CHAPTER-6

RURAL DEVELOPMENT

Q. What do you mean by Rural development? State the key challenges in front of Indian government for
rural development.

Ans. It is a comprehensive term which means a plan of action for the development of rural areas which
are lagging behind in socio-economic development.

The key issues are:

 Development of human resources like:

- health, addressing both sanitation and public health.
- literacy, more specifically, female literacy, education and skill development.

 Implementation of land reforms.

 Development of human resources like literacy, education and skill development.

 Development of the productive resources of each locality.

 Special measures for poverty alleviation and bringing about significant improvement in the living
conditions of the weaker sections of the population through generating employment opportunities.

 Infrastructure development like electricity, irrigation, credit , marketing , transport facilities

including construction of village roads and feeder roads to nearby highways, facilities for agriculture
research and extension and information dissemination.

Q. Define Credit. Discuss the need and importance of credit for Rural development.

Ans. Credit implies the loan provided to borrower in terms of money, goods or services by the lender
for a specified period of time at specific rate of interest.

Need:

 Farmers need credit to buy additional land, tools and implements, fertilizers and seeds.

 To pay off old debt, personal expenses like marriage, death, religious ceremonies etc.

 Since the gestation period between crop sowing and realisation of income after sale of
agricultural produce is very long farmers need to take credit.

 Most farming families in India are small and marginal holders producing just enough for
subsistence. They do not have any savings for investment.
 Q. Why should we attach such significance to Rural development when we see fast growing cities with
large industries and modern Information technology hubs?

Ans. - It is because two-third of India’s population depends on agriculture and one-third of rural India
still lives in abject of poverty. That is the reason we have to see a developed rural India if our nation
has to realize real progress.

Although the share of agriculture sector’s contribution to GDP was on a decline, i.e. about 3% per
annum during the 1991-2012, the population dependent on this sector did not show any Q5 Discuss
various types of Institutional sources of credit.

Q. Discuss the sources of credit with the help of examples.

Ans .There are mainly two sources of credit :

Institutional or Formal sources Non-institutional or informal sources

1) These resources are supervised by 1) These resources are not supervised
the central bank of the country. by anyone.

2) They follow proper terms of credit . Such 2) They do not follow any term of credit.
as documentation, collateral, low rate of
interest.
3)For example, commercial banks, 3)For example, Friends, relatives,
cooperatives, Self Help Groups etc. moneylenders, Zamindars etc.

Q. Discuss various types of Institutional sources of credit.

Ans. - At the time of Independence, moneylenders and traders exploited small and marginal farmers
and landless labourers by lending to them on high interest rates and by manipulating the accounts to
keep them in a debt-trap.

- A major change occurred after 1969, when India adopted social banking and multi-agency
approach to meet the needs of rural credit.
- The institutional sources consists of a set of multi-agency institutions, such as :

 Commercial Banks, Regional Rural Banks (RRBs), Cooperatives, and Land development
banks. They are expected to provide adequate credit at cheaper rates.

 National Bank for Agricultural and Rural Development (NABARD) : It was set up in 1982, as an
apex bank which coordinates the functioning of different financial institutions involved in
 rural financing system.
- Its objective is to promote health and strength of credit institutions (cooperatives, regional
rural banks etc.)
- Besides providing finance to credit institutions, NABARD also provides financial assistance to
the non-farm sector, to promote integrated rural development and prosperity of backward
rural areas.

- The Green Revolution was a harbinger of major changes in the credit system as it led to the
diversification of the portfolio of rural credit towards production- oriented lending.

 Self Help Groups(SHGs):  Self Help Groups(SHGs): They emerged as micro credit or finance
programme. Their focus is largely on those rural poor, who have no sustainable access to the formal
banking system.

-SHGs have emerged to fill the gap in the formal credit system. The formal credit delivery mechanism
has not only proven inadequate but has also not been fully integrated into the overall rural social and
community development.

-Moreover, vast proportion of poor rural households could not avail credit facilities because of their
inability to provide some kind of collateral.

-SHGs promote a thrift (savings) in small proportions by a minimum contribution from each member.
In this small groups of 10-20 members are formed . They save on daily basis and pool their resources to
provide credit to the needy members at reasonable interest rates, which is to be repaid in small
instalments.

- By March end 2003, more than 7 lakh SHGs had reportedly been credit linked.

-SHGs are the building blocks of the society who have also helped in the empowerment of women and
even working on social issues such as child marriage etc.

DRAWBACK / CRITICISM:

It is alleged that the borrowings are mainly confined to consumption purposes rather than productive
investment.

*The Poor Women’s Bank:

KUDUMBASHREE’ is a women-oriented community-based poverty reduction programme being

implemented in Kerala. In 1995, a thrift and credit society was started as a small savings bank for poor
women with the objective to encourage savings. The thrift and credit society mobilized Rs.1 crore as
thrift saving. These societies have been acclaimed as the largest informal banks in Asia in terms of
participation and savings mobilized.
Q. Critically analyse the role of Rural banking in the process of Rural development in India?

Ans. Rapid expansion of the banking system had a positive effect on the growth of output, income and
employment. Significant expansion of rural banking system played a positive role in:

 Raising farm and non-farm output by providing services and credit facilities to farmers.
 Providing long-term loans with better repayment options. It, thus helped in eliminating
moneylenders from the scene.
 Generating credit for self-employment schemes in rural areas.
 Achieving food security which is clear from the fact that we are abundant in buffer stocks of
grains.

Limitations of 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
inadequate. As a result, farmers often divert such loans for unproductive purposes, which
dilute the very purpose of such loan.
 Less attention to poor or marginal farmers: Lesser attention has been given on the credit
requirements of needy farmers. On the other hand, well-to-do farmers are getting more
attention due to better credit worthiness.
 Growing Agriculture loan default rates: The basic reason for growing overdues is the poor
repaying capacity of farmers. More than 50% defaulters are wilful defaulters which is a
major threat to the smooth functioning of banking system.
- Except commercial banks, other formal institutions have failed to develop a culture of
deposit mobilization – lending to worthwhile borrowers and effective loan recovery.
- Thus, the expansion and promotion of the rural banking sector has taken a backseat after
reforms.

Solution to the problems of Agricultural credit in India

 An effective mechanism for the recovery of agricultural loans should be evolved at the
earliest.
- Banks need to change their approach from just being lenders to building up relationship
banking with the borrowers.
- Inculcating the habit of thrift and efficient utilization of financial resources needs to be
enhanced among the farmers too.

Q. What do you mean by Agricultural Marketing System? Discuss the defects of this system in India.

Ans. - It is a process that involves assembling, storage, processing, transportation, packaging, grading and
distribution of different agricultural commodities (food grains, vegetables and fruits) across the
country.

- It is an efficient way by which the farmers can dispose their surplus produce at a fair and
 reasonable price.

- It involves different activities for movement of farm produce to the ultimate consumer.

Defects of the system / Obstacles that hinder the mechanism of Agricultural marketing / Problems faced
by farmers –

- Manipulation 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 Facility: They did not have proper storage facilities to keep back their [roduce
for selling later at a better price. Even today, more than 10% of goods produced in farms are
wasted due to lack of storage.

Therefore, state intervention became necessary to regulate the activities of the private sector . The
need for government intervention is imminent particularly when a large share of agricultural
products, is handled by the private sector.
Q. Discuss the steps / measures taken by the government to improve Agricultural Marketing

System.

Ans. The steps taken are:

 Regulated markets: The first step was to create orderly and transparent marketing
conditions. Regulated markets have been organized with a view to protect the farmers from
the malpractices of sellers and brokers.
Drawback: There is still a need to develop about 27,000 rural periodic markets as regulated
market places to realize the full potential of rural markets.

 Provision of physical infrastructure: The government has taken measures to develop facilities
like roads, railways, warehouses, godowns, cold storages and processing units.

Drawback: The current infrastructure facilities are quite inadequate to meet the growing
demand and need to be improved.

 Co-operative market: Co-operative marketing is a measure to ensure a fair price to farmers.

Under this, marketing societies are formed by farmers to sell the output collectively and to
take advantage of collective bargaining, in order to obtain better price. Milk Coorperatives in
Gujarat have been very successful in transforming the social and economic condition of
Gujarat and some other parts of the country.

Drawback: - Inadequate coverage of farmer members.

- Lack of appropriate link between marketing and processing cooperatives.
- Inefficient financial management.

 Policy Instruments:
Fixation of Minimum support Price (MSP): To safeguard the interest of farmers, government fixes
the minimum support prices of agricultural products, like wheat, rice, maize, cotton,
sugarcane, pulses, etc. Such a price may be regarded as an offer price, at which the
government is willing to buy any amount of grains from the farmers.
Maintenance of Buffer stocks: The Food Corporation of India (FCI) purchase wheat and rice at
the procurement prices, to maintain buffer stock. 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.
Public Distribution system (PDS): It is a system where government offers essential commodities
like wheat, rice, sugar oil etc. at prices lower than market through fair price shops and ration
shops to the poorer sections of the society.
-These instruments are aimed at protecting the farmers and providing foodgrains at a subsidized
rate to the poor.

Drawback: -Despite government intervention, private trade (by moneylenders, rural political
elites, big merchants and rich farmers) predominates agricultural markets.
- The quantity of agricultural products, handled by the government agencies and consumer
cooperatives, constitute only 10%, while the rest is handled by the private sector.
- It is often argued by some scholars that commercialization of agriculture offers tremendous
scope for farmers to earn higher incomes provided the government intervention is restricted.
 Emerging Alternative marketing channels:

1. Origin of Farmers Market: Farmers can increase their incomes, if they directly sell their
produce to consumers. As a result, the concept of “Farmers Market” was started, to give
boost to the small farmers by providing them direct access to the consumers and
eliminating the middlemen. Some examples of these channels are:
- Apni Mandi ( Punjab, Haryana and Rajasthan);
- Hadaspur Mandi (Pune);
- Rythu Bazars ( vegetable and fruit markets in Andhra Pradesh and Telengana;
- Uzhavar Sandies ( farmers markets in Tamil Nadu).

2. Alliance with National and Multinational Companies: Several national and multinational fast
food chains are increasingly entering into contracts / alliances with farmers.
- They encourage the farmers to cultivate farm products (vegetables, fruits, etc.) of the desired
quality.
- They provide them with not only seeds and other inputs, but also assure procurement of the
produce at the pre-decided prices.

Benefits of such arrangements –

- It will help in reducing the price risk of farmers.
- It would also expand the markets for farm products.

Q. What do you mean by Agriculture diversification.

Ans. Agricultural diversification includes two aspects:

- One relates to change in cropping pattern and
- The other relates to a shift of workforce from agriculture to other allied activities
(livestock, poultry, fisheries, etc.) and non-agriculture sector.

Types of Diversification:

 Diversification of crop production (Change in Cropping pattern): It 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. It implies a shift from single
cropping system to multi-cropping system. It reduces the dependence of farmers on one
or two crops as they are engaged in growing a wide variety of crops. It will also raise
their income.

 Diversification of Productive Activities: It means a shift of workforce from agriculture to

other allied activities and Non-farm activities with a view to raising income and exploring
alternative avenues of sustainable livelihood.
It is important because it will:

 Reduce the risk from agriculture sector.

 Provide sustainable livelihood options to people living in villages.
 Provide ecological balance.

Q. Why is agricultural diversification essential for sustainable livelihoods?

Ans. 1. The need for diversification arises as there is greater risk in depending exclusively on farming
for livelihood.
2. To provide productive sustainable livelihood options to rural people.
3. Much of the agricultural employment activities are concentrated in the Kharif season. But
during the Rabi season, in areas where there are inadequate irrigation facilities, it becomes
difficult to find gainful employment. Therefore, expansion into other sectors is essential to
provide supplementary gainful employment and in realizing higher levels of income for rural
people to overcome poverty.
Hence, there is need to focus on allied activities, non-farm employment and other emerging
alternatives of livelihood.

Q. What’s the role of non-farm employment in promoting rural diversification?

Ans. - As agriculture is overcrowded, a major proportion of the increasing labour force needs to
find alternate employment opportunities in other non-farm sectors.

- Majority of rural women find employment in agriculture while men generally look for non-farm
employment. In recent times, women have also begun looking for non-farm jobs.

- Non-farm sectors have the following sub-sectors:

1. The dynamic sub-sectors that permit healthy growth, like, agro-processing industries, food
processing industries, leather industry, tourism, etc.
2. Other sectors are in subsistence, low productivity propositions: Those sectors which have
the potential but seriously lack infrastructure and other support include traditional home-
based industries like pottery, crafts, handlooms, etc.

*TANWA (Tamil Nadu Women in Agriculture) –

It’s a project initiated in Tamil Nadu to train women in latest agricultural technique. It induces
women to actively participate in raising agricultural productivity and farming income. At a
Farm Women’s Group in Thiruchirapalli, run by Anthoniammal, trained women are
successfully making and selling vermicompost and earning money from this venture. Many
other Farm Women’s Groups are creating savings in their group by functioning like mini banks
through a micro-credit system. With the accumulated savings, they promote small-scale
household activities like mushroom cultivation, soap manufacture, doll making or other
income generating activities.
Q. Explain the activities performed under diversification of productive activities .

Ans. As agriculture is overcrowded, a major proportion of the increasing labour force needs to find
alternate employment opportunities under non-farm sector.

 Animal Husbandry (or Livestock farming): It is that branch of agriculture, which is concerned
with the breeding, rearing and caring for farm animals.

- In India, the farming community uses the mixed crop-livestock farming system-cattle, goats,
fowl are the widely held species.

- Milk, meat, eggs, wool and other by-products are emerging as important productive sectors for
diversification.
- This system provides increased stability in income, food security, transport, fuel and nutrition
for the family.
- Livestock sector alone provides alternate livelihood options to over 70 million small and
marginal farmers including landless labourers.
- Poultry accounts for the largest share. It is 58% of total livestock in India.
- Other animals which include camels, asses, horses, ponies and mules account for only 1%
share.

 Measures to improve livestock productivity in India:

-India had about 300 million cattle, including 108 million buffaloes, in 2012.
- Though, in terms of numbers, our livestock population is quite impressive but its
productivity is quite low as compared to other countries.

1. It requires improved technology and promotion of good breeds of animals to enhance

productivity.
2. Improved veterinary care and credit facilities to small and marginal farmers and landless
labourers would enhance sustainable livelihood options through livestock population.

 Fisheries:
- The fishing community regards the water body as ‘mother’ or ‘provider’. The water bodies
consist of sea, oceans, rivers, lakes, natural aquatic ponds, streams etc.
- Presently, fish production from inland sources contributes about 64% to the total value pf
fish production and the balance 36% comes from the marine sector (sea and oceans).
- Even though women are not involved in active fishing, about 60% of the workforce in export
marketing and 40% in internal marketing are women.
- Today, total fish production accounts for 0.8 % of the total GDP.
- In India, West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu are the
major producers of marine products.
- A large share of fishworker families are poor. Rampant underemployment, low per capita
earnings, absence of mobility of labour to other sectors and a high rate of illiteracy and
indebtedness are some of the major problems fishing community face today.
- There is need to increase credit facilities through cooperatives and SHGs for fisherwomen to
meet the capital requirements for marketing.
- Problems related to over-fishing and pollution need to be regulated and controlled. Welfare
 programmes for the fishing community have to be re-oriented in a manner which can provide
long-term gains and sustenance of livelihoods.

 Horticulture :
- Blessed with a varying climate and soil conditions, India has adopted growing of diverse
horticultural crops such as fruits, vegetables, tuber crops, flowers, medicinal and aromatic
plants, spices and plantation crops
- These crops play an important role in providing food, nutrition and employment.
- India is a world leader in producing a variety of fruits like mangoes, bananas, coconuts,
cashew nuts and a number of spices and is the second largest producer of fruits and
vegetables.
- Horticulture has emerged as a successful sustainable livelihood option. It contributes nearly
one-third of the value of agriculture output and 6% of GDP of India.
- Economic conditions of many farmers engaged in horticulture has improved and it has
become a means of improving livelihood for many unprivileged classes.
- Flower harvesting, nursery maintenance, hybrid seed production and tissue culture,
propagation of fruits and flowers and food processing are highly remunerative
employment options for women in rural areas.
- Golden Revolution is the period between 1991-2003 in which planned investment in
horticulture became highly productive and the sector emerged as a sustainable livelihood
option.

 Requirements for enhancing the role of horticulture –

1. Investment in infrastructure like electricity
2. Cold storage systems
3. Marketing linkages
4. Small-scale processing units
5. Technology improvement and dissemination

 Dairying: It is that branch of agriculture which involves breeding, raising and utilisation of
dairy animals for the production of milk and the various dairy products processed from it. - -
- The performance of the Indian dairy sector over the last three decades has been quite
impressive.
- Milk production in the country has increased by more than 8 times between 1951-2014.
- This can be attributed mainly to the successful implementation of “ OPERATION FLOOD”.
- Operation Flood or White Revolution was started by National Dairy Development Board
(NDDB) in 1970 under the expert guidance of Dr. Verghese Kurien (Chairman).
- The objective of this programme was to create a nationwide milk grid.
- Under this Operation Flood System, all the farmers pool their milk produce according to
different grades and same is processed and marketed to urban centres through cooperatives.
- The farmers are assured of a fair price and income from the supply of milk to urban markets.
- Gujarat state is held as a success story in the efficient implementation of milk cooperatives
which has been followed by many states.
  Information Technology:
- It plays a very significant role in achieving sustainable development and food security in the
following ways:
1. Predicting areas of food insecurity: Governments can predict areas of food insecurity and
vulnerability using appropriate information and software tools so that action can be taken
to prevent or reduce the livelihood of an emergency.
2. Disseminate information: IT has also a positive impact on the agriculture sector as it can
disseminate information regarding emerging technologies and its applications, prices,
weather and soil conditions for growing different crops, etc.
3. Releasing the creative potential and knowledge: IT can act as a tool for releasing the
creative potential and knowledge embedded in the society.
4. Employment generation: IT also has potential of employment generation in rural areas.

Q. What do you mean by Organic farming? Discuss its merits and demerits.

Ans. Organic farming is an eco-friendly technique of growing crops which promotes sustainable
development. It is a system of farming that maintains, enhances and restores the ecological balance.
It is an environment friendly and inexpensive technology which promote sustainable development
and even useful for small and medium farmers.

Benefits

 Economical farming: It offers a means to substitute costlier agricultural inputs such as HYV
seeds, chemical fertilizers, pesticides etc. with locally produced cheaper organic inputs and
generate good returns on investment.
 Generates income through exports: It generates income through international exports as
demand for organically grown crops is on a rise.
 Provides healthy food: It provides healthy food as organically grown food has more nutritional
value than food grown through chemical farming.
 Source of employment:It generates more employment opportunities as it requires more
labour inputs than conventional farming.
 Helps in sustainable development of agriculture: The produce of organic farming is pesticide-
free and is produced in an environmentally sustainable way.

Challenges / Problems / Limitations of Organic farming:

 Less Popular: It needs to be more popularised by creating awareness and willingness on the
part of farmers, for adoption of new technology. There is a serious need for an appropriate
agriculture policy to promote organic farming.
 Lack of infrastructure and marketing facilities: It faces problems of inadequate infrastructure
and marketing facilities.
 Low yield: It has a lesser yield in the initial years as compared to modern agricultural farming.
As a result, small and marginal farmers find difficult to adapt to large-scale production.
 Shorter food life: Organic produce has a shorter shelf life as compared to sprayed produce.
 Limited choice of crops: The choice in production of off-season crops is quite limited in
organic farming.
- Marketing of organically produced goods is another major problem.
- Organic produce may also have more blemishes and a shorter shelf life than sprayed produce.
- Organic food command higher price of around 10-100 per cent than conventional ones.

Suggestions to promote Organic farming:

- Creating awareness and willingness on the part of farmers to adapt to new technology.
- Provision of adequate infrastructure.
- Problem of marketing the products need to be addressed.
- Appropriate agriculture policy.
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