Class XI- XII (ISC- CBSE) ASIAN ACADEMY 8505979650, 8700972622

Rural development
Introduction
 In India, majority of the poor people live in rural areas, where they do not have access
to the basic necessities of life. Around 22% of our total population still lives below the
poverty line.
 Agriculture, with maximum share of rural economy, has grown at a meager rate of
2.7% in the last fifty years. During 2007- 2012, agriculture output has grown at 3.2%
 The share of agriculture sector to GDP was on a decline and there has been increase
in the share of industrial and service sector. However, the population dependent on
agricultural sector did not show any significant change.
 Moreover, after the economic reforms of 1991, the growth rate of agriculture sector
decelerated to 3% p.a. during 1991-2012, which was lower than the earlier years.
 So, real progress of India is possible only when rural areas and rural people are
developed, so that overall growth of India could be achieved.
Meaning of rural development
 In India, agriculture is the major source of livelihood in rural sector. So, development
in agriculture will contribute to the betterment of rural areas.
 The term rural development includes not only agricultural development, but it involves
all other aspects (economic and social) as well.
 In order to achieve rural development, government introduced various programmes in
its five year plans.
Process of rural development
Rural development aims at comprehensive change and improvement of rural life in all
aspects. Some of the areas, which are challenging and need fresh initiatives for development
in India include:
1. Development of human resources
 Literacy, education, skill development
 Better health facilities
2. Development of infrastructure
 Electricity, transport facilities, roads, irrigation facilities, credit, better facilities
for agricultural research etc.
3. Land reforms
 Actualisation of the goal of land to the tiller
 Improvement of social economic conditions of rural cultivators
 Increase agricultural productivity
4. Alleviation of poverty: as stated earlier, around 30% of total population is still below
the poverty line. So, there is a serious need for taking serious steps for alleviation of
poverty and bringing significant improvement in living conditions of weaker sections.
5. Development of the productive resources of each locality to enhance opportunities of
employment (particularly other than farming)

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Class XI- XII (ISC- CBSE) ASIAN ACADEMY 8505979650, 8700972622

Rural credit
In agriculture, farmers are in strong need for credit due to long time gap between crop
sowing and realization of income.
Farmers borrow from various sources 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 nd
incomes.
Sources of rural credit
With growing modernisation of agriculture during post- green revolution period, the
requirement of agricultural credit has also increased in the recent years. Broadly, there are
two sources, from which the farmers can raise loans:
i) Non institutional sources
ii) Institutional sources
Non institutional sources
Non institutional sources have been the traditional source of agricultural credit in India. The
major non institutional sources are
 Moneylenders – moneylenders exploit peasants by charging higher rate of interest
and sometimes by manipulating accounts
 Relatives – cultivators borrow funds at zero interest rate from their own relatives.
These loans are kind of informal loans and are normally returned after harvest.
 Traders and commission agents – they provide credit to the peasants on the mortgage
of crops.
 Rich landlords – landlords also charge high rates of interest and exploit the small
peasants.
Institutional sources
Government established the institutional sources with the following objectives:
 To provide adequate credit to farmers at a cheaper interest rate.
 To assist small and marginal farmers in raising their agricultural productivity and
maximising their income.
Some of the important institutional sources of agricultural credit are
1. Cooperative credit – to provide credit at low interest rates
2. Land development banks – provide credit against mortgage of land
3. Commercial banks
4. Regional rural banks – provide credit especially to small farmers in rural areas only

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Class XI- XII (ISC- CBSE) ASIAN ACADEMY 8505979650, 8700972622

5. Government – the loans provided by the government to farmers to purchase seeds,

fertilizers and for other agricultural purposes are known as TACCAVI loans.
6. National bank for agricultural and rural development – setup in 1982 as apex
institution of rural credit to promote strength of credit institutions
7. Self help group bank linkages programme for micro finance – SHG has emerged as
the major micro finance programme in the country in recent years
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 laborer’s, artisans etc.
SHG promotes thrift in small proportions by a minimum contribution from each
member.
Critical appraisal of rural banking
 The volume of rural credit is insufficient in comparison to its demand
 The institutional credit arrangements have failed to cover the entire rural farmers of
the country.
 The amount of loans sanctioned to the farmers is also inadequate.
 Poor farmers are generally given less attention as compared to rich farmers.
 The problem of overdue is major concern in this area. Almost 50% of the defaulters as
willful defaulters.

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