ECONOMICS by Vikarn

RURAL DEVELOPMENT 1
Rural Development refers to continuous and comprehensive socio-economic process, attempting to
improve all aspects of rural life.

In other words rural development may be defined as overall development of rural area to improve
the quality of life of rural people. It is an integrated process, which includes social, economic,
politicalandspiritual development of the poor section of the society.

PROCESS OF RURAL DEVELOPMENT

Rural development can be defined as, helping rural people set the priorities in their own
communities through effective and democratic bodies, by providing the local capacity, investment in
basic infrastructure and social services, justice, equity and security, dealing with the injustices of the
past and ensuring safety and security of the rural population, especially that of women.

1. Development of Human Resources: The quality of the human resources needs to be

improved through following reasons:-
▪ Better health facilities for the physical growth.
▪ Proper attention to literacy (specifically on female literacy), education and skill
development.

2. Development of infrastructure: It involves:

▪ Improvement in electricity, irrigation, credit, marketing and transport facilities
(including construction of village roads to nearby highways).
▪ Better facilities for agriculture research extension and information dissemination.

3. Land reforms : It involves:-

▪ Elimination of exploitation in land relations.
▪ Actualisation of the goal of “ land to the tiller”
▪ Increasing agricultural productivity and production.

4. Alleviation of poverty: As the stated earlier, around 30% of total population is still below
the poverty line. So, there is a serious need for talking serious steps for allevationof poverty
and bringing significant improvement in living conditions of weaker sections.
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SOURCES OF RURAL CREDIT
There are two sources of rural credit -

• Non-Institutional sources
• Institutional sources

1. Non-Institutional sources: Non-Institutional sources have been the traditional sources of

agricultural credit in India.
▪ Moneylenders: Money-lending has been the widely prevalent profession in the
rural areas. The money-lenders charge hugerate of interest and mortgage the
property of the cultivators and in some cases even the peasants and members of
his family are kept as collateral.
▪ Traders, landlords and commission agents: The agents give credit on the
hypothecation of crops which when harvested is used to repay loans.
▪ Credit from relatives: These credits are generally used for meeting personal
expenditure.

2. Institutional sources: - The general policy on agricultural credit has been one of progressive
institutionalization aimed at providing timely and adequate credit to farmers for increasing
agricultural production and productivity. Providing better access to institutional credit for
the small and marginal farmers and other weaker sections to enable them to adopt modern
technology and improved agricultural practices has been a major thrust of the policy.
▪ Co-Operative Credit Institutions: -The primary objective of the co-operatives is to
liberate the Indian peasantry from the clutches of moneylenders and to provide
them credit at low rates of interest.
▪ Land Development Banks: - They provide credit to the farmers against the mortgage
of their lands. Loans are provided for permanent improvement of land, purchasing
agricultural implements and for repaying old debts.
▪ The government: - The loans provided by the government are known as taccavi
loans and are lent during emergency or distress, like famines, floods etc.
▪ National Bank for Agricultural and Rural Development (NABARD):- It is the apex
Bank which coordinates the functioning of different financial institutions, working
for expansion of rural credit.
Its objective is to promote health and strength of credit institutions (namely,
cooperatives, commercial banks and regional rural banks).
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NABARD also provides financial assistance to the non-farm sector, to promote

integrated rural development and prosperity of backward rural areas. 3
▪ Self-Help group (SHG) bank linkages programme forMicro Finance: Their focus is
largely on those rural poor, who have no sustainable access to the formal banking
system. SHGs promote thrift in small proportions by a minimum contribution from
each member. From the pooled money, credit is given to the needy members at
reasonable interest rates, which is to be repaid in small installments.
SHGs have also helped in the empowerment of women. However, the borrowings
are mainly confined to consumption purposes and negligible proportion is
borrowed for agricultural purposes.

AGRICULTURAL MARKET SYSTEM

Agricultural marketing is a process that involves assembling, storage, processing, transportation,
packaging, grading and distribution of different agricultural commodities across the country.

Problems Faced by farmers

➢ Manipulations by Big Traders: Prior to independence, farmers suffered from faulty weighing
and manipulation of accounts while selling their produce to traders.
➢ Lack of market information: Farmers were often forced to sell at low prices due to lack of
required information on prices prevailing in markets
➢ Lack of storage facilities: They also did not have proper storage facilities to keep back their
produce for selling later at a better price.

Measures to improve Agricultural Marketing

▪ Regulated Markets: Regulated markets have been organized with a view to protect
the farmers from the malpractices of sellers and brokers. This policy benefited
farmers as well as consumers.
▪ Infrastructural Facilities: The Government aims to provide physical infrastructure
facilities like roads, railways, warehouse, godowns, cold storages and processing
units.
▪ Cooperative Marketing: The aim of cooperatives marketing is to realize fair price for
farmers’ products. Milk cooperatives in Gujarat have been very successful in
transforming the social and economic condition of Gujarat and some other parts of
the country.
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▪ Different policy Instruments:

Minimum support prices (MSP): To safeguard the interest of farmers, government 4
fixes the minimum support prices of 24 agricultural products like rice, wheat, maize,
cotton etc.
Public Distribution System (PDS): The Public distribution system in our country
operates through a network of ration shops and fair price shops. Fair price shops
offer essential commodities like wheat, rice etc. at a price below the market price, to
the weaker sections of the society.

Maintenance of buffer stocks: Buffer stock is created in the year of surplus

production and is used during shortages. It helps to ensure regularity in supply and
stability in prices.

Diversification-

Reason for Diversification

▪ There is greater risk in depending exclusively on farming for livelihood
▪ To provide productive sustainable livelihood options to rural people.

Benefits of Diversification
▪ To provide supplementary gainful employment
▪ To enable them to earn higher levels of income
▪ To enable rural people to overcome poverty and other troubles.

Types of Diversification
▪ Diversification of Crop production
▪ Diversification of productive Activities

Diversification of crop production: - It involves a shift from single-cropping system to

multi-cropping system. Diversification involves a shift in cropping pattern from food
grains to cash crops. Basically, the main aim is to promote shift from subsistence
farming to commercial farming. There is a need to encourage farmers to take up
cultivation of a wide variety of crops. It will also raise their income.

Diversification of production Activities: -As agriculture is already overcrowded, a major

proportion of the increasing labour force needs to find alternate employment
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opportunities in other non-farm sectors. It would provide alternative avenues of

sustainable livelihood and would raise the level of income. The dynamic sub-sectors 5
include agro-processing industries, food processing industries, leather industry, tourism,
etc.

INFORMATION TECHNOLOGY

Information Technology (IT) refers to the engineering that deals with the use of
computers and telecommunications to retrieve and store and transmit information.

Important points about information technology

▪ It also has a positive impact on the agriculture sectors as it circulates information

regarding emerging technologies and its applications, prices, weather and soil
conditions for growing different crops, etc.
▪ It also has potential of employment generation in rural areas.
▪ The aim for increasing the role of information technology is to make every village
a knowledge center, where it provides sustainable options of employment and
livelihood.

ORGANIC FARMING

Organic farming is the form of agriculture that relies on techniques such as crop rotation,
green manure, compost and biological pest control. This method avoids the use of
synthetic chemical fertilizers and genetically modified organisms.

▪ Organic farming is the process of producing safe and healthy food, without
leaving any adverse impact on the environment.
▪ In short, organic agriculture is a whole system of farming that restores, maintains
and enhances the ecological balance.

Benefits of Organic Farming

1. Economical farming: Organic Farming offers a mean to substitute costlier

agricultural inputs (such as HYV seeds, chemical fertilizers, pesticides, etc.)
with locally produced cheaper organic inputs.
2. Generates income through exports:It generates income through international
exports as demand for organically grown crops is on a rise.
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3. Sources of employment: Organic farming generates more employment

opportunities as it requires more labour inputs than conventional farming. 6
4. Provides Healthy Food: It provides healthy food as organically grown food has
more nutritional value than food grown through chemical farming.

NON-FARM AREAS OF EMPLOYMENT

▪ Animal Husbandry
▪ Dairying

➢ Animal Husbandry

Animal Husbandry is that branch of agriculture, which is concerned with the breeding, rearing and
caring for farm animals.

➢ Dairying

Dairying is that branch of agriculture which involves breeding, raising and utilization of dairy animals
for the production of milk and the various dairy products processed from it.
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GUIDELINES TO NCERT QUESTIONS

1. What do you mean by rural Development?
Ans- Rural Development means to continuous and comprehensive socio-economic process,
attempting to improve all aspects of rural life.

2. Discuss the importance of credit in rural development?

Ans- In agriculture, Due to long time gap between crop sowing and realization of income,
farmers are in strong need for credit. Farmers need money to meet initial investment on
seeds, fertilizers, implements and other family expenses of marriage, death, religious
ceremonies, etc. so, credit is one of the important factors, which contribute to agricultural
production.An efficient and effective rural credit delivery system is crucial for raising
agricultural productivity and incomes.

3. Explain the role of micro-credit in meeting credit requirement of the poor?

Ans- Micro-credit or self-Help group (SHG) has emerged as the major micro finance
programme in the country in recent year:-
▪ Their focus is largely on those rural poor, who have no sustainable access to the
formal banking system. So their target groups comprise of small and marginal
farmers, agricultural and non-agricultural laboures etc.
▪ SHG’s promote thrift in small proportions by a minimum contribution from
each member.
▪ From the pooled money, credit is given to the needy members at reasonable
interest rates, which is to be repaid in small installments.

4. Explain the steps taken by the government in developing rural markets?

Ans- The steps taken by the government in developing rural markets, include the following
measures:
▪ Regulated Markets: Regulated markets have been organized with a view to protect
the farmers from the malpractices of sellers and brokers. The policy benefited
farmers as well as consumers.
▪ Infrastructural Facilities: The government aims to provide physical infrastructure
facilities like roads, railways, godowns, warehousesand processing units.
▪ Cooperative Marketing: The aim of cooperative marketing is to realize fair price for
farmer’s products. Under this, marketing societies are formed by farmers to sell the
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output collectively and to take advantage of collective bargaining in order to obtain

better price. 8

5. Why is agricultural diversification essential for sustainable livelihoods?

Ans- Agricultural diversification is essential for sustainable livelihoods because:
▪ There is greater risk in depending exclusively on farming for livelihood.
▪ To provide supplementary gainful employment to rural people and to enable them
to overcome poverty by earning higher levels of income.

6. Critically evaluate the role of the rural banking system in the process of rural
development in India?
Ans- Rapid expansion of the banking system had a positive effect on rural farm and non-farm
output, income and employment. After green revolution, credit facilities helped farmers to
avail variety of loans for meeting their production needs. With buffer stock of grains, famines
became events of the past.
The following problems are being in the rural banking:
▪ Insufficiency: The volume of rural credit in the country is still insufficient in
comparison to its demand.
▪ Inadequate Amount of sanction: The amount of loan sanctioned to the farmers is also
in adequate.
▪ Less attention to poor or marginal farmers: lesser attention has been given on the
credit requirements of needy farmers.
7. What do you mean by agricultural marketing?

Ans- Agricultural marketing is a process that involves assembling, storage, processing,

transportation, packing, grading and distribution of different agricultural commodities
across the country.

8. Explain the term ‘Golden Revolution’?

Ans- The period of 1991-2003 is known as ‘Golden Revolution’ because during this
period, the planned investment in horticulture became highly productive and the sector
emerged as a sustainable livelihood option.

9. Explain the role of non-farm employment in promoting rural diversification?

Ans- The following are the importance of non-farm employment opportunities in
promoting rural diversification:
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▪ Non-farming Activities has several segments. Some segments of non-farm

activities possess dynamic linkages that permit healthy growth. 9
▪ The output of non-farm sectors act as an inputs for the large scale industries. Ex-
agro-based processing industries, leather industry etc.
▪ There is greater risk in depending exclusively on farming for livelihood. Non-farm
employment provides productive sustainable livelihood options to rural people.

10. ‘Information Technology plays a very significant role in achieving sustainable

development and food security’- comment?
Ans- Information Technology (IT) has revolutionized many sectors in the Indian
economy. It is widely accepted that It will play a critical role in achieving sustainable
development and food security in the 21st century.
▪ It aims to make every village a knowledge center, where it provides a
sustainable option of employment and livelihood.
▪ IT sector is also generating employment opportunities in the backward areas.
▪ IT also circulates information regarding emerging technologies and its
applications, prices, weather and soil conditions for growing different crops etc.

11. What is organic farming and how does it promotes sustainable development?
Ans- Organic farming is the form of agriculture that relies on techniques such as crop
rotation, green manure, compost and biological pest control.

Organic farming is the process of producing safe and healthy food, without leaving any
adverse impact on the environment. This method avoids the use of synthetic chemical
fertizers and genetically modified organisms. It means, organic farming promote
sustainable development as it maintains and enhances the ecological balance.

12. Enlist some problems faced by farmers during the initial year of organic farming?
Ans- Some of the problems faced by farmers during the initial year of organic farming
are:-
▪ Organic farming faces problems of inadequate infrastructure and marketing
facilities.
▪ Organic produce has a shorter shelf life as compared to sprayed produce.
▪ The choice in production of off-season crops is quite limited in organic farming.