Chapter-6

Rural Development

IMPORTANT TERMS:
I NABARD (National Bank for
Agriculture and Rural
Development)
II MSP (Minimum Support
Price)
III White Revolution /
Operation flood
IV Cooperative Marketing
V Golden Revolution
It was set up in 1982 as an apex body to coordinate the activities of all
instructions involved in the rural financing system.
Assurance of minimum support price for agricultural products by the
government.
The movement for massive rise in the milk production in India is termed
as white revolution. It is a system whereby all the farmers can pool their
milk produce according to different grading (based on quality) and the
same is processed and marketed to urban centres through cooperatives.
It is a system in which the farmers pool their marketable surplus of
crops and distribute the sale proceeds on the basis of each individual
share.
It refers to the period in which there was a tremendous rise in the
production of horticulture products like fruits, vegetables etc. in India.

RURAL DEVELOPMENT
Rural development refers to continuous and comprehensive socio-economic process, attempting to
improve all aspects of rural life.

NEED OF THE RURAL DEVELOPMENT

 Rural development essentially focuses on action for the development of areas that are lagging behind
in the overall development of the village economy.
 Mahatma Gandhi had always maintained that the real growth of India does not mean simply the
growth and expansion of industrial urban countries but mainly the growth and development of the
villages.
 The importance of rural development in India lies in the fact that 2/3 rd of the population still (directly
or indirectly) depends on agriculture and 1/3rd of the rural population still lives in abject poverty.
 During 2014-15, the GVA growth rate of agriculture and its allied sectors was less than 1%.

KEY ISSUES IN RURAL DEVELOPMENT

(1) Development of Human Resources
The quality of the human resource need to be improved by giving proper attention to literacy and better
health facilities.

(2) Development of Infrastructure

It involves improvement in electricity, irrigation, credit, marketing and transport facilities.

(3) Land Reforms

It includes: (i) Elimination of exploitation in land relations;
(ii) Actualisation of the goal of ‘land to the tiller’;
(iii) Improvement of socio-economic conditions of rural poor by widening their land base;
(iv) Increasing agricultural productivity and production.
(4) Alleviation of Poverty
It includes taking serious steps for alleviation of poverty and bringing significant improvement in living
conditions of weaker sections
(5) Create employment Opportunities
Development of the productive resources of each locality to enhance opportunities of employment
(particularly other than farming).

In short, Rural development means an ‘action-plan’ for the social and economic growth of the rural areas. The
action-plan is to focus on the lingering and emerging challenges in rural areas.
The principal lingering challenges are: (i) Challenge of rural credit, and
(ii) Challenge of rural marketing
The principal Emerging challenges are: (i) the need for diversification of productive activities, and
(ii) The need for organic farming.

RURAL CREDIT
Rural credit means credit for farming. Credit is the lifeline of farming activity in rural areas. This is because of
two reasons:

IMPORTANCE OF CREDIT IN RURAL DEVELOPMENT

1) Growth of rural economy depends primarily on infusion of capital, from time to time, to realize higher
productivity in agriculture and non-agriculture sectors.
2) As the time gestation between crop sowing and realization of income after production is quite long.
Farmers borrow from various sources to meet their initial investment on seeds, fertilizers, equipments
and other family expenses of marriage, death, religious ceremonies etc.

SOURCES OF RURAL CREDIT

Sources of rural credit are broadly classified as: (i) Institutional, and (ii) Non-institutional . Of the two, non-
institutional sources are the conventional/ traditional sources, while the institutional sources are modern/
emerging sources.

SOURCES OF RURAL CREDIT

Non-institutional Sources Institutional Sources

Moneylenders Co-operative Credit

Relatives Land Development Banks
Traders and Commission Agents Commercial Bank Credit
Rich Landlords Regional Rural Banks
The Government
NABARD
SHGs
NON-INSTITUTIONAL SOURCES
(1) Moneylenders
From the very beginning, moneylenders have been advancing a major share of farm credit.
The peasants are exploited through high rate of interest. Quite frequently, their accounts are manipulated
without their knowledge.

(2) Relatives
Cultivators borrow funds from their own relatives in times of crisis. These loans are a kind of informal loans
and carry no interest and are normally returned after harvest.

(3) Traders and Commission Agents

They provide credit to the peasants on the mortgage of crops at high rates of interest, on a condition, that
a crop will be sold to them at low prices.

(4) Rich landlords

Small as well as marginal farmers and tenants, take loans from landlords, for meeting their financial
requirements. Landlords charge high interest rates on such loans and exploit the 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 maximizing their
income.

Some of the important institutional sources of agricultural credit are:

(1) Co-operative Credit
The cooperative credit societies provide adequate credit to the farmers at reasonable rate of interest.
These societies also provide guidance in diverse agricultural operations with a view to raise crop
productivity.
Currently, cooperatives account for 16-17% of rural credit flow.
These societies are to ensure:
 Timely and rapid flow of credit to the farmers.
 Elimination of the moneylenders as credit agencies
 Spread credit facilities across all regions of the country.
 Provision of adequate credit in areas covered by special programmes of development.

(2) Land Development Banks

They provide credit to the farmers against the mortgage of their lands. Loans are provided for permanent
improvement of land, purchasing agricultural implements and for repaying old debts.

(3) Commercial Bank Credit

The State Bank of India (SBI) was set-up in 1955 with a focus on rural credit. The government realized that
rural credit needs could not be met by the cooperative credit societies alone, and that commercial banks
should play an important role.
This prompted nationalization of banks in 1969. The nationalized commercial banks were directed to offer
credit directly to the farmers as well as indirectly through cooperative societies.
(4) Regional Rural Banks
RRBs were set-up to promote credit supplies, particularly in the remote rural areas and backward districts.
These banks operate at the district level and are under obligation to focus on credit needs of small and
marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas.

(5) The Government

The loans provided by the government are known as taccavi loans and are lent during emergency or
distress, like famines, floods etc.

(6) NABARD (National Bank for Agricultural and Rural Development)

NABARD is an apex institution handling policy, planning and operations in the field of rural credit and
related economic activities. It was set-up in 1982. It’s main function are as these:
 To serve as an apex funding agency for the institutions providing credit in rural areas.
 To take appropriate measures to improve the credit delivery system. The bank was to focus on
restructuring of credit institutions and training of personnel.
 To coordinate the rural financing activities of all credit institutions and maintain liaison with
Government of India, State Government, RBI and other national level institutions concerned with
policy formulation.
 To undertake monitoring and evaluation of projects refinanced by it.

(7) SHGs (Self Help Groups)

SHG has emerged as the major micro finance programme in the country in recent years.
 Their target groups comprise of small and marginal farmers, agricultural and non-agricultural
labourers, artisans etc.
 SHGs promote thrift in small proportions by a minimum contribution from each member.
 From the pooled money, credit is given to the needy members without any security and at a
reasonable interest rates, which is to be repaid in small installments.
 Presently, nearly 54 lakh women SHGs with almost 6 crore women as members are operating across
different rural areas.
 About Rs. 10-15,000 per SHG and another Rs. 2.5 lakh per SHG as a Community Investment Support
Fund (CISF) are provided as part of renovating fund to take up self-employment for income generation.
 However, the borrowings are mainly confined to consumption purposes and negligible proportion is
borrowed for productive purposes.

RURAL BANKING- A CRITICAL EVALUTION

It is not denying the fact that institutional credit has gone a long way in liberating the farmers from the debt
trap of mahajans and moneylenders. Also, it is not denying the fact that institutional credit has promoted
commercialization of agriculture. But there is a flip side also.
Deficiencies of rural banking system are equally glaring. Notable observations in this regard are as these:

(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 loan.

(4) Less attention to poor or marginal farmers

Lesser attention has been given on the credit requirements of needy farmers. On the other hand, well-do-
to farmers are getting more attention due to better credit worthiness.

(5) Growing overdues

The problem of overdues in agricultural credit continues to be an area of concern. The basic reason for
growing overdues is the poor repaying capacity of farmers. As a result, credit agencies are becoming
cautions of granting loan to farmers.

AGRICULTURAL MARKETING
MEANING
Agricultural marketing is a process that involves assembling, storage, processing, transportation, packaging,
grading and distribution of different agricultural commodities across the country.

Obstacles in agricultural marketing mechanism due to which state intervention became necessary to regulate
the activities of the private traders are:
 Faulty weighing
 Manipulation of accounts
 Low selling price of agricultural produce
 Lack of storage facilities

MEASURES TO IMPROVE AGRICULTURAL MARKETING

In order to improve the system of agricultural marketing, the government has initiated a series of measures,
as under:

(1) Regulation of markets

 Regulated markets have been established where sale and purchase of the produce is monitored by the
Market Committee comprised of representatives of government, farmers and the traders.
 Market system is made transparent with a strict vigil on the use of proper scales and weights.
 The Market Committees ensure that the farmers get appropriate price for their produce.
 There is a need to develop about 27,000 rural periodic market places to realize the full potential of
rural markets.

(2) Provision of Physical Infrastructural

 Physical infrastructure includes transport facilities, storage facilities, and processing units.
 Better transport facilities like roadways, railways enable the farmers to sell their produce at locations
offering lucrative price.
 Storage helps the farmers to sell their produce at a time when the market price is lucrative. There is a
need to increase storage facilities (godowns and cold storage units) as even today, more than 10% of
the goods produced in farms are wasted due to lack of storage.
(3) Cooperative Agricultural Marketing Societies
 Cooperative marketing is a significant progressive step in the context of agricultural market system.
 As members of these societies, farmers find themselves better bargainers in the market, getting better
price of their produce through collective sale.
 Milk cooperatives in Gujarat are a brilliant example of cooperative marketing in rural India. These
cooperatives have not only changed the social and economic fabric of the economy of Gujarat but also
have played a key role in bringing about White Revolution in the country.

(4) Policy Instruments

In order to protect the farmers, the government has initiated the following policies:
 Minimum Support Price (MSP): MSP is an assurance to the farmers that their produce would be
purchased by the government at the specified price. Of course, the farmers are free to sell their
produce at a price higher than MSP in the open market. Thus, the farmers are always assured of some
minimum income from the sale of their crop.
 Maintenance of Buffer Stock: MSP purchases from the farmers are kept as buffer stocks by the
government. These stocks (of grains) are used, primarily for Public Distribution System, besides
meeting urgent needs during periods of low output and scarcity.
 Public Distribution System: PDS implies distribution of food grains and other essentials like sugar and
kerosene through ‘fair price shops’ at subsidized rates, so that the poorer sections of the society have
an easy access to these things.

CONCLUSION
Agricultural marketing has come a long way with the intervention of the government. However despite of
government intervention:
 Agricultural markets are still dominated by the private traders like moneylenders, rural political
leaders, big merchants and rich farmers.
 The quantity of agricultural products, handled by the govt. agencies and consumers cooperatives,
constitutes only 10%, while the rest is handled by the private sector.

EMERGING ALTERNATE MARKETING CHANNELS

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

2. Alliance with National and Multinational Companies: Several national and multinational fast food chains
are increasingly entering into contracts with farmers.
 They encourage the farmers to cultivate farms products of the desired quality.
 They provide them with not only seeds and other inputs, but also assure procurement of the produce
of the produce at pre-decided prices.
 It is argued that such arrangements will help in reducing the price risk of farmers and expand the
market for farm products.
DIVERSIFICATION OF AGRICULTURAL ACTIVITIES
Agricultural diversification refers to the re-allocation of some of farm’s productive resources into new
activities or crops reducing market risk. Because price of all the crops may not drop at the same time. If one
crop fetches low revenue, the other may fetch high. Thus, diversification helps stabilization of farm income by
lowering the market risk.
Diversification has two aspects:
1) One relates to change in cropping pattern and
2) The other relates to a shift of workforce from agriculture to other allied activities (livestock, poultry,
fisheries etc.) and non-agricultural sector.

IMPORTANCE OF AGRICULTURAL DIVERSIFICATION

Non-farm activities (agro-processing industries, poultry, craft, handloom etc.) provide alternative revenues for
sustainable livelihood and may raise the level of income as the risks due to fluctuations in production and
market prices is generally less. Agriculture in India is mainly a seasonal occupation, however, during off
seasons, it becomes difficult to find employment and stabilize farmer’s income. Thus, the Prime Minister has
urged appropriately in the best interest of the farmers of the rural India. Agricultural diversification is essential
for sustainable rural development in India.

NON-FARM AREAS OF EMPLOYMENT

(1) Animal Husbandry (Livestock Farming)
Animal Husbandry is that branch of agriculture, which is concerned with the breeding, rearing and caring
for farm animals.
 Under livestock farming, poultry, cattle, goats/sheep are important component in India.
 India owns one of the largest livestock populations in the world. Poultry accounts for 58%, cattle &
buffalos 24% and goats and sheep nearly 16% share in total livestock in India. In 2012, India had about
300 million cattle including 108 million buffaloes.
 It provides increased stability in income, food security, transport, fuel and nutrition for the family,
without disrupting other food producing activities.
 It provides alternate livelihood options to over 70 million small and marginal farmers, including
landless labourers.
 A significant number of women also find employment in the livestock sector.

(2) Dairy Farming

Dairying is that branch of agriculture which involves breeding, raising and utilization of dairy animals for
the production of milk and the various dairy products processed from it.
 The performance of the Indian dairy sector over the last three decades has been quite impressive due
to successful implementation of ‘Operation Flood’.
 Milk production in India has increased by more than 8 times between 1951-2016. It increased from 17
million tonnes in 1950-51 to 165.4 million tonnes in 2016-17.
 Operation Flood or White Revolution was started by National Dairy Development Board in 1970 under
the expert guidance of then chairman, Dr. Verghese Kurien. The objective of this programme was to
create a nationwide milk grid.
o Under this, all the farmers pool their milk produce according to different grades and same is
processed and marketed to urban centres through cooperatives. The farmers are assured of a
fair price and income.
o Gujarat, Madhya Pradesh, Utter Pradesh, Andhra Pradesh, Maharashtra, Punjab and Rajasthan
are major milk producing states.
(3) FISHERIES
Fisheries refers to the occupation devoted to the catching, processing or selling of fish and other aquatic
animals.
 The fishing community regards the water body as ‘Mother’ or ‘Provider’. The water bodies consisting
of sea, oceans, rivers, lakes, natural aquatic ponds etc.
 Presently, fish production from inland sources contributes about 64% to the total value of fish
production and the balance 36% comes from the marine sector (sea and ocean).
 Even though women are not involved in active fishing, about 60% of the workforce in export marketing
and 40% in internal marketing are women.
 Today, total fish production accounts for 0.8% of the total GDP.
 In India, West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu are major fish
producing states.
 A large share of fish worker families are poor. Some of the major problems faced by these communities
include:
o Widespread Underemployment
o Low per capita earnings
o Absence of mobility of labour to other sectors
o High illiteracy rate and indebtedness.
(4) HORTICULTURE
Horticulture refers to the science or art of cultivating fruits, vegetables, tuber crops, flowers, medicinal and
aromatic pants, spices and plantation crops.
 These crops play a vital role in providing food and nutrition, besides addressing employment concerns.
 Horticulture has emerged as a successful sustainable livelihood option. It contributes nearly 1/3 rd of
the value of agriculture output and 6% of GDP of India.
 India has emerged as a world leader in producing a variety of fruits like mangoes, bananas, coconuts,
cashew nuts and a number of spices and is the second largest producer of fruits and vegetables.
 Economic condition of many farmers engaged in horticulture has improved and it has become a means
of improving livelihood for many unprivileged classes.
 Flower harvesting, nursery maintenance, hybrid seed production and tissue culture, propagation of
fruits and flowers and food processing are highly remunerative employment options for women in
rural areas.
Requirements for enhancing the role of horticulture
1. Investment in infrastructure like electricity
2. Cold storage systems
3. Marketing linkages
4. Small-scale processing units
5. Technology improvement and dissemination

(5) INFORMATION TECHNOLOGY

Information Technology refers to that branch of engineering that deals with the use of computers and
telecommunications to retrieve and store and transmit information.
 Government can predict areas of food insecurity and vulnerability using appropriate information and
software tools so that action can be taken to prevent or reduce the likelihood of an emergency.
 IT also has a positive impact on the agriculture sector as it can disseminate information regarding
emerging technologies and its applications, prices, weather and soil conditions for growing different
crops etc.
 IT can act as a tool for releasing the creative potential and knowledge embedded in the society.
 IT also has potential of employment generation in rural areas.
SUSTAINABLE DEVELOPMENT AND ORGANIC FARMING
ORGANIC FARMING
Organic farming is an eco-friendly technique of growing crops which promotes sustainable development. In
other words, organic agriculture is a whole system of farming that restores, maintains and enhances the
ecological balance.
 It is the process of producing safe and healthy food, without leaving any adverse impact on the
environment.
 This method avoids the use of synthetic chemical fertilizers and genetically modified organism.

BENEFITS OF ORGANIC FARMING

(1) Environmental-friendly
Organic farming is an environment-friendly technique. On the other hand, chemical fertilizers pollute the
groundwater by raising its nitrate content. Nitrates are a health-hazard and pollute the environment.
Organic farming discards the use of chemical fertilizers.

(2) Economical farming

Organic farming offers a means to substitute costlier agricultural inputs (such as HYV seeds, chemical
fertilizers, pesticides etc.) with locally produced cheaper organic inputs.

(3) Generate income through exports

It also generate income through international exports as demand for organically grown crops is on a rise.

(4) Provide Healthy food

It provides healthy food as organically grown food has more nutritional value than food grown through
chemical farming.

(5) Source of Employment

It generates more employment opportunities as it requires more labour input than conventional farming.

(6) Sustain Soil Fertility

Use of animal manures and composts helps sustain soil fertility. On the other hand, chemical fertilizers
erode soil fertility.

CHALLENGES BEFORE ORGANIC FARMING

(1) Less Popular
It needs to be popularized by creating awareness and willingness on the part of farmers, for adoption of
new technology.
(2) Lack of infrastructure and marketing facilities
It faces problems of inadequate infrastructure and marketing facilities.
(3) Low yield
The yields from organic farming are less than modern agricultural farming in the initial years. As a result,
small and marginal farmers find difficult to adapt to large-scale production.
(4) Shorter food life
Organic produce has a shorter shelf life as compared to sprayed produce.
(5) Limited choice of crops
The choice in production of off-season crops is quite limited in organic farming.

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