined by considering the function of land as a factor of production in agriculture. Land as a factor of production performs two-fold functions.

I. Providing floor space both for farming and factory is the most fundamental function that land performs. Since, however, farming requires a larger floor space compared to industry, a major chunk of land is devoted to agriculture even in the most industrialized countries. This is so because of the very nature of agricultural industry which are of utmost necessity for the growth of plant and animal Unlike industry, agriculture greatly depends upon this function of land without these qualities, land will become barren and unproductive. 

II. Land serves as a repository of physical, chemical and biological elements.The non-agricultural uses of land do have a bearing upon its efficiency in agricultural use.

Non-agricultural Uses of Land:

I. With the growing urban population the demand for land for purposes of urban settlement has gone up. Greater industrialization will exert a stronger pull towards urban migration and land for urban uses shall be in great demand.

II. Land is required for recreation purposes. As a natural consequence of economic development and industrial tensions, the demand for recreation is increasing fast. A large area of land is put under national parks, state parks and other public parks to provide open breathing space to the suffocated urbanites and industrial workers.

III. Another use of land is for purposes of transportation. Although it takes only a small proportion of total land, its use is fast increasing and in turn is affecting the other uses of land. Transport does not only claim part of land bit increases its use and efficiency for agricultural activities. Land Have to be provided for rail and road transport which is the single most vital item of infrastructure needed for speedier economic-development.

IV. This is a known fact that clearing of larger forest areas encroached upon the flora and fauna and threatened its growth. Some of the wild life is already extinction some is on the brink of extinction and more areas of land shall, therefore, have to be enclosed for its preservation 

V. Land is needed for the construction of dams, barrages and canals.The use of land also arises for making provision for water reservoirs

VI. Finally, land has to be spared for mining production, sand dunes, bricks and other such uses as well.

Peculiarities of Land as a Factor of Production

Land as a factor of production has some important characteristics not common to the other factors of production. These characteristics may be listed as under:

(1) Land is subject to the law of diminishing returns;

(2) Land is limited in supply; and

(3) Land is heterogeneous in quality.

1. Law of Diminishing Returns: To a given price of land,other things remaining the same, the application of additional units of labour and capital yield positive but diminishing returns for each additional units of input.Additional units of labour and capital may give rise to higher returns for sometime but soon it happens that returns per unit of input become smaller and smaller till a stage is reached additional unit of labour and capital does not yield any increase in output. Beyond this stage, it will be judicious not to spend more on these inputs.

2. Limited supply of Land: These second unique characteristic of land is that it is limited in supply by nature. This characteristic of land makes it a precious factor of production in agriculture. Not only are world's land resources limited by nature, a significantly larger land area is of no use in agriculture. In India, for example, only about 45 per cent of land area is sown. In Great Britain not more than about 11 per cent of land is capable of cultivation.

3. Heterogeneity of land quality: The third important peculiarity of land as a factor of production in agriculture refers to its heterogeneity in quality. The best lands come under the plough the first and lands of poorer quality are sought thereafter. Not only does heterogeneity arise as such, different types of soil qualities, ecological conditions, topography and other factors also lead to wide varieties in the quality of land. It is these variations that give rise economic rent.

Conclusion: - The role of land in agriculture can hardly be over-emphasized as shown in the preceding sections. Land shall continue to play a significant role in farm occupations and help in meeting man's requirements in this regard.

Contribution of Capital In Agriculture

In agriculture, capital is of immense importance. Capital production is commonly defined as those forms of wealth other than the land, from the use of which an income is expected. This comes to mean that all forms of wealth other than land which yields an income is capital. There is hardly any agricultural activities where in additional doses of capital would not yield more returns toa farmer either by way of increasing output or by way-of reducing costs capital, therefore, play a very crucial role in agriculture in particular.

a) Acquisition of land and its preparation for an agricultural activity; 

 b) Acquisition of inputs such as seeds, fertilizers, pesticides, etc. 

(c) Acquisition of a kit of tools and implement 

(d) Organization of a group of workers who will man the tools and implements on land to raise the crops.

 

a) Mere acquisition of land is not enough unless it is prepared to agricultural operations (occupations). In this direction again, capital plays a crucial role. Land will not be ready for sowing operations till it ploughed either with a wooden ploughed an iron plough or a tractor.

b) Further, it is needless to state that an agricultural operation cannot proceed without the proper doses of seeds, fertilizers, water, pesticides etc. While seeds, fertilizers and pesticides etc. are a form of agricultural capital,water for fields cannot be supplied without the use of capital. It is with the help of big dams canals, tube wells and lift irrigation schemes that more lands get irrigated and ensure better returns.

c) Equally important is the kit of tools and implements that are used by the farmer to raise crops from the land. The nature and quality of these tools and implements which are provided determines the level of achievement of a farmer.

d) Capital also plays an important role in educating and training the arm workers which ensure more efficient farm operations and better returns.

1) Capital and Wealth: The capital is required in production. In modern economy the production depends not only on land and labour but capital is also equally important. It is also important to note that if wealth is not used in production process it is not said to be a capital. The unused wealth cannot be considered as capital. Hence all capital is wealth but all wealth is not capital.

2) Money and capital: In the ordinary language, capital is used in the sense of money. No doubt money is wealth and part of wealth used in production is called capital. But here in production process money is not used as such and hence it can not be termed as capital. Only by using money we are purchasing capital assets and hence money itself is not capital.

3) Capital is produced means of production: It is manmade instrument of production. Just like land and labour, capital as factor of production is not original. Since it is man-made it is not freely available.

Characteristics of capital:

1.) Capital is man made factor of production.

2) It involves time element.

3) Capital may be fixed: i.e. it is durable use pre use producer goods machinery, well in agriculture.

Importance of capital 

a) In modern economy capital is very important factor of production which is essential to undertake production.

b) Without capital other factors of production (like land, labour) will become handicap.

c) On the contrary, if ample supply-capital is made the production and productivity can be increased substantially.

d) The economic development of any country does not solely depend upon the available land and labour but how much capital is made available is also equally important.

e) The under-developed countries remained, under-developed due to lack of capital.

f) The ample supply of capital gives boost to production.

g) When more production is there, more economic activities can he initiated and as a result, more employment opportunities can be created.

h) More employment further helpful for minimizing the poverty or improving standard of living of the people

i) Introduction of additional capital resulted in a remarkable improvement in the productivity of farm labour.

The use of capital in agriculture has been stimulated by the adoption of new technology leading to a fall in the per unit cost of production, through, the overall capital cost per farm tends to increase. The use of capital becomes more intensive in the case of new agricultural technology as compared to the use of labour.

Sources of capital:

The sources of capital in agriculture may be listed as under:

a) Savings of landlords.

b) Savings of farm operators.

c) Borrowings.

d) Transfers - by way of gifts, inheritance, social contracts, ete.

Contribution of Labour in Agricultural Development

Labour is not the only resource that is necessary to produce goods and services to satisfy our needs. Each society has its own unique store of resources that differ in type, quantity, and quality. Labour, in many cases, is the most plentiful resource, although many factors influence its productivity. 

Labour is the single most factor which is of primary importance in increasing the production in traditional agriculture. The oldest production industry known to mankind is agriculture and the basic input in this production process has been human labour. 

Historical analysis of economic growth marks three distinct phases in the process of economic transformation.

a) The first phase is when the survival of the economy is sorely dependent upon agriculture employment. The sole contributor to national income is labour used in the primary sector whose productivity is undoubtedly low but has no other avenues of occupation on which to depend upon.

b) The second phase begins with the improvement in farm productivity and development of a non-farm sector that draws labour from farms. Initially.non-farm jobs mainly devoted to the production of materials used on the farm. With the introduction and expansion of non-farm jobs, the condition of living improve resulting in the increases in size and quality of labour force. This further stimulates the growth of non-farm sector and as a result, continuously drags out labour from the farm sector.

c) This then leads to the third phase of development marked by a rapid rise in non-farm employment and a higher rate of economic growth. It is therefore easy to understand the significance of the relationship between labour and agriculture in its historical perspective. Directly or indirectly,it has played a crucial role in this primary sector of production.

Supply of Labour

Supply of labour force in agriculture depends upon the size of population. In Traditional static agriculture, the size of farm labour force directly varied with the size of total population. Alternative employment avenues being non-existent, an increase in population straight-away led to an increase in labour force in the farm sector and vice-versa. In the event of farm and non-farm sectors existing side by side the agricultural labour force depends upon the residual formed by the rate of growth of population and the rate of growth of non-agricultural employment. The state of economic transformation from traditional static to modern dynamic society greatly influenced the supply of farm labour force.

Demand for Labour Force

Demand for agricultural labour force is influenced by the size of the farm, the system of farming and the degree of technological development. In general, it would appear that larger the size of farm, the greater will be the requirement of labour and vice-versa. 

Small farms normally require more labour for a holding of a given size than large farms practicing the same type of farming. Besides size and system of farmin.there are a variety of other factors that cause variations in the labour requirements

The third factor, viz.. leval of technological development. The nature of technological progress greatly influences the demand for farm labour force. The history of the developed countries reveals that technological progress in agriculture tended to reduce the demand for farm labour. The farming operations became more mechanized and displaced labour for use in non-farm sector.

Efficiency of Farm Labour

The simplest measure of labour efficiency is the amount of output per worker.Productivity of farm labour is directly linked with the size of labour force, the quality of labour force and the nature and level of technological development.Changes in the productivity of labour -are connected with the process of transformation from static to dynamic agriculture.

Size of Labour Force

In a static agricultural technology, as the size of labour force increase, marginal productivity of labour (or more appropriately of additional labour) tends to decline. If.technology continues to be static and labour force rises continuously, the productivity of labour is compelled to fall with the result that wages fall below minimum subsistence level and as a consequence increase the death rates and reduce rate of growth of population. 

Given the nature of agricultural production function an initial dose of additional labour input may be rewarded by more than a proportionate rise in agricultural production and average produce of labour may tend to be higher than the subsistence level.  This Form of farm labour productivity is typical of many developing countries where the levels of subsistence living are quite low.

Efficiency ef Labour Force

Generally labour has two aspects, quantitative aspect as well as qualitative aspect. The quantitative aspect of labour is concerned with the size of labour whereas qualitative aspect of labour is concerned with the efficiency of labour. The Efficiency of labour refers to the power of a worker to work and produce goods and services one can produce during a given period of time.

Productivity of farm labour shall greatly depend upon its quality, both physical and mental. Physical quality of labour force refers to sound health, stamina and race characteristics. Differences in the health of labour force result in productivity differentials.  Mental quality of labour force shall depend upon the level of education, extension services and agriculture training programmes.

The following measures are suggested for improving the efficiency of farm labour.

a) Education and training

b) Wage level

c) Incentive for better work

d) Working conditions

e) Business Organization. 

f) Allowance for bad weather

g) Social and political security