1.

Poverty Line Estimated in India:

The Poverty line was accordingly defined in terms of per capita consumption expenditure that
meets the average per capita daily calorie requirement of 2400 kcal per capita per day in rural
areas and 2100 kcal per capita per day in urban areas along with a minimum of non -food
expenditure.

Based on observed consumer behaviour in the NSS data in 1973-1974, it was estimated that in
order to meet the calories requirement of 2400 kcal per capita per day and a minimum of non-
food requirements in the rural areas, a consumption expenditure of Rs. 49.09 Per capita per
month was necessary. The corresponding estimate to meet the calorie requirement of 2100
kcal and minimum non-food requirements in the urban areas was pegged at Rs. 56.64 per
capita per month.

According to an expert panel headed by former RBI governor C Rangarajan:

Those Sending over Rs. 82 a day in rural areas and Rs. 47 in town and cities should not be
considered poor.

2. Causes of poverty in India:

Poverty is a multidimensional Social problem. Its causes are varied. They are as follows:

1.) Climatic factors:

Climatic conditions constitute an important cause of poverty. The hot climate of India reduces
the capacity of people, especially the rural people, to work, for which production severely
suffers. Frequent flood, famine, earthquake md cyclone causes heavy damage to agriculture.
Moreover, absence of rain, excessive or deficient rain affect country's agricultural production
severely.

2.) Demographic factors:

The following demographic factors are accountable for poverty in India.

i) Rapid growth of Population:-

Rapid growth of population aggravates the poverty of the people. The growth of population
exceeds the rate of growth in national income. Population growth, not only creates difficulties in
the removal of poverty but also lowers the per capita income which tends to increase poverty.
The burden of this education in per capita income is borne heavily by the poor people.
Population growth at a faster rate increases labour supply which tends to lower the wages.

ii) Size of family:-

Size of the family has significant bearing on rural poverty. The larger the size of family, the
lower is the per capita income and lower is the standard of living. The persistence of the joint
family system has contributed to the health and earning capacity of the rural people.
3.) Personal Causes:

i) Lack of Motivation:-

Lack of motivation is an important cause of rural poverty. Some rural people do not have a
motive to work hard or even to earn something. This accounts for the poverty of the rural
people.

ii) Idleness:-

Most of the rural people are lazy, dull and reluctant to work. Hence, they are in poverty.

4.) Economic Causes:

i) Low agricultural Productivity:-

Poverty and real income are very much interrelated. Increase in real income leads to reduction
of the magnitude of poverty. So far as agricultural sector is concerned, the farmers even today
are following the traditional method of cultivation. Hence there is low agricultural productivity
resulting in rural poverty.

ii) Unequal distribution of land and other assets:-

Land and other forms of assets constitute sources of income for the rural people. But
unfortunately, there has been unequal distribution of land and other assets in our economy. The
size-wise distribution of operational holdings indicates a very high degree of concentration in
the hands of few farmers leading to poverty of many in the rural sector.

iii) Decline of Village industries:-

At present consequent upon industrialization new factories and industries are being set up in
rural areas village. Industries fail to compete with them in terms of quality and price. As a result,
they are closed down. The workers are thrown out of employment and that leads to a life of
poverty.

iv) Immobility of labour:-

Immobility of labour also accounts for rural poverty. Even if higher wages are offered, labourers
are not willing to leave their homes. The joint family system makes people lethargic and stay-at-
home.

The rural people are mostly illiterates, ignorant, conservative, superstitious and fatalistic.
Poverty is considered as god- given, something preordained. All these factors lead to increase
in poverty in rural India.

v) Lack of Employment Opportunities:-

Employment is the reflection of poverty. Because of lack of employment opportunities, people
are either unemployed or underemployed. Most of these unemployed and underemployed
workers are the small and marginal farmers and the landless agricultural labourers.
5. Social Causes:

(i) Education:-

Education is an agent of social change and egalitarianism. Poverty is also said to be closely
related to the levels of schooling and these two have a circular relationship. The earning power
is endowed in the individual by investment in education and training. But this investment in
people takes away money and lack of human investment contributes to the low earning capacity
of individuals.

In this way people are poor because they have little investment in themselves and poor people
do not have the funds for human capital investment.

(ii) Caste System:-

Caste system in India has always been responsible for rural poverty. The subordination of the
low caste people by the high caste people caused the poverty of the former. Due to rigid caste
system, the low caste people could not participate in the game of economic progress.

A 'Shudra' was not allowed to become a trader and a 'Vasihya' could earn his bread only by
trade.

Birth would decide their occupation and their economic fare. K.V.Verghese rightly observes,
"Caste System acted as a springboard for class exploitation with the result that the counterpart
of the poverty of the many is the opulence of the few. The second is the cause of the first."

(iii) Joint Family System:-

The joint family system provides social security to its members. Some people take undue
advantage of it. They live upon the income of others. They become idle. Their normal routine of
life consists of sleeping and begetting children.

In this way, Poverty gets aggravated through joint family system.

(iv) Social Customs:-

The rural people spend a large percentage of annual earnings on social ceremonies like
marriage, death, etc. As a result, they remain in debt and poverty.

(v) Growing indebtedness:-

Most of the rural people depends on borrowings from the money-lenders and land-lords to meet
even their consumption expenses. Money lenders, however, exploit the poor by charging
exorbitant rates of interest and by acquiring the mortgaged land in the event of non-payment
loans.

Indebted poor farmers cannot make themselves free from the clutches of money lenders. Their
poverty is further accentuated because of indebtedness. Such indebted families continue to
remain under the poverty line for generations because of this debt trap.
3. Human Poverty:

The Human Poverty Index (HPI) was an indication of the standard of living in a country,
developed by the United Nations (UN) to complement the Human Development Index (HDI) and
was first reported as the part of the Human Development Report in 1997.

Human Poverty Index- HPI

The HPI , which was introduced in 1997, is a composite index which assesses three elements
of deprivation in a country- Longevity, Knowledge and a decent standard of living.

There are two indices; HPI-1, which measures poverty in developing countries, and HPI-2,
which measures poverty in OCED developed economies.

 HPI-1 (for developing countries):

The HPI-1 for developing countries has three components,

1. First element is longevity, which is defined as the probability of not surviving to the age of 40.

2. Second element is knowledge, which is assessed by looking at the adult literacy rate.

3. Third element is to have a decent standard of living. Failure to achieve this is identified by the
percentage of the population not using an improved water source and percentage of children
under-weight for their age.

As a region of the world, Sub-Saharan Africa has the highest level of poverty as a proportion of
total population, at over 60%. The second poorest region is Latin America with 35% of its
population living on poverty.

 HPI-2 (for developed- OECD)

The indicators of deprivation are adjusted for advanced economies in the following ways:

1. Longevity, which for developed countries is considered as the probability at birth of not
surviving to the age of 60.

2. Knowledge is assessed in terms of Percentage of adults lacking functional literacy skills, and;

3. A decent Standard of living is measured by the percentage of the population living below the
poverty line, which is defined as those below 50% of median household disposable income and
social exclusion which is indicated by the long-term employment rate.
4. Measures for remove the Poverty in India:

During the last four decades of planning the Indian Economy has witnessed a number of
changes and the Indian economy stands on a different footing today. However, it is a sorry state
of affairs that some of the major basic problems are no less serious today then what they ware
30 years back. It may appear paradoxical but it is true that in spite of planned efforts to
eradicate the problems of poverty has been increasing in India.

Yearly 50% of our population has been living below the poverty line continuously over a long
period. Hence urgent action is necessary to devise an immediate plan of action to remove
poverty. The strategy or removal of poverty is not enough on the basis of past experience and
difficulties uncounted in implementation of programmes. Appropriate steps should be taken to
find out suitable alternatives for reducing poverty and inequality.

The major objective of planning should be elimination of poverty instead of giving emphasis on
increase in national income.

In order to meet the problem of poverty various measures are to be taken. They are discussed
below:

 Poverty and unemployment inter-related. Therefore, adequate employment opportunities

should be created in rural areas particularly in agricultural sector. In order to eliminate
agricultural unemployment, it is necessary to improve agriculture in the country. Goods
quality seeds, good tools, good manure must be arranged for it if the production is to be
increased. The major cause of agricultural unemployment in India is the dependence of
cultivation upon the rains. Thus, there should be proper and good arrangement of irrigation
through below minor and major projects.
 If conditions for marketing agricultural products do not favor the cultivator, the increase in
production will not alleviate the problem of agricultural unemployment. The organization of
the agricultural market will increase the income of the cultivator as well as improve the
situation with regard to unemployment.
 The total impact of land reform on rural formation has been for less than hoped for. Efforts
should be made to remove the loop holes in land legislations in order to make land reforms
more meaningful and effective. Additional lands should be redistributed among landless
labours. the marginal & sub marginal farmers so that they will be able to earn more. Efforts
should be made to provide the landless labours with maximum of land by making barren
land fertile.
 Animal husbandry and cattle breeding have great potential, not only in employment but also
in overcoming malnutrition. The government should extent special encouragement for
animal husbandry, poultry and fish farming. Necessary training for poultry and dairy farming
should be imparted.
 An improvement in agriculture, not supplemented by any other corrective measures cannot
provide employment to the increasing population. Besides the farmer should also get some
work during that period of the year when he is not engaged in cultivation. Some of
subsidiary Industry, such as cottage industry like furniture making, weaving, spinning,
match, barked and ropes etc., can help to a considerable extent in removing
unemployment.
 In spite of the promise of industrial decentralization, which never seems to arrive, there are
some areas of small industries which could, in fact, those located in rural areas. A major
element in creating employee in rural areas must mean a removal of some small industrial
estate into purely rural areas. They will carry their power allocation with them and could
then be an element in small scale industrialization in rural areas. However, this by itself will
not be adequate to foster rural industrialization in dynamic sense. What is required is a new
concept of modernization, combing Indian traditional rural artisan skills with power
availability and with an appropriate technology. A substantial portion of value added can
appear from units set up efficiently in areas where artisans can greatly increase their output
by modernization of their technology.
 There is the need to strengthen all the poverty alleviation programmes, particularly IRDP-
Integrated Rural Development Program. All the organization deficiencies an execution of
the program such as the shortage of technical and expert staff, delays in release of funds
and inadequacies in funds, lack of proper co-ordination should be removed. It is essential
to see that the target groups are not wrongly selected to ensure leakage of benefits to the
non-poor. Other drawbacks in the program implementation such as right and non-co-
operative attitude of the corrupt officials. Practices in sanctioning of loans should also be
taken into considerations. Efforts are to be made to remove the deficiencies in the
implementation of Training of Rural Youth for Self-Employment-TRYSEM programme such
as poor infrastructural support to enable the trainees to follow the pursuits, lack of
coordination among banks and training institutes and lack of follow up to the trained.
Governement instead of sticking to only few traditional crafts, new vocational conducive for
income generating activities should be selected in order to make Training of Rural Youth for
Self-Employment- TRYSEM and Development of Women and Children in Rural Areas-
DWCRA programmes more effective adequate care is to be taken than while implementing
Jawahar Rozgar Yojana-0 JRY. The ingredients are not missed in it on the whole, for
smooth implementation of various programmes the entire administrative set up should be
properly co-ordinate.
 The personal disabilities of person include illness, physically handicap, old age etc. and for
this the methods suggested are specialized health services, adequate wage provision to
maintain health, and other social security schemes and new vocational opportunities.
 The recent increase population and pressure exercised on the limited resources of the
country has brought to the forefront the urgency of the problem of family planning and
population control. Thus, family planning or family welfare programmes should be
 effectively implementation. Adequate awareness about small family norm has to be created
among the people and steps should be taken to make it a people program.
 There is lack of political and social awakening among the rural people. The programme of
poverty elevation is not so simple as to be successfully solved by the government, thus
there is a great need for political and social awakening people should be made aware of
various programme and benefits of this programmes. So that people at the lowest rung of
rural society may make substantial progress in making their lives more economical
productive.

Eradication of poverty needs a multiplied strategy. But as things stand the most important,
indeed the general one, has to be the creation of massive wage employment opportunities both
on private and public accounts in rural areas. Then other programmes will provide opportunities
for the able and the enterprising. It is time resources organization and skill are directed to
this and if poverty is to be tackled in the decade to come.

5. Measures Adopted to Remove poverty in India (Government Schemes):

1.) Prime Minister's Rozgar Yojana (PMRY):

PMRY started in 1993 with the objective of making available self-employment

opportunities to the educated unemployed youth by assisting them in setting up any
economically available activity. So far, about 20 lakh units have been set up under the
PMRY, creating 30.4 lakh additional employment opportunities. The targets for
additional employment opportunities under the tenth plan and in 2004-05 are 16.50 lakh
and 3.75 lakh, respectively. while the REGP is implemented in the rural areas and small
towns (Population up to 20,000) for setting up village industries without any cap on
income, educational qualification or age of of the beneficiary, PMRY is meant for
educated unemployed youth with family income of up to Rs. 40,000 per annum, in both
urban and rural areas for engaging in any economically viable activity.

2.) Rural Employment Generation Programme (REGP):

REGP, launched in 1995 with the objective of creating self- employment opportunities in
the rural areas and small towns, is being implemented by the Khadi and Village
Industries Commission- KVIC. Under REGP entrepreneurs can establish village
industries by availing of margin money assistance from the KVIC and bank loans for
projects with maximum cost of Rs. 8.25 lakh. Since the inception of REGP, up to 31
march 2004, 1,86,252 projects have been financed and 22.75 lakh job opportunities
were created. A target of creating 25 lakh new jobs has been set for the REGP during
the Tenth plan. 8.32 lakh employment opportunities have already been created during
2003-04. For 2004-05, a target of crediting 5.25 lakh job opportunities has been fixed.
3.) NATIONAL SOCIAL ASSISTANCE PROGRAMME (NSAP):

This Programme was launched in during 1995-96. It provides three types of services to poor
people.

(a.) National family Benefit Scheme

(b.) National old Age Pension Scheme

(c.) National maternity Benefit Scheme

Whole of expenditure on this scheme is spent by central government but since April 2001,
NMBC has been handed over to ministry of the health and family welfare

4.) SWARNA JAYANTI SHAHRI ROZGAR YOJANA (SJSRY):

This Programme was launched in Dec. 1, 1997. Its main object is to provide self-employment to
unemployed youth of urban areas. It Includes youth educated up to the 9 th standard yet living
below poverty line. It is also based upon 75% centre and 25% state's contribution in
expenditure required for the scheme. The expenditure during 2003-04 was RS. 103 Crore. For
2004 -05 to allocation is Rs. 103 Crore, out of which Rs. 90.38 Crore were utilised by Dec. 31 st,
2004. In 2008-09, 9.47 lakh benefits were covered under it. Rs. 541 crores were spent on this
plant in 2008-09.

5.) SWARNA JAYANTI GRAM SWAROZGAR YOJANA (SGSY):

SGSY, launched in April 1999, aim at bringing the assisted poor families (Swarojgar) above the
poverty line organising them into Self Help Groups (SHGs) through a mix of bank credit and
government subsidy. In this scheme, Integrated Rural Development Program- IRDP and other
programmes have been included in this scheme, poor are granted bank loans and subsidies to
establish small enterprises. This scheme is centrally sponsored on 75:25 basis centre and
states. From this programme about 121 lakh self-based employed persons were benefited up to
2009. Rs. 27183 crores were spent on this plant in 2008-09.

6.) INDIRA AWAAS YOJANA (IAY):

This is a major scheme for construction for houses of unserviceable kutcha houses to semi-
pucca has also been added from 1999 to 2000, the criteria for allocation of funds to States /
UTs has been changed from poverty ratio housing shortage in the state. Similarly, the criteria
for allocation of funds to district have been changed to equally reflect to SC/ST Population and
the housing shortage. During 2007-08 Rs. 4033 crores have been earmarked for constructing
21.27 lakh houses. As per information by the states 9.40 lakh houses have been built up to
2008. Ministry of Rural Development (MORD) provides equity support to the Housing and
Urban Development Corporation (HUDCO) for this purpose.
7.) ANTYODAYA ANNA YOJANA (AAY):

AAY launched in December 2000 provides food grains at a highly subsidised rate of Rs. 2.00/
kg for wheat and Rs. 3.00/kg for rice to the poor families under the targeted public distribution
system (TPDS). The scale of issue, which was initially 25 kg per family per month, was
increased to 35 kg per family per month from April 1, 2002. The scheme initially for 1 crore
families was expanded in July 2003 by adding another 50 lakh BPL families during 2003-4,
under the AAY against an all allocation of 45. 56 lakh tonnes of food grains. 41.65 tonnes were
lifted by the state/ UT governments budget 2004-5 expanded the scheme further from August 1
2004 by reading another 50 lakh BPL families with his increase to crore families have been
covered under the AAY.

8.) PRADHAN MANTRI GRAM SADAK YOJANA (PMGSY):

The PMGSY, launched in December 2000 is a 100 percent centrally sponsored scheme, aims
at providing rural connectivity to unconnected habitations with population of 500 persons or
more in the rural areas by the end of the tenth plan period augmenting and modernizing rural
roads has been includes as an item of the NCPM. The programme is funded mainly from the
actuals of diesel cess in the central road fund in addition, support of the multi-lateral funding
agencies and the domestic financial institutions are being obtained to meet the financial
requirement of the programme up to 2 October, 2004 with an expenditure of Rs. 7866 crore
total length of 60.024 Km of roads works has been completed. National Rural Roads
development agency (NRRDA), an agency of the Ministry of Rural Development registered
under the Societies Registration Act, provides operational and technical support for the
programme in 2008-09 rupees 46,807 crores were spent on this plan about 2.14 lakh km road
length was completed according to this scheme, Rs. 60 thousand crores are to be spent in 7
years it is expected that by the end of this scheme 10 cross of rural village will be up lifted from
poverty line.

9.) ANNAPURNA YOJANA:

This scheme was initiated on 1st April, 2000. It is 100 % centrally sponsored plan. It provides
food grains to senior citizens. It involves those citizens who come under old age pension
scheme, yet do not get any pension and 10 kgs of food grains, free of cost, is given to each
individual. Since 2002-03, this scheme has been handed over to states.

10.) PRADHAN MANTRI GRAMODAYA YOJANA (PMGY):

PMGY launched in 2000-01 envisages allocation of Additional Central Assistance (ACA) to the
States and UTs for selected basic services such as primary health, primary education, rural
shelter, rural drinking water, nutrition and rural electrification for 2003-04 as well as 2004-05,
the annual allocation of ACA for PMGY was Rs. 2,800 crores.
11.) VALMIKI AMBEDKAR AWAS YOJANA (VAMBAY):

The VAMBAY launched in December 2001 facilitates the construction and upgradation of
dwelling units for the slum dwells and provides a healthy and enabling urban environment
through community toilets under NIRMAL BHARAT ABHIYAN, a component of the scheme.
The central government provides a subsidy of 50%, the balance 50% being arranged by the
state government. Since its inception and up to December 31, 2004, Rs.753 crore have been
released as government of India subsidy for the construction/upgradation of 3, 50,084 dwelling
units and 49,312 toilets seats under the scheme for the year 2004-05, out of the tentative
central fund allocation of Rs.28, 058 crore, up to December 31, 2004, an amount of Rs. 223.66
crore has been released covering 1, 06,136 dwelling units and 20,139 toilets seats.

12.) NATIONAL FOOD FOR WORK PROGRAMME:

In the line with the NCMP, National food for work programme was launched on November 14,
2004 in most backward districts of the country with the objective to intensify the generation of
supplementary wage employment. The programme is open to all rural poor who are in need of
wage employment and desire to do manual unskilled work. It is implemented as a 100%
centrally sponsored scheme and the food grains are provided to states free of cost. However,
the transportation cost, handling charges and taxes on food grains are the responsibility of the
states. The collector is the nodal officer at the district level and has the overall responsibility of
planning. Implementation, coordination, monitoring and supervision. For 2004-05, Rs. 2020
Crore has been allocated to 20 lakh tons of food grains.

13.) NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (NREGS):

This scheme was introduced on February 2, 2006. For this scheme national rural employment
guarantee act pass passed on 7th September, 2005 in this scheme two scheme have been
included

(a.) SAMPOORAN GRAMIN ROZGAR YOJANA

(b.) NATIONAL FOOD FOR WORK PROGRAMME

This NREGS scheme was started in 200 districts in the beginning. It will be launched in all the
districts throughout the country within periods of 5 years. The main objective is to provide at
least 150 days employment to every family in a year. Under this scheme 56 lakh people got
employment in 2006-07. This scheme will be expanded from 200 in 2006-07 to 596 districts in
2008-09. In the budget of 2009-10 Rs. 30, 100 crores have been fixed. According to the need
budget can be exceeded.
14.) PUBLIC DISTRIBUTION SYSTEM:

Poor people are provided food grams on cheaper rates through 4 lakh fair price shops so as to
assure food security to them. In some states, this scheme is implemented in both rural and
urban areas. Almost 3% of government budget is spent on this scheme public distribution
system has helped the poor people to some extent. For the success of this plan PDS system
has been computerised in 2007-08. Under this scheme, there was a provision of Rs. 32,667
crores for food subsidy in 2008-09.

15.) PRIME MINISTER EMPLOYMENT GENERATION PROGRAMME (PMEGP):

This programme was introduced by the government on 15th august, 2008. In it two employment
programmes have been merged

(i) PRIME MINISTER ROZGAR YOJANA

(ii) RURAL EMPLOYMENT GENERATION PROGRAMME

The main objective of this programmes is to generate new employment opportunities through
micro enterprises. About 37 lakh opportunities would be generated for this purpose Rs.740
crore would be spent in 2008-09 and Rs. 4485 crores during next four years.
3. Problems of Agricultural Sector in India:
The Agricultural Sector in India faces the following problems-

1. Slow and Uneven Growth:-

a.) The growth of agricultural sector is not sufficient to meet the rising demands of fast-growing
population. While the population is growing at a rate of around 2% per annum, food grain production
has increased at an annual rate of around 2% (190-2011). Growth in the agricultural sector has quite
often fallen short of the plan targets. The Ninth and Tenth Plans witnessed agricultural sector growth
rate pf 2.44% and 2.3% respectively , compared to 4.72% growth rate during Eighth Plan. During
Eleventh Plan, Agricultural growth is estimated at a little over 3% against the target of 4%. The poor
performance of agricultural sector resulting mainly from deficient and uneven rainfall in the recent
years has led to create inflationary pressure in some primary products and reduction in the potential
growth of other sectors by dampening growth. This is just sufficient to maintain the existing standard
of consumption of people. If we desire better standards of consumption and nutrition, then
agriculture will have to grow at a higher rate. The Approach Paper to Twelfth Plan emphasizes the
need to enhance our efforts to ensure 4% average growth of agriculture in the 12th Plan.

b.) Certain crops (like Wheat) are growing at a higher rate than other crops (like Maize, Jawar, etc.)

c.) Low Yield per unit area across almost all crops has become a regular feature of Indian
agriculture. Though India is one of the largest producers of most of the agricultural crops but ranks
very low in terms of yield. For example, It has the largest area under Rice and Wheat in the world
and is the second largest producer of these crops, but in terms of productivity, its world rank is 52 nd
in rice and 38th in Wheat. There is a need for a renewed focus in improving productivity.

d.) The regional imbalances in the spread of growth has remained confined to certain area like
Punjab, Haryana and Western Uttar Pradesh.

e.) Till very recently, the attention and resources were devoted to the development of agricultural
crops and Animal Husbandry, Fisheries and Forests were not given much attention.

2. Not so Modern Agriculture:-

a.) The High Yielding Variety Programme- HYVP was initiated on a small area of 1.89 million
hectares in 1960-61 and even in 2003-04 only 80 million hectares of land was covered by this
program, which is just 44% of the gross cropped area. Naturally, the benefits of the new technology
have remained confined to this area only.

b.) In many areas and in a number of crops old methods of ploughing, sowing and harvesting etc.
are still used. As a result, Productivity in such areas and crops is very low.

c.) About 60% net sown area is rain fed and there are no appropriate dry farming techniques (in
order to address the problems faced by farmers of rain fed area, especially small and marginal
farmers, Rainfed Area Development Programme was launched)
d.) Only 40% of the gross cropped area has irrigation facilities. the irrigation sector requires a
renewed thrust both in terms of investment as also modern management.

3. Flows in Land Reforms:-

a.) The legislation measures haves not been completed in all the states.

b.) There are snags in legislation like definitions of 'Personal Cultivation' and 'tenants' were
inadequate, substantial area were given to Zamindars for their personal cultivation, landlords often
forced their tenants to surrender the lands voluntarily, ceiling laws were inadequate and Zamindars
indulges in large scale transfer of land to their family members in order to escape these laws.

4. Problems relating to Finance:-

Since agriculture is an unorganized profession dependent mainly on rains, banks and other financial
institutions are reluctant to provide finance to this sector. In fact, till a very long period after
Independence, the main source of Agricultural credit was the money lender as organized institutions
insisted on collateral securities. In 1951, money lenders accounted for as much as 71.6% of rural
credit. Money lenders used to charge exorbitant rates of interest ranging from 18 to 50%. They often
manipulated accounts and cheated the poor uneducated farmers. Therefore, after Independence,
steps were taken to free farmers from the clutches of money lenders, the most important being the
expansion of institutional being the expansion of institutional credit to agriculture. Fourteen Banks
were nationalized in 1969 and six banks were nationalized in 1980, with an important objective of
providing credit to the rural and other priority sectors. In 1975, the government established Rural
Regional Banks (RRB) to specifically meet the requirements of the farmers and villages. This was
followed by the setting of an apex bank called National Bank for Agriculture and Rural Development-
NABARD (based on the recommendation of Shivaraman Committee) in 1982. Co-operative Credit
Societies were also established to finance rural projects at lower rates of interest. As a result of all
these efforts the share of money lenders has reduced to about 37% now and that of institutional
credit has increased.

Lately, a number of steps have been taken to enhance credit support to farmers. These includes:

 Introduction of the 'Farm Credit Package' in 2004. As a result of this package the flow of credit
to the farm sector has consistently exceeded the target.
 There has been a massive increase in the institutional sources of credit to agricultural sector in
India.
 Farmers are given crop loans at concessional rate of interest and on easy terms.
 'Kisan Credit Card Scheme' was started in 1998 to provide adequate and timely support from
the banking system to the farmers for their cultivation needs. A revised and improved 'Kisan
Credit Card Scheme' was introduced in 2012.
 NABARD provides refinance to state co-operative and Agriculture and Rural Development
Banks, State Co-operative Banks, Regional Rural Banks, Commercial Banks and other
financial institutions so that they can meet the credit requirements of rural people.
  From time to time, the government announces agricultural debt waiver and debt relief schemes
so as to mitigate the distress amongst farmers.

Although much improvement has taken place in agricultural finance, the following problems have
emerged:

 Agricultural loans are concentrated in certain region and states for example, nearly half of the
agricultural bank credit is concentrated in Southern States.
 The Proportion of overdue to demand has been increasing, Nearly 40% of the amount
financed does not came back to the society.
 The major beneficiaries of the agricultural credit have been the large and medium farmers.
 There is a lack of experienced and skilled staff in these institutions.

5. Problems relating to warehousing and marketing:-

a.) The storage facilities with the individual farmers are normally very primitive types in the form of
dug-holes and pits. As a result, 10-15% of agriculture produce gets spoiled or eaten by rats.
Government agencies like Food Corporation of India provide storage facilities but these are
inadequate.

b.) There is a lack of organization among farmers. So, they do not get a fair price from the
purchasers who are generally well-organized.

c.) There are a number of agents between the producers (farmers) and the customers (buyers).
They charge a heavy amount as their fees or as commission. As a result, the farmers do not get a
fair share in the total product price charged.

d.) Because of heavy indebtedness, the farmers are many times forced to sell their produces at low
prices and sometimes due to lack of proper transport facilities in the nearest market at not so great
prices.

e.) A great number of farmers live just for subsistence. Their marketable surplus is very low or
almost NIL.

f.) Several malpractices exist in unorganized agricultural markets such as under weighing, levying of
number of unauthorized fees and taxes etc.

g.) The farmers are many a times not well informed about the prevailing market conditions including
prices prevailing in the markets.

h.) Grading and Standardization are at a very low level. So often inferior quality gets mixed up with
superior one, killing the motivation of farmers to produce superior quality products.

i.) In order to meet the needs of poor people in the country, the government runs a network of ration
shops and fair price shops which provide food grains and other essential commodities at very low
prices to consumers. Despite the massive coverage of these shops, the total requirements of food
grains of all vulnerable sectors are not met.
There is need to develop marketing infrastructure, storage, warehousing, cold chains and spot
markets that are driven by modern technology. In this direction some steps have been recently
taken. These includes:

 To bring about reforms in agricultural marketing, Agricultural Produce Market Committee

(APMC) Act is being amended by various states.
 To transfer agricultural technologies and information to the farming sectors a number a of
initiatives have been taken by the Department of Agriculture & Co-operation. These includes
setting up of Agri-clinics and Agri-business Centers (ACABC), setting up of Kisan Call Centers
and developing of Kisan Knowledge Management System (KKMS) etc.
 The National Policy for farmers, 2007, is being adopted by the government. Major policy
provisions include Provisions for assets reforms, water use efficiency, use of technology,
inputs and services, good quality seeds, disease free planting material credit insurance etc.
 Modified National Agricultural Insurance Scheme and Weather based crop Insurance Schemes
are being run for insuring the farmers against crop loss and loss arising out of bad weather.
The Agriculture Insurance Company of India Ltd. is the implementing agency for these.