NAME OF THE CHAPTER- RURAL DEVELOPMENT

SUBJECT: ECONOMICS CLASS XII PRESCRIBED BOOK: SANDEEP GARG

Glossary/Key Terms:
 Rural Development- It refers to continuous and comprehensive socio-economic process,
attempting to improve all aspects of rural life.
 Rural Credit- Rural credit means credit for the farming families
 Agriculture Marketing- It is a process that involves assembling, storage, processing,
transportation, packaging, grading and distribution of different agricultural commodities
across the country.
 Agricultural productivity- It refers to output per hectare of land.
 NABARD (National Bank for Agriculture and Rural Development)- It was set up in 1982 as an
apex body to coordinate the activities of all institutions involved in the rural financing
system.
 Organic Farming- It is the form of agriculture that relies on techniques such as crop rotation,
green manure, compost and biological pest control.

TOPIC-1 RURAL DEVELOPMENT

Rural Development: It refers to a continuous and comprehensive socio-economic process, attempting to

improve all aspects of rural life.
 It includes all those aspects which improve quality of life of people.
 Example: In India, most of the population is engaged in the agricultural sector, absorbing two-
third of India’s population. So, rural development includes the improvement of agricultural
sector.
 Rural people account for about 3/4th of total population.
The basic objectives of rural development are:
 Increasing the productivity of the agricultural sector, so that the income of the farmers
increases.
 Generating alternative means of livelihood in the rural areas, so that dependency on agriculture
sector is reduced.
 Promoting education and health facilities in the rural areas, so that human development is also
achieved.

Key Areas in Rural Development: Some of the areas which are challenging and need fresh initiatives for
development in rural India are as follows:
 Development of the productive resources of each locality.
 Development of human resources
 Infrastructure development
 Special measures for alleviation of poverty

PROCESS OF RURAL DEVELOPMENT

 Development of Human Resources: The quality of human resource needs to be improved by

 literacy (special emphasis on female literacy)
 education and skill development
 better health facilities
  Development of Infrastructure: It involves better facilities of transport and marketing,
improvement in irrigation and electricity facilities and better facilities of agriculture research
extension and information dissemination.
 Land reforms: It includes the following objectives:
 Eliminating the exploitation of cultivators
 Improvement of socio-economic conditions of rural poor
 Increasing agricultural production and productivity
 Alleviation of Poverty: One-third of rural India still lives in abject poverty.
 Special measures for alleviation of poverty must be taken
 Efforts should be made to bring significant improvement in living conditions of weaker
sections.
 Development of the productive resources: Development of the productive resources of each
locality to enhance opportunities of employment other than farming.

TOPIC-2 RURAL CREDIT

Rural credit means credit for the farming communities.

Importance of credit in rural development:

 Exploitation by middlemen: Moneylenders and traders exploit small and marginal farmers and
landless labourers by lending them money on high rates and manipulating the accounts to keep
them in a debt-trap.
 Long-Gestation period: Time gestation between crop sowing and realization of income after
production is quite long. Farmers need credit to meet their initial investment on seeds,
fertilizers, purchasing agricultural tools and machines, digging wells and tube wells and other
family expenses.
 Source of Economic development: Rural economic development mainly depends on timely
infusion of capital, to realize higher productivity in agriculture and non-agriculture sectors.

An efficient and effective rural credit delivery system is crucial for raising agricultural productivity and
incomes.

SOURCES OF RURAL CREDIT

1. Non-institutional sources
2. Institutional Sources

1. Non-institutional Sources: Non-institutional sources are money lenders, traders and commission
agents, landlord, relatives and friends. Non-institutional sources of credit are not encouraged by
government because of the following reasons:
 They charge high rate of interest.
 They acquire land on failure to pay interest and loan.
 They manipulate accounts.
 2. Institutional sources: Government established the ‘Institutional Sources of credit’ with 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.

Institutional sources are as follows:

(i) ) Commercial Banks
(ii ) Regional Rural Banks
(iii) Co-operative credit societies.
(iv) Self Help Groups (SHGs)
(v) NABARD (National Bank for Agriculture and Rural Development.)
(vi) Government
(vii) Land development banks

Commercial Bank Credit- After the Nationalisation of Banks in 1969, commercial banks played a major
role in advancing credit. The objectives of commercial banks are:
 To directly help the farmers by expanding their branches in rural areas
 finance the farmers by giving them loans

Regional Rural Banks- These banks have been set up to cover the gap in credit structure of the available
facilities in the rural areas. The main objectives are:
 to open the branches in those areas where there are no banking facilities available
 to provide the credit and other facilities especially to small and marginal farmers, agricultural
labourers in rural areas

Co-operative Credit- These societies advance credit to the farmers at reasonable rates of interest. These
contribute nearly 20% of the rural credit. These focus on the following objectives:
 To free farmers from the clutches of moneylenders
 to advance credit at low rates of interest

Self- Help Group (SHG) Bank Linkages Programme for Micro Finance
 Their focus is largely on those rural poor who have no sustainable access to the formal banking
system.
 Their target groups comprise of small and marginal farmers, agricultural and non-agricultural
labourers, artisans etc.
 They promote thrift in small proportions by a minimum contribution from each member.
 From the pooled money, Credit is given to the needy members at reasonable interest rates.
 They also helped in the empowerment of the women
 By May 2019, nearly 6 crore women in India have become member in 54 lakh women SHGs
 Such credit provisions are generally referred to as micro-credit programmes.
Drawback: It is alleged that the borrowings are mainly confined to consumption purposes rather than
productive purposes.

National Bank for Agriculture and Rural Development (NABARD)- It was set up in 1982 as an apex body
to coordinate the activities all institutions involved in the rural financing system. Its main functions are:
 To promote the health and strength of the institutions who advance credit in the rural areas
 To provide assistance to the non-farm sectors also
 To control and evaluate the projects financed by it
 It coordinates the functioning of different financial institutions involved in advancing rural
credit.
 It focuses on developing rural infrastructure by financing projects related to irrigation, rural
roads etc.

Government- The loans provided by GOI is known as taccavi loans and these are given only during the
emergencies. (ROI = 6%)

Land developments Banks- They provide credit to the farmers against the mortgage of their lands.
Objectives of land development banks are:
 To provide long-term credit
 To provide credit for purchasing agricultural inputs mainly like permanent improvement of land,
purchasing agricultural implements etc.

CRITICAL APPRAISAL OF RURAL BANKING

Advantages of Rural Banking
 Raising farm and non-farm output by providing services and credit facilities to farmers.
 Generating credit for self-employment schemes in rural areas.
 Achieving food security which is clear from the abundant buffer stocks of grains.

Limitations of Rural Banking

 Less attention to poor farmers: Small and marginal farmers receive only a very small portion of
the institutional credit due to lack of collateral.
 Growing overdue: Rural banking is suffering from the problems of large amount of over dues
and default rate.
 Inadequate coverage of institutional sources: The sources of institutional finance are inadequate
to meet the requirements of agricultural credit.
 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.
 Regional inequalities: There exist regional inequalities in the distribution of institutional credit.

Suggestions

 Bank needs to change their approach from just being lenders to building up relationship banking
with the borrowers.
 Inculcating the habit of thrift and efficient utilisation of financial resources needs to be
enhanced among the farmers too.
TOPIC-3 AGRICULTURAL MARKETING

MEANING- Agricultural marketing is the process that involves assembling, storage, processing,
transportation, packaging, grading and distribution of different agricultural commodities across the
country.
By this, farmers can dispose their surplus produce at a fair and reasonable price. It involves different
activities for movement of farm produce from the producer to ultimate consumer.

But, there were some problems faced by the farmers in this agricultural market like
 Manipulation by big traders: Prior to independence, farmers suffered from faulty weighing and
manipulation of accounts while selling their produce to traders.
 Lack of market information: Farmers were often forced to sell at low prices due to lack of
required information on prices prevailing in the market.
 Lack of storage facilities: Framers do not have storage facility to keep back their produce for
selling later at a better price. Even today, more than 10% of goods produced in farms are
wasted due to lack of storage.

Measures by Government to Improve Agriculture Marketing:

Regulated Markets-
 The first measure to improve agriculture marketing aspect is regulation of markets to create
orderly and transparent marketing conditions.
 This was done to create orderly and transparent marketing conditions in order to protect the
farmers from the malpractices.
 Regulated markets have been established where sale and purchase of the produce is
monitored by the Market Committee consisting of representatives of government, farmers and
the traders.
 Market committees ensure that the farmers get appropriate price of their produce. This policy
benefited farmers as well as consumers.
 Drawback: However there is still need to develop about 27000 rural periodic markets as
regulated market places to realize the full potential of rural markets.

Infrastructural facilities-
 It is the second measure to improve the agriculture marketing aspect.
 Government provides physical infrastructural facilities like roads, railways, warehouses, cold
storages etc. These facilities will help in strengthening the market channels.
 Drawback: The current infrastructure facilities are quite inadequate to meet the growing demand
and need to be improved.

Cooperative Marketing-
 It is the third measure taken by government in realising the fair prices for farmers’ products. It was
organised in order to realise fair price for farmer’s products.
 Under this system, farmers get together and form marketing societies to sell the produce
collectively and take benefit of collective bargaining to secure a better price of their produce.
 Eg.-Milk Cooperatives in Gujarat
 Benefits:
 It improves bargaining power of farmers as they sell their produce together through one
agency.
 It helps farmers in satisfying their immediate cash requirements by providing them credit.
  They often have storage facilities. So, farmers are not in a hurry to sell their produce and
they can wait for better prices.
 Facility of bulk transportation of farmers produce is often cheaper and easier.

Different problems faced by cooperative during the recent past are:

 Inadequate coverage of former members
 Lack of appropriate link between marketing and processing cooperatives.
 Inefficient financial management.

Different policy instruments-

GOI have initiated following policies in order to protect the farmers:
 Minimum Support Price (MSP): In order to safeguard the interest of farmers, government fixes the
MSP of agricultural products. Such price is regarded as an offer price at which government would
buy any amount of grains from the farmers.
 Maintenance of Buffer Stock: FCI purchases wheat and rice at the procurement prices to maintain
buffer stock. It is created in the year of surplus production to use during shortages.
 Public Distribution System (PDS): It operates through a network of ration shops and fair price
shops. These shops provide essential commodities at a price lower than market price to the weaker
sections of the society.

CONCLUSION:
 Despite government intervention, private traders still dominates agricultural markets.
 Government agencies and consumer cooperatives handles only 10% of quantity of agricultural
products, rest is handles by private sector.

 Emerging Alternative Marketing Channels: In India, alternative marketing channels are emerging.
Through these channels, farmers directly sell their products to the consumers. This system
increases farmers’ share in the prices paid by the consumers.
1. Farmer’s Market: It was started to give boost to the small farmers by providing them direct
access to the consumers and eliminating the middlemen.
Important examples of such channels are
 Apni mandi (Punjab, Haryana and Rajasthan).
 Hadaspar mandi (Pune);
 Rythu Bazars (Vegetables and fruit market in Andhra Pradesh).
 Uzhavar Sandies (farmers market in Tamil Nadu)

2. Alliance with National and Multinational Companies: Several national and international fast
food chains and hotels are also entering into contracts with the farmers to supply them farm
products (fresh vegetables and fruits) of the desired quality.

Such arrangements will help in reducing the price risks of farmers and would also expand the
markets for farm products.

TOPIC-4 DIVERSIFICATION OF AGRICULTURAL ACTIVITIES

Diversification means a major proportion of the increasing labour force in the agricultural sector needs
to find alternate employment opportunities in other non-farm sectors. Diversification is an emerging
challenge in the context of rural development.
Reason for Diversification:
 The need for diversification arises from the fact that there is greater risk in depending exclusively
on farming for livelihood.
 It is important to provide productive sustainable livelihood options to rural people.
 It is essential to provide supplementary gainful employment and to enable them to earn higher
levels of income to overcome poverty.

Diversification of Crops
This implies a shift from single cropping system to multi-cropping system. In India, where subsistence
farming is still dominant, it may also mean a shift from subsistence farming to commercial farming.
Significance of Diversification of Crops Diversification of crops is important because it will:

 Minimise the risk occurring due to failure of monsoon.

 Minimise the market risk arising due to price fluctuations

Diversification into Productive Activities

Agriculture sector is a seasonal based activity, most of agriculture employment activities are
concentrated in Kharif season. But during Rabi season, in the areas where irrigation facilities are
inadequate, it becomes difficult to find gainful employment.

So, there is a need to focus on allied activities, non-farm employment and other emerging alternatives
of livelihood. Also agriculture sector is already over-crowded; a major proportion of the increasing
labour force needs to find alternate employment opportunities in other non-farm sectors
Benefits: Diversification of agricultural activities into other sectors is essential because of following
reasons:
 To provide supplementary gainful employment
 To enable them to earn higher levels of income
 To enable rural people to overcome poverty and other troubles.

TOPIC-5 NON-FARM AREAS OF EMPLOYMENT

ANIMAL HUSBANDRY
1. It is concerned with the breeding, rearing and caring for farm animals.
2. Widely held Species are - cattles, goats and fowls
3. It provides alternative livelihood options to over 70 million small and marginal farmers.
4. It provides stability of income, food security, transport and fuel and nutrition for the family.
5. A significant number of women also find employment in the livestock sector.
6. In India, poultry accounts for the largest share of 61%.

Measures to increase livestock productivity in India:

 It requires improved technology and promotion of good breeds of animals to enhance

productivity.
 Improved veterinary care and credit facilities to small and marginal farmers and landless
labourers would enhance sustainable livelihood options through livestock production.

DAIRYING
1. It involves breeding, raising and utilisation of dairy animals for the production of milk and the
various dairy products processed from it.
2. Due to the successful implementation of OPERATION FLOOD (White Revolution), India ranks
first in the milk production across the world.
3. Under this system, all the farmers pooled their milk produce according to different grades and it
was processed to urban centres.
4. In Gujarat, there was most efficient implementation of milk cooperatives.

OPERATION FLOOD (White Revolution: It was started by National Dairy Development Board in 1970
under the expert guidance of then Chairman, Dr. Varghese Kurien.
The aim was to create a worldwide milk grid.
 Under this system, all the farmers pool their milk produce according to different grades and
same is processed and marketed to urban centres through cooperatives.
 Farmers are assured of a fair price and income
 Gujarat state is held as a success story in the efficient implementation of milk cooperatives,
followed by Madhya Pradesh, Uttar Pradesh, Andhra Pradesh, Maharashtra, Punjab and
Rajasthan.
FISHERIES
1. It refers to the occupation devoted to the catching, processing or selling of fish and other
aquatic animals.
2. In India, after progressive increase in budgetary allocations and introduction of new
technologies in fisheries and aquaculture, the development of fisheries has come a long way.
3. Fish production from inland sources contributes 65% of the total fish production and the rest
35% comes from marine sector.
4. Total fish production accounts for 0.9% of the total GDP.
5. In India, West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharastra and Tamil Nadu are major
fish producing states.
6. 60% of the workforce in export marketing and 40% in internal marketing are women.

7. There is a need to increase credit facilities in the form of cooperatives and SHGs for fisher
women to meet their working capital requirements for marketing.

8. Problems: A large share of fish worker families is poor. Widespread underemployment, low per
capita earnings, absence of mobility of labour to other sectors, high illiteracy and indebtedness
are major problems.

HORTICULTURE
1. It refers to the science or art of cultivating fruits, vegetables, tuber crops, flowers spices and
plantation crops.
2. Golden Revolution Period- It covers the period of 1991-2003 as during this period the planned
investment in horticulture became highly productive and there was a tremendous rise in the
production of horticultural products. This revolution made India a world leader in the
production of mangoes, bananas, coconut and spices.
3. Nirpakh Tutej is considered as the Father of the Golden Revolution in India
4. It contributes 6% of GDP of India
5. Share In World’s production- India has emerged as a world leader in producing a variety of
fruits.
6. Currently India is 2nd largest producer of fruits and vegetables in the world.
7. Improvement in Economic Condition- Horticulture has improved economic condition of many
farmers and has become a means of improving livelihood.
INFORMATION TECHNOLOGY (IT)
1. It refers to that branch of engineering that deals with the use of computers and
telecommunication to retrieve and store and transfer information.
2. It has the potential of generating the employment in rural areas.
3. It also has a positive impact on the agriculture sector as it can disseminate information
regarding emerging techniques and its applications, prices, weather and soil conditions for
growing different crops..
4. It also contributes to the knowledge sector in the economy.
ORGANIC FARMING
Organic Farming- It is the form of agriculture that relies on techniques such as crop rotation, green
manure, compost and biological pest control.
 It is the process of producing safe and healthy food, without leaving any adverse impact on
environment.
BENEFITS:
 Economical farming: Organic agriculture offers a means to substitute costlier agricultural inputs
(such as HYV seeds, chemical fertilisers, pesticides etc.) with locally produced organic inputs
 Generates income: Organic agriculture also generates income through exports as the demand
for organically grown crops is on a rise.
 Provides healthy food: Organically grown food has more nutritional value than chemical farming
thus providing us with healthy foods.
 Source of Employment: Since organic farming requires more labour input than conventional
farming, India will find organic farming an attractive proposition.
 Safety of environment: The production is done in an environmentally sustainable way.

Challenges:
 Less Popular: Popularising organic farming requires awareness and willingness on the part
of farmers to adapt to new technology.
 Lack of infrastructure and marketing facilities: Inadequate infrastructure and the problem of
marketing the products are major concerns which need to be addressed.
 Low Yield: The yields from organic farming are less than modern agricultural farming in the
initial years. Therefore, small and marginal farmers may find it difficult to adapt to large
scale production.
 Shorter food life: Organic produce has a shorter shelf life than sprayed produce.
 Limited choice of crops: choice in production of off-season crops is quite limited in organic
farming.

EVALUATION OF RURAL DEVELOPMENT

 CHALLENGES
1. Stress on Diversification: There is a need to stress on diversification into dairying, poultry,
fisheries, vegetables and fruits etc.
2. Rural and urban linkage: Efforts should be made to link up the rural production centres with
urban and foreign markets to realise higher returns on investment.
3. Better facilities: Proper efforts should be made to develop infrastructure, farmer- friendly
agricultural policies etc.
4. More emphasis on sustainable development.
Mind Map

RURAL
DEVELOPMENT

AGRICULTURAL DIVERSIFICATION OF
SORCES
MARKETING AGRICULTURE
OF
SYSTEM
RURAL
CREDIT
REGULAION POLICY
NON- OF MARKETS INSTRUMENTS
INSTITUTIONAL INSTITUTI
SOURCES ONAL PROVISION
SOURCES OF MINIMUM
PHYSICAL SUPPORT
MONEY COOPERATIVE INFRASTRU PRICE NON-
LENDERS CREDIT CTURE FARM
AREAS
LAND
RELATIVES DEVELOPMENT BUFFER
BANKS COOPERATIVE
STOCK
MARKETING
RICH REGIONA
LANDLORDS L RURAL
BANKS PDS

NABARD

SELF HELP
GROUPS