INDIAN NOTES

ECONOMICS
DEVELOPMENT
RURAL DEVELOPMENT

REVISION NOTES
CHAPTERWISE &
TOPICWISE
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INDEX

Chapter 6: Rural Development

Concepts Covered:
1. Rural Development
➢ Introduction and Meaning
➢ Important points
➢ Process of Rural Development
• Development of Human resources
• Development of Infrastructure
• Land Reforms
• Alleviation of Poverty
• Development of productive resources
2. Rural Credit
➢ Introduction and Meaning
3. Sources of Rural Credit
➢ Institutional Sources
• Co-operative credit
• Land development banks
• Commercial bank credit
• Regional rural banks
• NABARD
• Self-help groups
➢ Non-Institutional resources
• Moneylenders
• Relatives
• Traders and Commission agents
• Rich landlords
4. Issues in Rural Banking System

5. Agricultural Market System

➢ Meaning of Agricultural marketing
➢ Measures to improve agricultural marketing
• Regulated markets
• Infrastructural facilities
• Co-operative Marketing
• Different policy instrument
6. Diversification of Agricultural activities
➢ Reason for Diversification
➢ Benefits of diversification
➢ Types of Diversification
• Diversification of Crop production
• Diversification of Productive activities
7. Alternate farming- Organic Farming
➢ Meaning and explanation
➢ Benefits of organic farming
➢ Challenges before organic farming
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INDEX

8. Mind Map
➢ (Colourful & Interactive/ Complete All Concept Covered)
9. Assertion Reason Questions
➢ (An assertion is a simple statement, whereas a reason gives a detailed explanation about
that given statement.)
10. Case Study Questions
➢ (A scenario in a particular professional context which students are expected to analyse and
respond to, guided by specific questions posed concerning the situation.)
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RURAL DEVELOPMENT

RURAL DEVELOPMENT
Introduction and Meaning
Rural development is the process of improving the quality of life and economic well-being of people
living in rural areas, often relatively isolated and sparsely populated areas. Rural development has
traditionally cantered on the exploitation of land-intensive natural resources such as agriculture and
forestry.

Rural development is the continuous and comprehensive socio-economic process of improving all
aspects of rural life. Traditionally, rural development has been focused on the exploitation of land-
intensive natural resources such as forests and agriculture. However, growing urbanisation and
changes in global production networks have changed the character of rural areas today. Rural
development remains at the core of the country’s overall development. More than two-thirds of the
country’s population depends on agriculture for a living, and one-third of rural India is still below the
poverty line. As a result, it is important for the government to be productive and provide adequate
amenities to raise their standard of living.

Important points
a) To improve productivity and wages of rural people
b) To guarantee increased and quick employment possibilities
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RURAL DEVELOPMENT

c) To demolish unemployment and bring a notable decline in underemployment.

d) To guarantee an increase in the standard of living of the underprivileged population
e) To provide the basic needs: elementary education, healthcare, clean drinking water, rural
roads, etc.

Process of Rural Development

1. Development of Human resources: The quality of human resources must be improved through:
• Proper attention to literacy (particularly female literacy), schooling and skill development,
• Better health facilities for physical growth, and
• Sanitation facilities in homes and workplaces.
2. Development of Infrastructure: Infrastructure development involves improvement in electricity,
irrigation, credit, marketing, and transportation facilities, and improved agricultural research,
extension, and information dissemination.
3. Land Reforms: Its objectives include the elimination of exploitation from land relations,
realisation of the ‘land to the tiller’ objective, widening the rural poor’s land base that improves
their socioeconomic circumstances, and improving agricultural productivity.
4. Alleviation of Poverty: Approximately 22% of the total population is still poor or below the
poverty line, and approximately 75% of the total poor (approximately 27.82 crores) reside in rural
regions. Specific measures/schemes for poverty relief must be implemented.
5. Development of Productive Resources: Productive resources in each rural location are to be
identified and developed so that existing resources can be used to their full potential and
opportunities for investment and employment in farm and non-farm areas can be developed.
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RURAL CREDIT

RURAL CREDIT
Introduction and Meaning

1. Growth of the rural economy depends on the timely infusion of capital, to realize higher
productivity in agriculture and non-agriculture sectors.
2. In agriculture, farmers are in strong need of current due to the long-time gap between crop
sowing and realization of income.
3. Farmers borrow from various sources to meet initial investments on seeds, fertilizers,
implements and other family expenses of marriage, death, religious ceremonies, etc.
4. 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.
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SOURCES OF RURAL CREDIT

SOURCES OF RURAL CREDIT

Institutional Sources
It is mainly composed of the government, cooperative societies, rural municipal financial institutions,
industrial financial institutions, and other entities. It accounted for the most efficient 7% of the
general credit score requirement at the start of the main five years plan (in 1950-51), but it is now
due for approximately 70%.

Some of the Institutional sources of rural credit are as follows:

1. 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. This is the most cost-effective
and essential source of rural financing. It was established with the goal of facilitating small and
medium-sized farmers’ complete financing requirements.
2. 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.
3. 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.
4. Regional Rural Banks: India is an agriculturally oriented nation with a large population engaged
in the agricultural sector. Thus, in order to utilise this sector and connect Indian farmers with
banks in order to facilitate financial transactions, the Government of India established Regional
Rural Banks. (RRB). Regional rural banks in India play a key role in providing banking facilities to
farmers living in remote areas.
5. 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.
6. Self-Help Group: 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 non-agricultural 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 instalments from the pooled
funds.
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SOURCES OF RURAL CREDIT

Non-Institutional resources
It constitutes 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. However, due to
restricted resources, they were unable to satisfy their medium and long-term needs/requirements.
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 high rates of interest and
manipulating accounts to keep them in debt.

The major non-institutional sources of rural credit are:

1. Moneylenders: Moneylenders have long been a source of credit for many agricultural
households in India’s rural credit environment. However, they exploit peasants through high rates
of interest and even manipulate their accounts to keep them in debt.
2. Traders and Commission Agents: Traders and commission agents give loans to agriculturists for
productive reasons before crop maturity and then compel farmers to sell their harvests at very
low rates to them while charging a high fee. This form of loan is typically used for cash crops.
3. 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.
4. 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 laborers.
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ISSUES IN RURAL BANKING SYSTEM

ISSUES IN RURAL BANKING SYSTEM

Rural banking

Rural banking refers to banking services and financial products provided to customers residing in
rural areas, often with limited access to traditional banking services. These services include savings
accounts, loans, insurance, and other financial products that are designed to meet the unique needs
of rural communities.

1. Insufficiency: The volume of rural credit in the country is still insufficient in comparison to its
demand.
2. Inadequate Coverage of institutional sources: The institutional credit arrangement continues to
be inadequate as they have failed to cover the entire rural farmers of the country.
3. 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 loans.
4. Less attention to poor or marginal farmers: Lesser attention has been given to the credit
requirements of needy (small and marginal) farmers. On the other hand, well-to-do farmers are
getting more attention due to better creditworthiness.
5. Growing Overdue: The problem of overdue agricultural credit continues to be an area of concern.
• The basic reason for growing overdue is the poor repaying capacity of farmers. As a result,
credit agencies are becoming cautious about granting loans to farmers.
• Agriculture loan default rates have been chronically high. It is alleged that farmers are
deliberately refusing to pay back loans. It is a threat to the smooth functioning of banking
system and needs to be controlled.
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AGRICULTURAL MARKET SYSTEM

AGRICULTURAL MARKET SYSTEM

Meaning of Agricultural marketing

The agricultural sector is the backbone of the Indian economy and contributes significantly to the
country’s Gross Domestic Product (GDP). The agricultural sector is also the primary source of
livelihood for a significant portion of the population. In recent years, the Indian government has
taken several measures to improve the agricultural sector and increase its competitiveness in the
global market. The agricultural marketing system is one of the critical aspects of the agricultural
sector’s growth and development. Agricultural Marketing refers to the process of assembling,
storing, processing, transporting, packaging, grading, and distributing different agricultural
commodities across the country.

Measures to improve agricultural marketing.

The Indian government has taken several measures to improve the agricultural marketing system.
Some of the measures are:

1. Regulated Markets:

Regulated markets or Agricultural Produce Market Committees (APMCs) were established to

ensure fair prices for the farmers and prevent exploitation by middlemen. The APMCs are
responsible for regulating the buying and selling of agricultural products and ensuring that the
farmers receive a fair price for their produce and to benefit the consumers too.

2. Infrastructural Facilities:

The government has also focused on developing infrastructural facilities such as storage,
transportation, and marketing. Storage facilities such as warehouses and cold storage help in
reducing wastage and preserving the quality of the produce. Transportation facilities such as
roads, railways, and airports facilitate the movement of agricultural products from one place to
another. Marketing facilities such as mandis and hats provide a platform for farmers to sell their
produce directly to consumers.

3. Cooperative Marketing:

Cooperative marketing is a system where farmers come together to form a cooperative society
and sell their produce collectively. This helps in reducing the dependence on middlemen and
ensures a fair price for the farmers. The cooperative societies also provide access to credit and
other support services to the farmers.

4. Different policy instruments:

In order to protect the farmers, the government has initiated the following policies:
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AGRICULTURAL MARKET SYSTEM

• Minimum Support Prices (MSP): To safeguard the interest of farmers, government 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 Government is willing to
buy any number of grains from the farmers.
• Maintenance of Buffer Stocks: The Food Corporation of India (FCI) purchases wheat and rice
at the procurement prices, to maintain buffer stock. Buffer stock is created CS years of surplus
production and is used during shortages. It helps to ensure regularity in supply and stability
in prices.
• 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, kerosene, etc. at a price below the market price, to the weaker
sections of the society.
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DIVERSIFICATION OF AGRICULTURAL ACTIVITIES

DIVERSIFICATION OF AGRICULTURAL ACTIVITIES

Reason for Diversification
1. Every economic activity has a workforce absorption limit beyond which not only potential is
underutilised but also productivity stops growing.
For example, Agriculture sector diversification will offer individuals choices to make ends
meet in addition to reducing agricultural risk.
2. The majority of agricultural operations flourish throughout the Kharif and Rabi Seasons. Those
that rely solely on agriculture do not earn enough to feed themselves for the rest of the year.
Furthermore, in locations with inadequate irrigation, even the Rabi Season does not provide
consistent revenue. People in these situations, look for other ways to generate money.
3. During agricultural production, a farmer may face several kinds of adversities and climatic
vagaries such as unpredictable rainfall, stone hail, drought, flood, and so on. Issues like post-
harvest losses, storage, and a lack of accessible effective marketing are worsening the
situation. Human-wildlife or human-crops conflict, forest fires, monoculture, plant disease
and infestation, migration, and youth reluctance to agriculture are all fresh obstacles.
4. For more than five decades, Indian agriculture has faced serious issues due to a rise in input
costs to increase production. However, production proportionate to input maintains for a
period of time before plateauing and then gradually declining in many cases.
5. Farmers have been utilising the common government-promoted Green Revolution cropping
pattern rice-wheat-rice to increase production for a long time. Following the same cropping
plan over a longer period of time has extracted specific nutrients from the soil, resulting in
soil deficiency in those nutrients as well as a drop in soil microfauna population.
In the agricultural rhizosphere, the macrofaunal population is responsible for nutrient
mobilisation and absorption.

Benefits of diversification
Most of the agricultural employment activities take place in Kharif Season. Therefore, during the
Rabi Season, it becomes difficult for the farmers to find some gainful employment opportunities in
the areas which lack adequate irrigation facilities. Therefore, it becomes essential for the farmers to
diversify into other sectors to:

• Provide supplementary employment which is gainful for them.

• Enable them to earn higher level income, and
• Enable the rural people in overcoming poverty and other troubles.

Types of Diversification
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DIVERSIFICATION OF AGRICULTURAL ACTIVITIES

1. Diversification of Crop production

• It involves a shift from a single-cropping system to a multi-cropping system.
• Diversification involves a shift in cropping patterns from food grains to cash crops. The
main aim is to promote a shift from subsistence farming to commercial farming.
• In India, agriculture is still dominated by subsistence farming and farmers give prime
importance to the cereals in the cropping system.
• Multi-cropping system reduces the dependence of farmers on one or two crops as they
are engaged in growing a wide variety of crops.
• There is a need to encourage farmers to take up the cultivation of a wide variety of crops.
It will also raise their income.
2. Diversification of Productive Activities
• It would provide alternative avenues of sustainable livelihood and would raise the level of
income.
• Non-farm Activities have several segments. Some segments of non-farm activities possess
dynamic linkages that permit healthy growth, while others are in subsistence, low
productivity propositions.
• The dynamic sub-sectors include ago-processing industries, food processing industries,
leather industry, tourism, etc.
• Those sectors, which have the potential but seriously lack infrastructure and other
support, include traditional household-based industries, like pottery, crafts, handlooms,
etc.
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ALTERNATE FARMING - ORGANIC FARMING

ALTERNATE FARMING - ORGANIC FARMING

Meaning and explanation
The form of agriculture that relies on techniques such as crop rotation, green manure, compost and
biological pest control is known as Organic Farming. The use of synthetic chemical fertilizers and
genetically modified organisms are avoided.

• It is a process of producing safe and healthy food, without leaving any adverse impact on the
environment.
• Organic agriculture is a whole system of farming that resorts, maintains and enhances the
ecological balance.
• In order to enhance food safety throughout the world, there is an increasing demand for
organically grown food.

Benefits of organic farming

1. Economical Farming: Organic Farming is economical as it offers a means to substitute costlier
agricultural input, such as HYV seeds, chemical fertilizers, pesticides, etc., with locally
produced cheaper organic inputs.
2. Environment Friendly: Chemical fertilizers pollute the groundwater by rising its nitrate
content, whereas, in organic farming, environment-friendly manures and fertilizers are used,
which discards the use of chemical fertilizers.
3. Sustains Soil Fertility: In Organic farming manures and compost are used, which maintain soil
fertility.
4. Provides Healthy Food: Organic farming offers healthier and tastier food compared to
chemical farming. It was observed that naturally developed food is more nutritious than the
food from compound cultivation.
5. Inexpensive technique: Organic farming is an inexpensive farming technology for small and
marginal farmers, and unlike, conventional technology, it does not require expensive inputs
like HYV seeds, Pesticides, chemical fertilizers etc.
6. Generates Income through Exports: Income is generated through exports as there is a high
demand for organically grown crops.

Challenges before organic farming

1) Less Popular: There is less awareness about Organic Farming. It needs to be popularised by
creating awareness and willingness on the part of farmers, to adoption of new technology.
There should also be an appropriate agricultural policy to promote organic farming.
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ALTERNATE FARMING - ORGANIC FARMING

2) Lack of Infrastructure and Marketing Facilities: Organic Farming faces problems of

inadequate infrastructure and marketing facilities.
3) Low Yield: The yield in Organic Farming is less in the initial years as compared to modern
agricultural farming. And because of this, small and marginal farmers find it difficult to adapt
to large-scale production.
4) Shorter Food Life: The shelf-life is shorter in the case of organic produce as compared to
sprayed produce.
5) Limited Choice of Crops: There is limited choice in the production of crops in the case of
organic farming.
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MIND MAP

MIND MAP
Chapter 6 RURAL DEVELOPMENT
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CASE STUDY

CASE STUDY
Chapter 6 Rural Development
Question 1:

At the time of independence, money lenders 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 adequately meet the needs of rural credit.
The institutional structure of moral banking today consists of a set of multi-agency institutions,
namely, commercial banks. regional rural banks. cooperatives and land development banks.
They
are expected to dispense adequate credit at cheaper rates. Recently, self-help groups have
emerged to fill the gap in the formal credit system. The SHGs promoter shrift in small
proportions by a minimum contribution from each member. From the pooled money, credit is
given to the needy members to be repayable in small instalments at reasonable interest rates.
By May 2019, nearly 6 crore women in India have become member in 54 lakh women SHGs.
About
Rs 10-15.000 per SHG as a community investment support fund are provided as part of
renovating
fund to take up self-employment for income generation.
1. _____________was set up in 1982 as an apex body to coordinate the activities of all
institutions involved inthe rural financing system. (RBI/NABARD)
[Link] was a harbinger of major changes in the credit system as it led to the diversification
of the padfolio of rural credit towards production-oriented lending.
(a) Green Revolution (b) Golden Revolution
(c) White revolution (d) None of these.
[Link], Self Help Groups have emerged to fill the gap in the formal credit system. Such
credit provisions are generally referred to as
(a)Macro credit programmes (b) Micro credit programmes
(c) Both ‘a’ and ‘b’ (d) None of these
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CASE STUDY

[Link] of the following part is not a part of the institutional structure of rural banking
today?
(a)Commercial banks. (b) Regional rural banks.
(c) Non- banking finance companies. (d) Land development banks

Answer:

[Link]

2.(b) Golden Revolution.

3.(b)Micro credit programmes.

4.(c) Non- banking finance companies.

Question 2:
Rural Development is the key issue with the government. Without the development of
rural areas India cannot increase its growth to desired level. Rural development does not
mean only to develop its agriculture marketingand credit but also to develop education,
training, and infrastructure in rural areas. The government has launched many programs
especially of provision of credit and marketing facilities. The farmers often have shortage of
funds. Farmers generally go to non-institutional sources for their short term and longterm
loans. But farmers are generally exploited. To help them government started provided
loan through commercial banks and an apex bank named NABARD was established in 1982.
Government is also making efforts to improve agricultural marketing by removing the role
of intermediaries where farmers can directly sell their produce to seller without
involving any commission agent or middlemen.

1. Name the Non-institutional sources of credit

(a) Landlords (b) Moneylenders
(c)Traders and commission agents (d) All of above
[Link] is established in the year
a) 1982 b) 1992 c) 1988 d) 1989
3. Non-farm activities are promoted by government for:
(a)regular income to farmer (b) addressing the problem of disguised unemployment
(c) reducing pressure on land (d) All of the above
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CASE STUDY

Answer:

1. (d) All of above

2. (a)1982

3. (d) All of the above

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06
ASSERTION REASON

ASSERTION REASON
Chapter 6 Rural Development

Question 1:

Directions: For two statements are given-one labelled Assertion (A) and the other labelled
Reason (R). Select the correct answer to these questions from the codes (a), (b), (c) and (d)
as given below:

Assertion: Information technology plays an important role in achieving sustainable

development and food security.

Reason: It can also provide necessary information about the new techniques of
production, prices and weather etc, to the farmers.

a. Both A and R are true and R is the correct explanation of A

b. Both A and R are true but R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
Answer: Both A and R are true but R is the correct explanation of A

Question 2:

Directions: For two statements are given-one labelled Assertion (A) and the other labelled
Reason (R). Select the correct answer to these questions from the codes (a), (b), (c) and (d)
as given below:

Assertion: Self Help Groups (SHGs) have been set up to promote thrift in small proportions
by a minimum contribution from each member.

Reason: From the pooled money, credit is given to the needy members to be repayable in
small instalments at reasonable interest rates.

a. Both A and R are true and R is the correct explanation of A

b. Both A and R are true but R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
Answer: Both A and R are true and R is the correct explanation of A.

Question 3:
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ASSERTION REASON

Directions: For two statements are given-one labelled Assertion (A) and the other labelled
Reason (R). Select the correct answer to these questions from the codes (a), (b), (c) and (d)
as given below:

Assertion: Small and marginal farmers need to form cooperatives to obtain fair price for
their produce.

Reason: Instead of marketing their produce separately, if they self their produce through
one agency, this will increase their bargaining power.

a. Both A and R are true and R is the correct explanation of A

b. Both A and R are true but R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true

Answer: Both A and R are true but R is the correct explanation of A

Question 4:

Directions: For two statements are given-one labelled Assertion (A) and the other labelled
Reason (R). Select the correct answer to these questions from the codes (a), (b), (c) and (d)
as given below:

Assertion: India ranks first in the world in milk production.

Reason: India's milk production increased due to Operation Flood.

a. Both A and R are true and R is the correct explanation of A

b. Both A and R are true but R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true

Answer: Both A and R are true and R is the correct explanation of A

Question 5:

Directions: For two statements are given-one labelled Assertion (A) and the other labelled
Reason (R). Select the correct answer to these questions from the codes (a), (b), (c) and (d)
as given below:

Assertion: Rural Banking has always given lesser attention on the credit requirements of
small and marginal farmers.

Reason: Marginal farmers enjoy better creditworthiness.

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06
ASSERTION REASON

a. Both A and R are true and R is the correct explanation of A

b. Both A and R are true but R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true

Answer: A is true but R is false