The International Monetary Fund (IMF) has said that India and China need to improve agricultural productivity in order to sustain higher levels of growth.
"For China and India, where the typical citizen is still a farmer and not an assembly line worker or a call centre employee, continued productivity growth will come from the shift out of agriculture," Economic Counsellor of the International Monetary Fund Raghuram Rajan said.
"But because a substantial population will still be employed in agriculture in these poorer Asian economies for some time, an important objective of policy should be to improve agricultural productivity," he added.
Rajan was previewing the analytical chapters of the Fund's World Economic Outlook ahead of the annual Meetings of the Fund and the World Bank in Singapore next week.
"Indeed, in both China and India, TFP (total factor productivity) growth exceeds the contribution of physical or human capital accumulation. This extraordinary change has been made possible through an enabling environment that has fostered the development of efficient manufacturing (and in the case of India, services), even while encouraging some movement out of low-productivity agriculture," Rajan said.
Rajan further said that while governments should create an enabling environment for productivity growth by providing citizens broad-based access to education and finance, as well as ensuring security of private property, they should also open up agriculture and services to foreign and domestic competition, so that these sectors have the impetus to become more productive, much as manufacturing did.