Class: +2

Subject: Economics
Part: Indian Economic Development
Chapter-7
Issues of Rural Development: Rural Credit and Marketing Assignment

No.: 37-46

Question. What do you mean by rural credit?

Answer. Indian farmer is a poor person. Without capital investment, agriculture cannot progress. To
improve agriculture and his earning capacity, he must get appropriate amount of rural credit at appropriate
time and at reasonable rate of interest. To provide money for all this is called RURAL CREDIT. Question.
What are the types of Rural Credit?
Answer. Credit needs of the Indian farmer are classified into three categories:
1. Short-term Credit: This is needed to fulfill the current financial requirements of the farmers related
to the purchase of seeds and fertilizers or the payments of wages.it extends up to a period of 15 months.
2. Medium-term Credit: It extends up to a period of 5 years, and is needed for the purchase of
tools/implements or the construction of wells.
3. Long-term Credit: It is required for repayment of old debts, purchase of land, tractors and the like.
Its duration ranges between 15-20 years.
Question. What are the non-institutional sources of Rural Credit?
Answer. Those sources of rural credit in India which do not follow any rule or legal provision as
prescribed by RBI or by any government law, may be referred as non –institutional sources of rural credit.
Following are types of these:
1. MONEYLENDERS OR MAHAJANS: Since a long period of time, moneylenders have been the
most important source of rural credit in India. There are two categories of these moneylenders: i.
Non-Professionals Moneylenders: These are those moneylenders who the lending or financing just as aside
business along with their main profession. They include rich farmers etc.

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 ii. Professional Moneylenders: These are those moneylenders for whom lending or financing is a
profession. They fulfill the requirement of rural people, yet they exploit the farmers in ways more
than one.
2. TRADERS AND COMMISSION AGENTS : Traders commission agents, landlords etc. also
supply credit to the rural people.
3. RELATIVES, FRIENDS AND OTHERS: Rural people also obtain credit from relatives, friends,
neighbours etc. Such a loan is generally for a short period and it carries either no or very low rate of
interest .
Question. What do you know about institutional sources of credit?
Answer. Those institutions which provide rural credit by following formal rules and legal provisions
concerning financing and which are under the strict control of monitory and financial authorities of the
country are known as institutional sources of rural credit. In India these sources of rural credit include
mainly the commercial banks, co-operative banks and regional rural banks.
Various Institutional sources of rural credit are given below:
1. Cooperative banks and cooperative credit societies: In 1904, the Indian government passed the
‘Cooperative Credit Societies Act’. This act marked the beginning of cooperative credit in India. It enables
people to voluntarily come together to meet their mutual financial needs as and when required. Cooperative
credit societies were formed with the following broad objectives.
i. To eliminate the role of moneylenders as a source of credit
ii. To provide easy and adequate credit to farmers
iii. To expand the flow of credit in rural areas
In India, cooperative credit societies work at three levels.
i. Primary agricultural credit societies (PACS): These societies work at the village level and deal directly
with the rural borrowers.
ii. Central cooperative banks: These banks work at the district level. They advance short-term as well as
medium-term loans to PACS.
iii. State cooperative banks: These banks work at the state level. They, too, advance loans to PACS.
Presently, cooperative credit societies account for 30% of the total rural credit.
Cooperative credit societies have certain drawbacks that prevent them from becoming a popular source of
credit in rural areas. Some of these limitations are discussed below.
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i. Insufficient financial resources: Cooperative credit societies do not have sufficient financial resources
to cater to the demands of the rural regions.
ii. Huge overdue amount: Many cooperative credit societies have huge amount of overdue, which has
made them virtually defunct.
iii. Delay in advancing credit: Most cooperative credit societies are unable to advance timely credit. iv.
Inclination towards large farmers: Cooperative credit societies have mostly benefitted big farmers. These
societies have failed to solve the fund problems of small and marginal farmers. v. Uneven growth:
Cooperative credit societies have come up unevenly in different parts of the country. Only certain regions
seem to have benefitted from this initiative.
2. Commercial banks: The entry of commercial banks in the rural sector was necessitated by the
failure of cooperative credit societies to meet the rural credit requirement. In 1969, fourteen commercial
banks were nationalised for the purpose of advancing credit to rural people. These commercial banks have
been directed to advance 40% of their total loan credit to the priority sector, which includes the agricultural
sector. The share of commercial banks in rural credit has increased tremendously over time. In 2007-08,
they accounted for 68% of the total rural credit.
3. Regional rural banks (RRBs): RRBs were set up to complement commercial banks and cooperative
credit societies in satisfying the credit needs of small and marginal farmers. Initially, 5 RRBs were set up in
1975. This number rose to 196 by 2005. However, later, their number declined to 86 as a result of the
amalgamation process started by the government. RRBs advance credit only for productive purposes. They
account for almost 8–10% of the total agricultural credit. The weaker sections and backward districts have
been the major beneficiaries of RRBs.
4. National Bank for Agricultural and Rural Development (NABARD): Established in 1982,
NABARD controls and regulates the activities of rural banking institutions. Some of its functions are
discussed below.
i. To act as the apex rural credit institute: NABARD serves as the apex agency for financial institutions
that advance credit for various rural developmental activities.
ii. To take necessary steps for improving the credit delivery system: NABARD takes appropriate steps or
measures to improve the credit delivery system. These measures include monitoring, formulation,
restructuring of institutions and training of manpower.
 iii. To coordinate the rural financing activities: NABARD coordinates the rural financing activities of all
credit institutions engaged in developmental work at the grass-roots level.
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iv. To refinance and monitor other financial institutions: NABARD refinances institutions that are
involved in financing the rural sector. In addition, it also monitors and evaluates the projects that it
refinances.
5. Microcredit: Microcredit refers to the credit and other financial services provided to the poor
through self- help groups (SHGs) and non-governmental organisations (NGOs). SHGs play a crucial role in
meeting the credit requirements of the rural poor by inculcating in them the habit of saving. The individual
savings of many farmers are pooled together to meet the financial requirements of the needy members of
SHGs. The members of these groups are linked with the rural banks. A poor individual, thus, become
financially strengthened by being part of an SHG. Further, the financing made through SHGs reduces
transaction costs for both lenders and borrowers. Presently, more than 7 lakh SHGs are operating in
different rural areas. SHGs are becoming popular among the small and marginal borrowers owing to their
informal credit delivery mechanism and minimal legal formalities.
6. Kisan Credit Card: Launched in 1997-98, the Kisan Credit Card scheme aims to increase the
farmers’ accessibility to credit. Under this scheme, credit limits are fixed for farmers based on their
operational land holdings, their estimated credit requirements, cropping patterns, etc. A farmer can then use
the Kisan Credit Card to withdraw money up to the assigned credit limit. Loans can even be rescheduled in
the event of a natural calamity or crop failure. Up to 2008, seven hundred and fifty-seven lakh Kisan credit
cards had been issued.
7. The poor women’s bank: In order to promote saving and banking habits among poor women, a
scheme called Kudumbashree was launched in Kerala in 1995. It is a community-based programme that
has poverty reduction as its core objective. Under this scheme, thrift and credit societies have been formed
to mobilize savings and credit. This initiation has been quite successful and is acclaimed as the largest
informal banking system in Asia.
Question: What are the major problems of Rural Credit in India?
Answer: The main problems of agricultural credit in India are explained as below: 1. Insufficiency: In spite
of expansion of rural credit structure, the volume of rural credit in the country is still insufficient as
compared to its growing requirement arising out of increase in prices of agricultural inputs.
2. Inadequate Amount of Sanction: The amount of loan sanctioned to the farmers by the agencies is
also very much inadequate for meeting their different aspects of agricultural operations. Considering the

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amount of loan sanctioned as inadequate and insignificant, the farmers often divert such loan for
unproductive purposes and thereby dilute the very purpose of such loan.
3. Lesser Attention of Poor Farmers: Rural credit agencies and its schemes have failed to meet the
needs of the small and marginal farmers. Thus, lesser attention has been given on the credit needs of the
needy farmers whereas the comparatively well-to-do farmers are getting more attention from the credit
agencies for their better credit worthiness.
4. Growing Over-dues: The problem of over-dues in agricultural credit continues to be an area of
concern. The recovery of agricultural advances to various institutions is also not at all satisfactory. In 1997-
98, the recovery of agricultural advances of commercial banks, co-operative banks and regional rural banks
were 63 per cent, 66 per cent and 57 per cent respectively. Such growing over-dues has also been resulted
from poor repaying capacity of farmers. As a result of that, the credit agencies are becoming wary of
granting loan to farmers.
5. Inadequate Institutional Coverage: In India, the institutional credit arrangement continues to be
inadequate as compared to its growing needs. The development of co-operative credit institutions like
Primary agricultural credit societies, land development banks, commercial banks and regional rural banks,
have failed to cover the entire rural farmers of the country.
6. Red Tapism: Institutional agricultural-credit is subjected to red-tapism. Credit institutions are still
adopting cumbersome rules and formalities for advancing loan to farmers which ultimately force the
farmers to depend more on costly non-institutional sources of credit.
Question. What suggestions can be given to solve the problem of rural credit from India? Answer.
Proper development of agricultural credit will prove to be very beneficial for the development of
agriculture. The following measures can be adopted to solve the problems of rural credit from India:
1. Efforts should be made to make co-operative societies more useful and efficient.
2. The number of Multipurpose societies should be increased.
3. Cooperatives should get a lot of money.
4. The shortcomings of the government-provided loans should be rectified.
5. The Reserve Bank should lend more money for long term loans.
6. Like the United States, a “Credit Guarantee Institution” should be set up to guarantee loans to
 farmers .
7. Cooperatives, Post Offices, Savings Banks should encourage farmers to save.

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8. Emphasis should be placed on the establishment of warehouses in India in whose receipt farmers can
get more loans from commercial banks.
9. The work of moneylenders and merchants should be controlled and efforts should be made to
organize them.
10. Farmers sometimes take different types of loans from different institutions by mortgaging the same
item which makes it difficult to recover the loans. To address this the farmers should be given loan
cards which should contain all the records of the loans taken from various institutions, repayments
and details of goods, so that the lending institution can ascertain the status of the farmer and the
future problems that occur can be avoided.
11. In order to remove the need for certification of land aggregation, wells etc. by the Land Revenue
Officers, the farmers should be given the land aggregate passbook to eliminate the need for
certification of land aggregate wells etc. This passbook should contain all the required information
such as irrigated land area, type of land, number of farms, wells and non-irrigated land. The loans
received by the farmer from the mortgage bank in this pass book so should also be written that the
lending institutions can give loans only by mortgaging the passbook.
12. The lending institution should provide regulatory and as for the completion of related tasks from
loan approval to full repayment of the loan required technical knowledge.
13. Debt card facility should be provided to the farmers to save them from further and unnecessary
interest incurred on the loan. The loan should be repaid in instalments from time to time as required
and not in one instalment. The details of the payment amount should be given in the loan card.
14. Sometimes lenders are intermediaries between borrowers. This is detrimental to both classes.
Therefore, every effort should be made to stop this wrongdoing.
15. In addition to productive loans, loans should also be given to farmers for essential consumption
purposes.
16. In addition to loan approvals, lending institutions provide information on farmers' consumption,
technical knowledge, new use of means of production and monitor the use of loans, so that farmers
can avail the full benefits of the loan.
Question: What is meant by Agricultural Marketing?
Answer: Over the past few years, the Indian agricultural setup has changed significantly. Farmers no
longer produce simply for their own consumption. Rather, they produce a surplus to cater to the demands

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of the market as well. In other words, Indian agriculture is fast getting commercialized. Consequently,
farmers have become aware of the importance of post-production work such as storage, packaging and
transportation. This is where agricultural marketing becomes significant. Agricultural marketing system
consists of activities ranging from harvesting till the final sale of the produce. The following are the
activities involved in the agriculture marketing.
i. Gathering the produce after harvesting
ii. Processing the produce
iii. Grading the produce according to different quality norms
iv. Packaging the produce
v. Storing the produce for future use
vi. Selling the produce at attractive prices
In other words, agricultural marketing does not simply refer to farmers’ act of bringing their produce to the
market for the purpose of sale. Rather, it also includes all those activities that help farmers fetch the
maximum price for their produce.
Question: Describe different methods of agricultural marketing in India.
Answer: When a farmer grows his crop, his next step is to take the crop to the market and sell it, so that he
can earn income from it. A farmer uses a variety of methods to sell his crop in the market. All these
methods are described as follows:
1. Sales in villages: It is accepted as the oldest system of selling crops in India. In it, Indian farmers
sell their produce in the villages immediately after harvest. It is estimated that about 50 percent of the crop
sold in India is sold by farmers in villages. The farmer sells his crop in the villages in various ways, such as
in the occasional village markets, to the moneylenders in the villages, to the traders roaming in the villages,
etc. But when a farmer sells his crop in the villages, it is called forced sale by the farmer because the farmer
makes the sale under duress. The reasons for this are as follows:
i. Most of the farmers in India are small and therefore their crop is so small that they consider it right to
sell it in the villages.
 ii. Due to lack of means of transportation, these farmers do not find it easy to sell their produce in the
market.
iii. Most of the farmers are indebted to the moneylenders and hence it becomes their obligation to sell
their produce to these moneylenders to repay their loans.

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iv. Farmers do not have access to warehouses, so they cannot store their crops. So as soon as their crop
arrives, they have to sell it in the villages as well.
v. There is no government market in every village in India, so the farmer is forced to sell his crop to
moneylenders in the villages.
vi. Market usually cheat less educated farmers. To avoid this, he finds it more profitable to sell his crop to
a well-known moneylender in the village.
vii. In government markets, farmers are charged exorbitant taxes, to avoid which they sell their produce in
the villages.
viii. Due to illiteracy of Indian farmers, they have no idea about the right value of his crop in the market.
So, they thinks it is right to sell his crop in the villages.
2. Sales in Markets: Markets are the second method of selling crops in India. Farmers who do not sell
their produce in the villages or those farmers who are not ready to sell their produce in the villages, take
their produce to the markets and sell it. There are two types of markets, in which farmers can sell their
crops. These are described as follows:
i. Irregular Markets: Markets which do not follow any rules and regulations while procuring crops from the
farmers are called Irregular Markets. There are moneylenders in the market who purchase the crops of the
farmers, who are also the intermediaries of the farmers. They fix the price of the crop and all the other
conditions related to the procurement of the crop at their own level and behind these their main objective of
is to exploit the farmers. Like sales in villages, farmers are also exploited in these markets.
ii. Regulated Markets: Regulated markets means all the markets in which all the rules and regulations
are strictly followed while procuring their produce from the farmers and in these markets the government
and various government agencies like Food Corporation of India etc. procures the crop from the farmers
and in return the farmers are provided fair price of their crop. Due to the efforts of the government, many
irregular markets in India have now been replaced by regulated markets.
3. Sales in Cooperative Markets: Cooperative markets are also one of the main means by which
farmers can sell their produce. In it many farmers of a village come together to form their own co-operative
society and collect their crops and sell their produce in the market together. This increases their bargaining
power in the market, the cost of transportation is distributed to all the farmers, which reduces the cost of
farming, etc., which benefits all the farmers. But in India these co-operative societies have undergone very
little development and as a result they have not been able to become a major source of agricultural sales.

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4. Other Means of Sale: Apart from the above means, the government has also provided many other
means to the farmers to sell their produce. These resources include Cotton Corporation of India, Fertilizer
Corporation of India, Jute Corporation of India etc. The Indian farmer can also sell his crop to these
institutions and since all these institutions are government owned, the farmers are not exploited in any way
and they are given a fair price for their crop.
From the above it is clear that farmers have a variety of means to sell their crop, some of which are
irregular and some are regulated. Most of the regulated means have been provided to the farmers by the
government and the farmers can use these means to sell their crop at fair price and thereby develop
agriculture by increasing their income.
Question: What are the conditions for a satisfactory agricultural marketing in India? Answer: The
following are some of the important conditions for the satisfactory development of agricultural marketing
in India:
1. Eliminating Middlemen: In order to ensure a fair and satisfactory market for agricultural produce,
elimination of middlemen is very much required. Such middlemen between the farmers and the ultimate
consumers usually disturb the normal functioning of the market.
2. Freedom from Moneylenders: Easy finance facility should be developed so as to set free the farmers
from the clutches of moneylenders who often force them to go for distress sale of their output. 3. Storage
Facility: Suitable agricultural marketing structure needs an improved and adequate storage capacity in the
form of modern warehouses and cold storages. Such facilities can raise the holding capacity of farmers for
getting a remunerative price of their product.
4. Bargaining Capacity: The poor bargaining capacity of the farmers arising out of poor holding
capacity should he improved for getting price of their produce in the market.
5. Regulated Markets: A good number of regulated markets should be set up throughout the country
for removing the practice of exploitation of farmers by the middlemen. Weights and measures are also to be
modernized.
6. Adequate Transport Facility: For developing satisfactory agricultural marketing cheaper and
adequate means of transport must be developed so that farmer can take their produce in urban market or
mandis.
7. Agricultural Marketing Societies: Agricultural marketing co-operative societies should be formed
throughout the country for developing a better marketing structure.

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8. Market Intelligence: Proper arrangement should be made through mass media coverage to pass
correct and updated information to the farmers about ruling prices and marketing operations. Question:
What are the various measures adopted by the government to improve agricultural marketing in
India?

Answer: Realizing the importance of agricultural marketing, the Indian government has adopted various
measures to improve the same. Here are some of those measures.
1. Organization of regulated markets: In regulated markets, the sale and the purchase of farm
produce are monitored by a market committee that comprises farmers, government agents, brokers and
traders. These markets operate with the basic rationale of protecting farmers from fraudulent practices of
intermediaries. Often, on account of their illiteracy and lack of awareness, farmers are cheated by
middlemen through the use of wrong weights and measures, underhand dealings, etc. The market
committee aims at protecting farmers from such practices. Some of the important functions of the market
committee are summarized below.
i. Prohibiting underhand dealings, unlawful deductions and fraudulent practices of intermediaries
ii. Infusing greater transparency through the use of proper scales and weights
iii. Ensuring that farmers receive a fair price in exchange of their produce\
iv. Making farmers aware of the prevailing market conditions and information
v. Fixing the weighing and brokerage charges
Till 2006, there were 7566 regulated markets in India. Farmers throughout the country have benefitted from
these markets. The government has also set up regulated market yards on the outskirts of major towns and
cities. Farmers can sell their produce in these markets at a fair price and also use the available storage
facilities for their crops.
 2. Infrastructure development: Lack of proper infrastructure forces farmers to sell their produce right
after harvesting, even at unfavourable prices. This impedes agricultural productivity and growth prospects.
To counter this, the Indian government has set up cold storages and warehouses all across the country. The
central and state warehousing corporations offer storage and warehousing facilities to farmers. This has
given farmers the option of selling their produce at the right time and the right price. The availability of
these facilities has also motivated farmers to generate greater marketable surplus. Further, the advancement
of the Indian railways and roadways (which offer subsidised transport facilities) has helped farmers to
extend their market to urban areas where they are able to earn even higher profits.

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3. Propagation of market information: Prior to the introduction of the agricultural marketing system,
Indian farmers would fall prey to intermediaries and traders. To safeguard the interests of farmers, they had
to be made aware of the prevailing market conditions such as current prices, sales and stock updates of
farm products. So, these market updates and market forecasts began to be disseminated via the radio,
television, newspapers, etc. Special agriculture-based programmes such as Krishi Darshan began to be
broadcast on Doordarshan and the All India Radio. In 2004, the government initiated the Kisan Call
Centres to speed up the dissemination of information and to provide round-the-clock solutions to various
grievances of farmers. All these facilities have helped farmers sell their produce at a favourable time, so as
to get the maximum returns.
4. MSP policy: Minimum Support Price (MSP) is the minimum legislated price that farmers can charge
in return for selling their produce. This policy enables farmers to sell their produce in the open market at a
higher price. MSP insulates farmers in case of price fall as they are assured of selling their produce at the
minimum price. Government agencies (such as the Food Corporation of India) purchase the produce from
farmers at MSP and keep it as buffer stock. The purchases are then distributed to the public through the
public distribution system and fair price shops at subsidised prices. The buffer stock is also used during
emergencies such as low produce and scarcity.
5. Setting up of warehousing facilities: The availability of warehousing facilities encourages farmers
to invest in crops, store their excess produce and sell it later at an attractive price. The central and state
warehousing corporations have provided farmers with storage space for storing their excess produce.
6. Improvement of transportation facilities: With better transportation facilities at their disposal,
farmers can sell their produce in urban areas at higher prices. In this way, they are able to enhance their
earnings.
Question: What is meant by Cooperative Marketing?
Answer: Cooperative marketing gives an idea of collective efforts to achieve specific objectives to carry
out marketing strategy for agricultural products. The cooperative marketing arises due to the prevalence of
many defects in the private and open marketing system. This concept was first introduced in the European
countries. Cooperative is an important tool of economic development in rural India. It is defined as form of
organization, where in person voluntarily associate together as human beings, on the basis of equality for
the promotion if economic interests of themselves.
Question: What is the role of Cooperative marketing societies in India?

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Answer: The advantages or the role that cooperative marketing can confer on the farmer are multifarious,
some of which are listed below:
1. Increases bargaining strength of the farmers: If the farmers join hands and form a cooperative
society, they will be able to increase their bargaining strength because their produce will now be marketed
by single agency.
2. Direct dealings with final buyers: It outcast an intermediaries which eliminates the exploiters and
ensures fair prices to both, the producers and the consumers.
3. Provision of credit: The marketing cooperative societies provide credit to the farmers to save them
from the necessity of selling their produce immediately after harvesting. This ensures better returns to the
farmers.
4. Easier and cheaper transport: This reduces the cost and botheration of transporting produce to the
market.
5. Storage facilities: The cooperative marketing societies generally have storage facilities. Thus, the
farmers can wait for better prices; also there is no danger to their crop from rains, rodents and thefts. 6.
Grading and standardization: This task can be done more easily for a cooperative agency than for an
individual farmer. For this purpose they can seek assistance from the government or can even evolve their
own grading arrangements.
7. Market intelligence: The cooperatives can arrange to obtain data on market prices, demand and
supply and other related information from the markets on a regular basis and can plan their activities
accordingly.
 8. Influencing market prices: While previously the market prices were determined by the
intermediaries and merchants and the helpless farmers were mere spectators forced to accept whatever was
offered to them, the cooperative societies have changed the entire complexion of the game.
9. Provision of inputs and consumer goods: The Cooperative marketing societies can easily arrange
for bulk purchase of agricultural inputs like seeds, manures, fertilisers, pesticides, etc., and consumer goods
at relatively lower prices and can then distribute them to the members.
10. Processing of agricultural produce: The Cooperative societies can undertake processing
activities like crushing oil seeds, ginning and pressing of cotton, etc.
Question: What are the defects of Cooperative Societies in India?
Answer: Some of the limitations faced by co-operative organizations in India are as follows!

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1. Limitations of capital: Profit, the main force attracting capital, is missing. The members in a co
operative society are people with limited resources, and therefore, they cannot make large capital
contributions.
2. Inefficient management: A co-operative society generally suffers on account of inefficient
management. Due to limited financial resources, it is generally not in a position to employ and retain
competent professional managerial personnel. It, therefore, has to depend on its own members who
generally lack in skill and experience. Voluntary service is good but it is no substitute for efficiency, skill,
maturity, and experience of professionals.
3. Lack of unity and cohesion: After an enthusiastic start, the functioning of a co-operative society is
generally marred by a lot of rivalry, factionalism, and politicking among its members, and this reflects on
the efficiency and effectiveness of the society. One of the reasons responsible for this is the lack of proper
training and education to members in co- operative principles and functioning.
4. Limitations of size: Apart from the limitations of capital, management, and cohesive functioning, a
co-operative society also suffers on account of its small size. Since a co-operative is generally organized to
cater to the requirements of a limited membership, and therefore, its operations are limited, and that makes
the size of the organization small.
5. Inadequate motivation: Motivation is conspicuous in a co-operative society by its absence. Low or no
dividend to shareholders and nominal remuneration to the members of the society act as dampers on their
activity and enthusiasm. The net result of all this is that the have- not’s generally cluster around a co
operative society and dishonest and less competent people come to occupy managerial positions in it. This
sets a vicious circle in motion.
6. Delays in decision-making and decision-implementing: The conduct of business of a co-operative
society is strictly according to the rules and regulations framed in this regard by the government. No one
single office-bearer can take any important decision on his own. It can be taken only by the managing
committee for whose meeting reasonable notice has to be given to all members. Matters of larger
significance can be decided only at the general meeting of the society which is really a time consuming
affair. Delay is experienced not only at the level of taking decisions but also in their implementation.
7. Excessive government interference and lack of secrecy: The functioning of a co-operative society is
generally subjected to a lot of supervision and regulation by the co-operative department — it has to submit
its accounts regularly to the Registrar, it has to get its accounts audited every year by auditors of the co-

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operative department, and in some cases it has to get the appointment of its managerial personnel approved
by the Registrar.
8. Lack of public confidence: A co-operative society generally does not enjoy much public confidence
due to both the excessive state regulation and the dishonest and political conduct of the society’s office
bearers.

Question: What is agricultural diversification?

Answer: Agriculture, which employs the majority of the population in India, is a seasonal occupation.
Many farmers remain out of work for certain months in a year due to the seasonal nature of agriculture. As
a result, these farmers are unable to ensure a continuous flow of income for themselves. Moreover,
agricultural production in India is largely dependent on rains. Poor or late monsoons can hamper the
production process and, thereby, affect farmers’ income. So, we can say that depending solely on
agriculture leads to instability in the income of the rural population. Thus, there is the need to diversify
agriculture.
Diversification of agriculture has two aspects.
i. Diversification of crops
ii. Diversification of production activity
i. Diversification of crops: Farmers should be encouraged to grow a variety of crops rather than focus
on producing only one crop. Diversification of crops, thus, implies a shift from single-cropping system to
multiple-cropping system. Crop diversification can also be understood as a shift from subsistence farming
to commercial farming practices. Multiple cropping helps farmers to avoid the risk arising due to
fluctuations in market prices. Farmers can grow crops depending upon the prevailing market conditions
and, thereby, maximise their gains.
ii. Diversification of production activity: The rural folk should be encouraged to set up and seek
employment in non-farming practices. Diversification of production activity, thus, implies a shift from
farming activities to non-farming activities such as agro-processing, food processing, horticulture, fisheries
and livestock farming. Such diversification not only raises the standard of living of the rural population, but
it also reduces the strain upon the agricultural sector by creating alternative avenues of employment.
Question: What is meant by organic farming?
Answer: Organic farming is a system of farming that employs organic inputs for the cultivation of crops.
Unlike conventional farming, organic farming does not make use of chemical fertilisers and toxic
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pesticides for crop growth. Instead, it employs organic inputs such as animal manure and compost. This
type of farming is practised to produce non-poisonous and chemical-free food for consumers. At the same
time, organic farming ensures that the fertility of soil is maintained.
The following are the major features of organic farming.
i. Instead of chemical fertilisers and toxic pesticides, it employs green manure and biological pest
control methods for the cultivation of crops and plantations.
ii. It uses farm inputs like animal dung and crop residues as nutrients for crops.
iii. It focuses on maintaining soil fertility and ecological balance.
Question: What is the need of Organic Farming in India?
Answer: India has tremendous potential in organic farming. Research suggests that nearly 70% of the land
under cultivation in India is arable. Such type of land requires negligible amount of chemical fertilizers for
the cultivation of crops. Such land offers ample opportunities for organic farming. Organic farming
involves labor-intensive techniques of production. India is a labour-abundant country. Hence, India has a
comparative advantage in organic farming. Organically produced products have a higher demand not only
within the country but also in foreign countries. By producing and exporting organic products, India can
generate higher income for itself. If India realises the potential of organic farming, then it can become the
largest supplier of organic food in the world.
Question: What is the role of organic farming in sustainable development?
Answer: Sustainable development is the process of development that aims at meeting the needs of the
present generation without compromising the ability of the future generations to meet their own needs.
Traditional farming techniques such as the use of chemical fertilisers and toxic pesticides harm the
ecosystem. The harmful chemicals present in fertilisers and pesticides dissolve in water and penetrate the
soil, thereby reducing its fertility. These chemicals also harm livestock. Moreover, the crops grown with the
aid of chemical fertilisers and pesticides pose serious health hazards. In contrast, organic farming relies on
the use of organic inputs for crop cultivation. This type of farming practice produces toxic-free food for
consumers while simultaneously maintaining the fertility of soil. In this way, it helps maintain the
ecological balance. In other words, organic farming enables eco-friendly sustainable economic
development.
Question: What are the advantages of organic farming?
Answer: The following is a detailed discussion of the benefits of organic farming.

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1. Discards the use of chemicals: Unlike conventional farming, organic farming does not make use of
chemicals. The chemicals present in fertilisers and pesticides penetrate into the groundwater and raise its
nitrate content. This causes health hazards and also pollutes the environment. So, organic farming, by
discarding the use of chemicals, is an environment friendly method of farming.
2. Sustains soil fertility: The use of chemical fertilisers and pesticides adversely affects soil fertility.
Organic farming discards the use of chemicals and employs organic inputs instead. Therefore, the crops
produced by this technique are toxic-free. At the same time, the fertility of soil is maintained.
3. Healthier food: Organically grown crops have higher nutritional value than conventionally grown
crops. Hence, food crops grown organically are healthier. This is why the demand for organically produced
food has risen rapidly despite their higher price.
4. Inexpensive technology for small and marginal farmers: Small and marginal farmers constitute
the bulk of the farming sector. Organic farming offers these farmers an inexpensive farming technique as it
does not involve the use of expensive chemical fertilizers and pesticides.
5. Less incidence of pests and diseases: As compared to conventional farms, organic farms are found
to have lesser incidence of outbreak of crop diseases and pests.
Question: What are the limitations of organic farming?
Answer: Despite its benefits, organic farming does have certain shortcomings. In the initial years of
organic farming, Indian farmers faced the following disadvantages.
1. Lesser yield: Organic farming offers lesser yield than conventional farming. Therefore, the
productivity of the former is lower than that of the latter.
2. Lacks initiative: The popularity of organic farming depends on the awareness and willingness of
farmers to adopt this system. Due to lower productivity, farmers lack the initiative to adopt organic farming
techniques.
3. Inadequate infrastructure: Organic farming suffers from lack of infrastructure with respect to its
market reach. Thus, the problems of inadequate infrastructure and marketing need to be addressed to
promote organic farming.
4. Financially infeasible for small farmers: As mentioned before, organic farming offers lesser yield
than conventional farming. Hence, the former is not financially viable for small and marginal farmers.

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