RURAL DEVELOPMENT

Rural development is a wider term involving development in various areas in the rural sector.

In order to provide the rural people with better prospects for economic development increased
participation of people in the rural development programs decentralization of planning better
enforcement of land reforms and greater access to credit facilities.

The main area or key issues which need by immediate attention or as follow:
● Development of human resource which include improvement in literacy rate especially
female literacy rate.
● Development of infrastructural facilities like roads ,irrigation facilities, credit
marketing, rural housing, rural electricification, rural telecommunication organic farming
etc.
● Land reforms
● majors special measures for eradication of poverty and bringing out significant
improvement in the living condition of the weaker section of the people.

The issues of rural development are planned and executed by the ministry of rural development.
Annual budget: ₹159,964 crore (US$20 billion) (2023-24)
the ministry at present consists of the following two departments
● department of rural development
● department of land resources

CREDIT IN RURAL AREAS

Majority of farmers in India produce for subsistence and rarely generate surplus for further
investment. Also the gestation period between crop showing and realization of income after the
sale of agricultural products is very long. Therefore, credit requirements become inevitable for
Indian farmers.

Purpose of credit:

● short term credit-

● medium term credit -
● long term credit -

Sources of Rural Credit

Agriculture is the primary source of income for people living in India’s rural areas.
Farmers and peasants have to invest a significant amount of funds each year to guarantee a
healthy crop.
As a result, they frequently borrow money from moneylenders and financial institutions to meet
their basic requirements before harvest season so they can make money by selling their crops.
Agricultural Rural Credit refers to any loan taken for agricultural reasons or small home
enterprises in India’s rural regions.

Sources of Rural Credit in India:

The two sources of rural credit from which the farmers can raise loans are:

Non-institutional Sources (Informal)

Institutional Sources (Formal)

1. Non-institutional Sources (Informal):

It consists of cash lenders, free agents, landlords, relatives, and friends. Historically, non-
institutional sources satisfied or fulfilled the majority of farmers’ credit requirements due to their
simpler loan procedures and willingness to give even for unproductive purposes.

These sources accounted for roughly 93% of the full credit score requirement of the agricultural
people in 1950-51 and at present account for 30% of the most effective credit score
requirement.
They used to take advantage of small and marginal farmers by asking for high rates of interest
and manipulating accounts to keep them in debt.

The major non-institutional sources of rural credit are:

i) Moneylenders:
Moneylenders exploit peasants through high rates of interest and even manipulate their
accounts to keep them in debt.

ii) Traders and Commission Agents:

This form of loan is typically used for cash crops. These traders’ share of agricultural loans
grew gradually from 5.5 percent in 1951-52 to 8.8 percent in 1961-62 before declining to 5.0
percent in 1996. As a result, its significance has decreased in recent years.

iii) Relatives:
In times of crisis, cultivators frequently borrow funds from their own relatives, either in cash or in
kind. These are informal debts that have no interest and are usually repaid after harvest.

iv) Rich Landlords:

In India, small and marginal cultivators and tenants are also accepting loans from landowners to
satisfy their financial requirements. This source has been following all of the bad practices of
moneylenders, merchants, and so on. Landless workers are sometimes forced to work as
bonded labourers.
As a result, non-institutional sources of agricultural credit suffered from severe flaws such as
exorbitant interest rates, loans for useless purposes, non-repayment of loans, and so on.
Exploitation by Non-institutional Sources
The farmers are usually exploited by non-institutional sources such as traders, landlords, and
moneylenders in the following ways:

Manipulation of Accounts: The non-institutional sources are often involved in different

malpractices. They do so by manipulating the accounts of the borrowers without having them in
their knowledge. They even take advantage of the illiteracy of the farmers and do not give them
any receipts for repayment.

High-Interest Rates: The non-institutional sources charge high-interest rates from the farmers
ranging from 24% to 50%.

2. Institutional Sources (Formal):

It is mainly composed of the government, cooperative societies, rural municipal financial

institutions, industrial financial institutions, and other entities.
However, a substantial change happened after 1969, when India implemented a social banking
and multi-agency strategy to meet rural lending requirements.

According to this method,

14 major commercial banks were nationalised in July 1969, and six more were nationalised in
April 1980.
In 1976, rural regional banks were created.

The apex bank, NABARD, was established in July 1982 to manage the operations of different
financial institutions involved in providing rural credit.
The two main objectives of the Government behind establishing the institutional sources are:
● credit to the farmers at a cheap rate of interest
● assisting small and marginal farmers, so they can raise their agricultural productivity and
maximise their income.

i) Co-operative Credit:
The main goal of co-operatives is to free Indian peasants from the clutches of moneylenders
and provide them with credit at low-interest rates.
It was established with the goal of facilitating small and medium-sized farmers’ complete
financing requirements.

ii) Land Development Banks:

These institutions lend money to farmers in exchange for a lien on their property. Loans are
available for permanent property improvement, the purchase of farming tools, and the
repayment of past obligations. A land mortgage is another name for this type of loan.

Mortgages are also known as liens against property or claims on property.

A lien is a claim or legal right against assets

Collateral in the financial world is a valuable asset that a borrower pledges as security for a
loan.
For a car loan, the vehicle is the collateral.

It gives farmers an affordable long-term financing option based on the mortgage of their
property at cheap interest rates for 15 to 20 years. These types of loans are typically accepted if
farms need to do some land development work, such as digging wells.

iii) Commercial Bank Credit:

Commercial banks initially played a minor part in promoting rural credit. However, after
nationalisation in 1969, they extended their rural branches and began directly financing farmers.
Earlier, these banks only accepted deposits from the urban populace and issued loans only to
industry and trade.

They usually ignored agriculture and rural businesses because agriculture is a high-risk
business.
Commercial banks also grant finance to the Food Corporation of India and state food
organisations for purposes such as food procurement.
“village adoption scheme,” which was originally started by the State Bank of India.

iv) Regional Rural Banks:

The Government of India established Regional Rural Banks. (RRB). The Narasimham
committee proposed the RRB idea, and it was formed in 1975 with the main goal of providing
loans and other financial services to farmers, agricultural labourers, and small merchants.
Prathama Grameen Bank, the first RRB bank, was established on October 2, 1975.
● Initially, there were six RRBs with 17 locations in India till December 1975.
● However, there are 43 RRBs established in India by 2022.
● The regional rural banks provide good interest to the people on their savings accounts.
● These banks also provide farmers with loans for purchasing crops and fertilizers at a
significantly lower rate.

v) National Bank for Agricultural and Rural Development (NABARD):

● National Bank for Agriculture and Rural Development (NABARD) is the Apex Bank which
has to coordinate the functioning of various financial institutions that are working for the
expansion of rural credit.
● The basic objective of NABARD is to promote the health and strength of credit
institutions including commercial banks, cooperatives, and regional rural banks.
● It also provides assistance to the non-farm sectors for the promotion of integrated rural
development and prosperity of backward rural areas.

vi) Self-Help Group (SHG) Bank Linkages Programme for Micro Finance:
The primary emphasis of SHGs is on the rural poor, who lack long-term access to the formal
banking system. Therefore, the targeted customers of SHGs include small and marginal farms,
agricultural and nonagricultural workers, artisans, and so on.
SHGs encourage thrift in small portions by asking for a minimal contribution from each member.
Credit is granted to needy members at fair interest rates, to be returned in small installments.

Critical Appraisal of Rural Banking

The rural banking system has provided support to the farmers and has helped in rural
development, directly and indirectly. With it, the farmers can now avail credit at cheap rates of
interest from the formal sources of rural credit. It has also helped the farmers in increasing rural
farm and non-farm output, income, and employment in rural areas.
Besides these benefits, the agricultural credit structure of the economy faces a lot of problems.
Some of these problems include:

● Insufficiency: As compared to the demand for rural credit, its volume in India is still
insufficient.
● Inadequate Coverage of Institutional Sources: As the institutional credit
arrangements have failed to cover the country’s rural farmers, they remain inadequate.
● Inadequate Amount of Sanction: Besides credit arrangements, the amount sanctioned
by the sources of rural credit is inadequate,
● Less attention to Poor or Marginal Farmers: Under the rural banking system, the
credit requirements of poor or marginal farmers have been given less attention. It is
because the demand for credit by these needy farmers gets rejected by banks and other
institutional sources, as they do not have collateral.

● Growing Overdues: Overdue is one of the major problems in agricultural credit that
keeps on growing. The basic reason behind it is the poor capacity of farmers to repay
the loan amount, because of which credit agencies are now becoming more cautious
while granting loans to the farmers.
It is presumed that the rise in agriculture loan default is because the farmers are refusing
to pay back loans.

Because of the above-stated problems, the expansion and promotion of the rural banking
system have been slow after the reforms.

Agricultural Marketing
At the time the independent agricultural marketing system in India was full of many defects and
obstacles that hindered the mechanism of agriculture marketing prominent among them their
presence of a large number of middlemen like wholesaler ,retailer money lenders etc
prevalence of male practices such as faulty being and manipulation of accounts.
● Indian farmers were forced to sell their product at unreasonable prices and at improper
time due to lack of proper marketing facilities
 ● After independence the Government of India adopt a number of measures to improve
the system of agriculture marketing which are discussed below:

1. Organization of Regulated Markets:

● Currently agricultural markets are regulated under APMC agricultural produce marketing
committee act.
● To protect the farmers from the mail practices of sellers and brokers.
● The provides supervision the weighting system
● They helps the farmers to take decision regarding the time of cell and quantity to be sold
2. Provision of Infrastructure Facilities:
● Facilities such as transportation godown and storage processing units provide a network
of godown and storage facilities so that the farmer are not compelled to sell their
produce immediately after the harvesting of the crops
● at present grading standard for several commodities has been laid down in this regard
AGMARK seals are issued for certain graded agriculture products railways are providing
subsidized transport facilities to the farmer

3. Cooperative Marketing:
● The cooperative marketing structure in the country is working at various levels. The
NAFED national agriculture cooperative marketing federation of India limited provides
the facilities of cooperative market to work smoothly.
● IT HELPS TO POOR MARGINAL FARMERS THAT THEY INCREASE BARGAINING
POWER.
● The success of milk cooperatives in Gujarat is indeed praiseworthy.

4. Important Instruments to Safeguard the Interest of Farmers:

● MSP minimum support price (fixed under CACP Commission for Agricultural Cost and
Prices)
● Buffer stock (wheat ,rice by FCI)
● PDS public distribution system

FCI purchases agricultural commodities from the farmers at fairly remunerative prices and sells
them through the PDS at subsidized rates so that the poor section of people have easy access
to these commodities.

All these measures to avoid distress sale means when farmers are selling their output at low
prices in the market.

ALTERNATIVE MARKETING CHANNELS

Government has also taken steps for the promotion of agro - export through the Vishesh krishi
upaj Yojana. Through this farmer cancel their output directly to the consumers,

● Apni Mandi (Punjab Haryana and Rajasthan)

● Hadaspar Mandi (Pune )
 ● Rythu bazar vegetable and fruit market in (Andhra Pradesh) and
● Uzhavar Sandies ( Tamilnad)

Diversification of agricultural activities

● Diversification broadly classified into two parts

● diversification of crop production
● diversification of productive activities
●
Diversification of productive activities (shift of workforce from agriculture to allied activities )

● animal husbandry - get and reading off animals

● Dairying - business of producing storing and distribution milk and it's produce white
revolution operation flood
● fisheries - occupation of catching and rearing fish
● horticulture - practice of growing flowers fruits and vegetables golden revolution

Need for diversification

● to reduce risk from agriculture
to reduce pressure from agriculture
● to produce sustainable livelihood
● to provide supplementary employment and income to overcome poverty
Organic farming
Method that does not make use of chemical fertilizers and pesticides.

Benifits
● More nutritional value
● use of local organic inputs
● more exports
● more income generate employment opportunities sustainable way
Limitations
● Less popular
● inadequate infrastructure
● problem of marketing
● less yeilds
● shorter shelf-life
● limited choice of production

Important facts
● In India politary accounts for the largest share of 61% India had about 303 million cattle
including 110 million buffaloes in the year 2019
● due to successful implementation of operations flood India ranks first in the world in milk
production
● India's milk production increased from 17 million tons in 1950-51 to 102.6 millions turns
into 2006-07 operation flood was started by national dairy development board in 1970
● under the expert guidance of the chairman Dr Verghese Kurien
● the total fish production accounts for 0.9% of the total GDP in India. West Bengal,
Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu are major fish producing
states
● Horticulture sector contributes nearly 1/3 of the value of agriculture output and 6% of
gross domestic product of India.
● In October 2014 the government of India introduced a new scheme called Sansad
Adarsh Graham yojna.
● Another company, n- Logue which has been set up by the IIT, Chennai provides an info
kiosk ( personal computer with internet) cost at a low cost.
● The scheme of kisan call centers was launched with the view to provide online
information to farmers.