Chapter – 5

(RURAL DEVELOPMENT)
POINTS TO REMEMBER:-
 Rural Development: Rural Development is a process of improving the
quality of life and economic welfare of the people living in rural areas.

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. Emerging challenges
include (i) the need for diversification of productive activities and (ii) the need
for organic farming.

 Need for Rural Development:

(i) Majority of population in India is living in rural areas.

(ii) About 80 percent of the total poor live in rural areas.

(iii) Agriculture is the main occupation of rural population which is in the state
of backwardness. Economic development of India is not possible without rural
development

(iv) No programmes of rural development can succeed much unless the

participation of rural people themselves increases substantially.

 The key Issues in Rural Development: The Main areas (or key issues)
which need immediate attention include:

(A) Development of human resources including.

(i) Literacy, more specifically, female literacy, education and skill

development

(ii) Health, addressing both sanitation and public health

(B) Development of local productive resources.

(c) Infrastructure development like electricity, irrigation, credit, marketing,

transport facilities.

(d) Alleviation of poverty and bringing about significant improvement in the

living conditions of the weaker section of the population.

 Rural Credit:

Need: The development of rural economy largely depends on the availability

of cheap and adequate credit. As there is a time gap between crop sowing and
 crop production, farmers need credit to meet their requirements of agricultural
inputs such as seeds, fertilizers, tools implements etc.

Kinds of Agriculture Credit: On the basis of time : Rural Credit needs of the
farmers can be classified into three categories. (i) Short-term – 6 to 12
months, (ii) Medium-term – 12 months to 5 years, (iii) Long-term – 5 to 20
Years

On the basis of purpose: Rural credit needs of the farmers can be classified on
the basis of purpose into the following categories – (i) Productive needs, (ii)
Consumption needs, and (iii) Unproductive needs.

 Sources of Rural Credit: Sources of rural or agricultural 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.

 Non-Institutional Sources: (i) Landlords, (ii) Village traders, and (iii)

Moneylenders are the three important sources of Non-institutional rural credit
in India.

Traditionally, most credit needs of the farmers were met through these
sources. Non-institutional sources accounted for 93 percent of the total
borrowing of the farmers in the beginning of First Five Year Plan.

 Institutional Sources : Institutional sources include : (i) government, (ii)

cooperatives, (iii) Commercial banks, and (iv) the regional rural banks.

Together, they accounted for only 7 percent of the credit needs of the faremrs
in the beginning of First Five Year Plan, but presently their share has increased
to over 66 percent.

Out of total institutional credit, cooperative credit contributes nearly 15

percent and commercial banks about 75 percent. Apart from substantial
expansion in the flow of credit by commercial banks and Regional Rural Banks
(RRBs), the cooperative credit institutions have emerged as important
institutional agencies offering credit support and related services. NABARD is
the apex institution at national level for agricultural credit and rural
development.

In recent years two new channels have emerged in the field of rural credit.
They are Kisan Credit Card Scheme and Self-Help Groups. The Kisan Credit
Card (KCC) scheme was introduced in 1988 to provide adequate and timely
support from the banking system to the farmers. The Self-Help Groups (SHGs)
has emerged s an alternative to banking with the poor which required no
collateral. The focus under SHG programme is largely on those rural poor who
have no access to the formal banking system.

 Problem of Rural Credit in India:

(i) The sources of institutional credit are inadequate.

 (ii) Various institutions providing credit to farmers are not well coordinated.

(iii) Long paper work

(iv) Lack of institutional credit to small and marginal farmers.

(v) Problem of over-dues

(vi) Lesser attention to the credit needs of small and marginal farmers and
landless labourers.

 Agricultural Marketing: Agricultural marketing comprises all operations

involved in the movement of farm produce from the producer from the
producer to the ultimate consumers. Thus, agricultural marketing may be
defined as the process that involves:

(i) Gathering the produce after harvesting.

(ii) Processing the produce like separating the straw from the grains.

(iii) Grading the produce according to its quality.

(iv) Packaging the produce according to buyers’ preferences.

(v) Storing the produce for future sale and

(vi) Selling the produce when the price is lucrative (unprofitable).

 Defects of Agricultural Marketing in India: (i) Lack of storage facility, (ii)

Distress sale by the farmers, (iii) Lack of transportation facilities, (iv)
Intermediaries and malpractices in markets, (v) Lack of grades, (vi) Lack of
Institutional finance.

 Government Measures to Develop Agricultural Marketing in India: (i)

Setting up of regulated markets, (ii) Provision of warehousing facilities, (iii)
Encouragement of co-operative markets, (iv) Providing market information, (v)
Grading and Standardisation, (vi) Fixation of MSP, Provision of Infrastructural
facilities.

 The Commission for Agricultural Costs and Prices (CACP) : CACP

was established in 1965 by the government that annually recommends
the minimum support prices for several crops.

 Food Corporation of India (FCI) : FCI was set up to procure food grain
from the farmers and maintains their buffer stock to be distributed
among the poor through public distribution system.

 Cooperative Marketing: Cooperative marketing is a practice in which

farmers join hands to form a cooperative society to sell their produce
through this society. In India, cooperative marketing structure has been
built-up at various levels. At the apex is NAFED (National Agricultural
Cooperative Marketing Federation of India Ltd.)
 Agricultural Diversification: Agriculture diversification refers to
diversification of crop production and also shift of workforce from agriculture
to other allied activities e.g. livestock, poultry, fisheries, etc.

 Organic Farming: Organic farming is a sustainable farming system that

maintains long term fertility of the soil. Under this system, nutrients are
supplied to the soil instead of plants. It avoids the use of chemical fertilizers
and pesticides.

 Benefits of Organic Farming:

(i) It restores, maintains and enhances the ecological balance.

(ii) Organic food has more nutritional value.

(iii) Organic farming requires cheaper agricultural inputs.

(iv) It is suited to India as it requires more of labour and less of capital.

 Limitations of Organic Farming:

(i) Yield from organic farming are less than from modern farming.

(ii) Small and marginal farmers find it difficult to adopt it.

(iii) Choice in production of off season crops is limited.

(iv) Organic produce have a shorter shelf life than sprayed produce.

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Short Answer/MCQ
1. Rural Credit for less than 12 months period is called
(a) Short term Credit (b) Medium term credit
(c) Long term Credit (d) Very short period credit

2. Rural Credit for more than 5 years comes under:

(a) Short term credit (b) Medium term credit
(c) Long term credit (d) Both (b) and (c)

3. Loan taken for buying tractor comes under:

(a) Short period credit (b) Medium term credit
(c) Long term Credit (d) None of the above

4. Which of the following is the major source of institutional credit in rural areas?
(a) Co-operative Banks (b) Commercial Banks
(c) Regional Rural Banks (d) Very short period credit
5. Agriculture marketing does not comprise of.........................
(a) Transportation of the produce to the market place for sale.
(b) Grading of the produce according to the quality.
(c) Storage of the produce for sale in future.
(d) Credit taken to meet expenditure on agriculture.
6. Following is an advantage of institutional credit:
(a) Easier procedure
(b) Available even for unproductive purposes.
(c) Low rates of interest.
(d) Timely flow of credit.
7. Regional Rural Banks were set up in ..............
(a) 1975 (b) 1965
(c) 1951 (d) 1969

8. National Bank of Agriculture and Rural Development was set up in:

(a) July, 1969 (b) July 12, 1982
(c) April 1, 1949 (d) June 12, 1982

9. Which of the following do not provide direct rural credit?

(a) Co-operative Banks (b) Commercial Banks
(c) Regional Rural Banks (d) NABARD

10. Tick mark the correct statement.

(a) Primary co-operative societies operate at district level.
(b) Diversification of agriculture is essential to provide sustainable livelihood
options to rural people.
(c) In organic farming, only short term fertility of the soil is maintained.
(d) About two-third of the total fish production in India comes from marine sources.
11. Following is the advantage of lending by moneylenders:
(a) Easy procedure of lending
(b) Available for both productive and unproductive purposes.
(c) Loans are not made public
(d) All the above
12. 14 Major commercial banks were nationalised in:
(a) 1969 (b) 1980
(c) 1975 (d) 1991
13. Which of the following is a measure initiated by the government to improve the
agricultural marketing?
(a) Establishment of Regulated markets.
(b) Provision of infrastructure facilities.
(c) Cooperative marketing
(d) All of the above
14. What is NABARD?
 (a) Poverty eradication programme (b) Social security scheme
(c) Bank (d) None of these
15. Which of the following is not a non-institutional source of agriculture finance?
(a) Friend (b) Relative
(c) Money lender (d) Cooperative banks
16. When was the Kisan Credit Card Scheme was introduced in India?
(a) 1992 (b) 1998
(c) 1999 (d) 2001
17. Government established institutional sources of finance:
(a) To provided cheap and adequate credit to farmers
(b) To protect the farmers from the clutches of money lenders.
(c) Neither (a) and (b)
(d) Both (a) and (b)
18. Which of the following is the problem of institutional rural credit?
(a) Insufficient credit
(b) Growing overdues.
(c) Lesser attention to small and marginal farmers.
(d) All the above
19. ....................... is the apex body which co-ordinates the function of various financial
institutions providing rural credit.
(a) NABARD (b) Self-Help Groups
(c) Reserve Bank of India (d) Commercial Banks
20. The need for agricultural diversification arises:
(a) To reduce the risk in depending exclusively on farming for livelihood.
(b) To provide productive sustainable livelihood options to rural people.
(c) To provide alternative employment opportunities.
(d) All of the above.
21. The period of 1991-2003 is known as:
(a) Green Revolution (b) Blue Revolution
(c) White Revolution (d) Golden Revolution
22. Blue revolution is associated with:
(a) Indigo cultivation (b) Poultry farming
(c) Fisheries (d) Availability of drinking water
23. The period of 1991-2003 is known as:
(a) Green revolution (b) Blue revolution
(c) White revolution (d) Golden revolution
24. The minimum support price fixed for agricultural crops by the government:
(a) Safeguards the interest of consumers.
(b) Safeguards the interest of farmers.
(c) Safeguards the interest of government
 (d) None of these
25. Under horticulture comes-
(a) Fish Farming (b) Poultry Farming
(c) Flower cultivation (d) Timely flow of credit.
26. White revolution is associated with:
(a) Horticulture (b) Fisheries
(c) Dairying (d) Animal Husbandry
27. The feature of organic farming is:
(a) Sustainable agriculture (b) Use of local inputs
(c) Focus on soil health instead of plants (d) All the above
28. Organic farming is beneficial because
(a) It generates high income through exports (b) It provides healthy food
(c) It is a sustainable way of farming (d) All the above
29. Following is the limitation of organic farming
(a) Unsustainable agriculture
(b) Less demand for organic food
(c) Use of modern technology
(d) Shift from single cropping to multiple cropping.
30. Crop diversification of agriculture implies:
(a) Crop diversification of agriculture
(b) Commercialisation of agriculture
(c) Use of modern technology
(d) Shift from single cropping to multiple cropping.

31. Diversification of agriculture is essential:

(a) To check food inflation
(b) To provide sustainable livelihood options to rural people
(c) To generate large exports surplus
(d) None of these
32. Which of the following is not an advantage of organic farming?
(a) Cheap inputs
(b) Attractive returns on investment
(c) Greater possibilities for import
(d) High nutritional value
33. A process that involves the assembling, storage, processing, transportation, packaging,
grading and distribution of different agricultural commodities across the country is
known as:
(a) Agricultural Diversification (b) Agricultural Banking
(c) Agricultural Management (d) Agricultural Marketing
34. Identify which of the following statement is not correct with Self Help Groups?
 (a) Group members can borrow funds at nominal rate of interest.
(b) Borrowing in micro credit system are mainly taken for consumption purpose
(c) Micro credit system has helped men in rural areas to become self-dependent.
(d) Formal credit system has failed to provide credit to the needy people in the rural
areas.
35. Identify the incorrect statement from the following.
(a) Diversification into other sector is essential to enable rural people to overcome
poverty.
(b) Diversification is an essential component because there is greater risk in depending
exclusively on farming for livelihood.
(c) Diversification provides supplementary gainful employment.
(d) Diversification activities are not beneficial.
36. .............. is the proportion of agricultural produce which is sold in the market by the
farmers, after meeting their self-consumption requirements.
(a) Trade surplus (b) Marketable surplus
(c) Producer surplus (d) Consumer surplus
37. National Bank for Agricultural Produce which is sold in the market by the farmers, after
meeting their self-consumption requirements.
(a) Cooperative (b) Apex
(c) Micro credit (d) Private
38. The scheme of micro finance is extended through .....................
(a) Self-help groups (b) Land Development Banks
(c) NABARD (d) Regional Rural Banks

39. Name the state which is held as a success story in efficient implementation of milk
cooperative.
(a) Maharashtra (b) Karnataka
(c) Gujarat (d) Andhra Pradesh
40. What is the name for the vegetable and fruit market in Andhra Pradesh
(a) Apni Mandi (b) Hadaspar Mandi
(c) Rythu Bazars (d) Uzhavar Bazars
41. ‘If India has to make real progress she has to develop its rural areas’ which of the
following is the incorrect reason for the above mentioned statement?
(a) Approximately one-third population of rural India still lives in abject poverty.
(b) More than 50 percent India’s population depends on agriculture for their livelihood.
(c) Growth rate in the India Agriculture sector has been quite lower than of other sector.
(d) Majority of rural people have access to the basic necessities of life.
42. The need for organic farming arises due to which of the following reasons.
(a) It is environment friendly (b) It is sustains soil fertility
(c) Both (a) and (b) (d) None of these
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Fill in the blank:

1. Farmers need credit both for productive as well as ..................... purpose.
(Unproductive)

2. ................. is an apex bank in the field of credit for agriculture and other activities in
rural areas in India. ( NABARD)

3. ....................... term credit is required for purchase of additional land, acquiring assets
like tractors and make Permanente improvement on land. (long/short)

4. Long term loans are for a period of ........................ (5 to 20 years)

5. Primary agricultural credit society operates at the ................. level. (Village)

6. Land development banks provide ............... term loans. (Long)

7. ................... accounts for largest share in India’s livestock. (Poultry)

8. Organically grown food has more nutritional value than food grown
under......................... farming. (Conventional)

9. Under ................ marketing societies are formed by farmers to sell their produce
collectively. (Cooperative)

10. Conventional farming is capital intensive where as organic farming is .................

intensive. (Labour)

11. Diversification of crop production implies shift from single cropping system to ......
system. (Multiple Cropping)

12. ....................... major commercial banks were nationalised in 1969. (14 / 6)

13. Most of the agricultural activities in India are carried in the ......................... season. (rabi/
kharif)

14. India adopted social banking and multiple agency approach after ............... (1991 / 1969)

15. ............... sources of credit generally provide loans for productive purposes.
(Institutional / Non-Institutional)

16. .................. farming relies heavily on chemical fertilizers and toxic pesticides. (Organic /
Conventional)

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ASSERTION AND REASON BASED QUESTIONS:-

Read the following statements – Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct
explanation of Assertion (A)
(c) Assertion (A) is true but Reason (R) is false
(d) Assertion (A) is false but Reason (R) is true.

1. Assertion (A) : Rural development includes only agricultural development.

Reason (R) : Rural development aims at improving the economic and social conditions
of people living in villages.
Ans. (d)
2. Assertion (A) : Diversification of agriculture is essential because there is greater risk in
depending exclusively on farming for livelihood and to provide productive sustainable
livelihood option.
Reason (R) : Organic farming offers a means to substitute costlier agricultural inputs
(such as HYV seeds, chemical fertilizers, pesticides, etc.) with locally produced cheaper
organic inputs.
Ans. (b)
3. Assertion (A) : Non-farm activities provide the alternative opportunities of employment.
Reason (R) : Agriculture in India suffers from the problem of surplus labour. Non-farm
employment can reduce over dependence on agriculture.
Ans. (a)
4. Assertion (A) : India ranks first in the world in milk production.
Reason (R) : India’s milk production increased due to operation food.
Ans. (a)
5. Assertion (A) : Organic farming heavily depends on the use of chemical fertilizers and
toxic pesticides etc.
Reason (R) : The period between 1991 to 2003 is referred to as the period of Golden
Revolution.
Ans. (d)
6. Assertion (A) : Yield from organic farming are more than from modern farming.
Reason (R) : Organic farming is a sustainable farming system which maintains long
term facility of the soil through the use of on-farm resources.
Ans. (d)
7. Assertion (A) : After independence there was an expansion in farm and non-farm output,
income and employment.
Reason (R) : Rural banking has helped farmers to avail benefits of credit facilities for
meeting their needs.
Ans. (a)
8. Assertion (A) : Self Help Groups have emerged to fill the gap in the formal credit
system.
Reason (R) : The formal credit delivery mechanism has not only proven inadequate but
has also not been fully integrated into the overall rural social and community
development.
Ans. (a)
9. Assertion (A) : Cooperative marketing is a significant progressive step in the context of
agricultural market system.
Reason (R) : Effective coordination between marketing cooperatives and processing
cooperatives is the key characteristic of Indian system of cooperative marketing.
Ans. (c)
10. Assertion (A) : Since independence, the economic condition of many farmers across
India has improved as they have adopted horticulture as a secondary source of income.
Reason (R) : Varying climatic and soil conditions have given India an added advantage
to be the producer of diverse horticultural crops.
Ans. (a)

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CASE STUDY BASE QUESTIONS:

Q1. Read the following case study carefully and answer the questions on the basis of the
same:
The central government will spend Rs. 9800 crores on livestock development over the
next five years in a bid to leverage almost Rs. 55,000 crore of outside investment into the
Animal Husbandry sector. It would do this by merging a slew of schemes of the
Department of Animal Husbandry and Dairying into three main programmes, focused on
indigenous cows and dairy development, livestock health and infrastructure
development, an official statement said. The Cabinet Committee on Economic Affairs
approved the implementation of the special livestock sector package by revising and
realigning the various components of the existing schemes in order to boost growth and
make animal husbandry more remunerative for the 10 crore farmers engaged in it.
1. Livestock production provides .................. for the family without disrupting other food
producing activities.
(a) Increased stability of income (b) Food security
(c) Transport and fuel (d) All of these
2. The central bank undertakes to invest on livestock development in ............. (horticulture /
animal husbandry) sector.
Ans. Animal husbandry
3. State one limitation of livestock sector in India.
Ans. The livestock productivity is quite low as compared to other countries.

Q2. Read the following case study carefully and answer the questions on the basis of the
same:
Prior to independence, farmers, while selling their produce to traders, suffered from
faulty weighing and manipulation of accounts. Farmers who did not have the required
information on prices prevailing in market where often sourced to sell at lower prices.
They also did not have proper storage facilities to keep back their produce for selling
later at a better price. Do you know that even today, more than 10 percent of gods
produced in farms are wasted due to lack of storage? Therefore, state intervention
became necessary to regulate the activities of the private traders.

The first step was regulation of markets to create orderly and transparent marketing
condition. Second component is provision of physical infrastructure facilities like road,
railways, warehouses, cold storage, and processing units. The next element is the policy
instruments like (1) assurance of minimum support price (2) Maintenance of buffer
stocks of wheat and rice by Food corporation of India (3) Distribution of food grains
through PDS.

1. Farmers depend on money lenders and traders, who charge ............... rate of interest.
(a) High (b) Low
(c) Moderate (d) zero
2. The aim of ........... marketing is to realize fair price for farmers product
(a) Financial (b) Agricultural
(c) Cooperative (d) Personalized
3. .............. operates through a network of ration shop and fair price shops in which
essential commodities are offered at a price below the market price to the weaker section
of society.
(a) FCI (b) MSP
(c) NABARD (d) PDS
4. Name some alternative marketing channels for agricultural marketing
Ans. Apni Mandi (Punjab, Haryana, Rajasthan)
Hadaspar Mandi (Pune)
Rythu Bazars (Andhra Pradesh, Telangana)
Uzhavar Sandies (Tamil Nadu)
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SOLVED QUESTION:-
Q1. What do you mean by rural development?

Ans. Rural development refers to the process of improving the quality of life
and economic welfare of the people living in rural areas.

Q2. Why do farmers need credit?

Ans. Farmers need credit because there is long time gap between crop
sowing and realisation of income after the sale of their produce.

Q3. What are institutional sources of agricultural credit? Name them

Ans. (a) Cooperative Banks, (b) Commercial Banks, (c) Regional Rural
Banks, (d) Land development Banks.

Q4. Name non-institutional sources of rural credit in India.

Ans. Moneylenders, relatives, traders and landlords.

Q5. What is micro finance?

Ans. Micro finance (a loan up to Rs. 25,000) is a credit scheme extended to

the poor through self help groups (SHGs)

Q6. What is an SHG (Self-help group)?

Ans. An SHG is a group of about 15 to 20 people who join hands together to

address a common issue.

OR

Self help groups are micro finance groups of people which promote
thrift in small proportions by a minimum contribution from each
member.

Q7. What is the full form of NABARD? When was it set up?

Ans. National Bank for Agriculture and Rural Development. It was set up on
July 12, 1982.

Q8. State of meaning of agricultural marketing.

Ans. Agricultural marketing is a process that involves the assembling,

storage, processing, transportation, packing, grading and distribution
of agricultural commodities across the country.

Q9. What is cooperative marketing?

Ans. Cooperative marketing refers to a system in which marketing societies

are formed by farmers to sell the output collectively to take advantage
of collective bargaining.

Q10. What is E-NAM?

Ans. E-NAM is electronically integrated National Agriculture Market. It was
set up to eliminate price difference across the country.

Q11. Why is Minimum Support Price (MSP) fixed by the government?

Ans. Minimum Support Price (MSP) for crops is fixed by the government to
safeguard the interest of farmers.

Q11. What do you mean by regulated markets?

Ans. Regulated markets are those which are set up by the government and
in which farmers sell their products and there are no middlemen
between farmers and buyers.

Q12. What is buffer stock?

Ans. Buffer stock refers to the stock of food grains held by the government
to stabilise their prices.

Q13. What is AGMARK?

Ans. AGMARK is a label which is put on standardised products of agriculture

under the supervision of government officials. It is a short form of
agricultural marketing.

Q14. What do you mean by ‘Operation Flood’ or White Revolution?

Ans. Operation flood is a project launched by National Development Board

in 1970. It is a system, whereby all the farmers can pool their milk
produce according to different grading and the same is processed and
marketed in urban areas through co-operatives.

OR

It is a system where by all the farmers can pool their milk produced
according to different grades and the same is processed and marketed
to urban centres through cooperative.

Q15. What is organic farming?

Ans. Organic farming is a system which avoids or largely excludes the use
of chemical inputs and relies mainly on organic inputs.

Q16. State the meaning of livestock.

Ans. Livestock of a country includes poultry, cattle and buffaloes, sheep and
goats, camels, asses’ horses, ponies, and mules etc. which provide
livelihood options to people.

Q17. State the three challenges facing Rural development in India.

Ans. Three challenges area for development in rural India include:

 (1) Challenge of Infrastructure Development: Basic
infrastructure like electricity irrigation, credit availability,
construction of village roads are areas which need attention of the
government.

(2) Alleviation Poverty: The problem of poverty in rural areas

needs to be tackled seriously. About one-third of the rural
population still lives in abject poverty.

(3) Development of Human Resources: The development of

human resources in rural areas in another challenge before the
government. Rural people are still unable to have access to
affordable education and health care. This needs to be given top
priority.

Q18. Rural Development is very essential for overall economic development of India.
Comment.
OR
‘Economic Development of India is impossible without its rural development’ justify the
statement with valid reasons.
Ans. Mahatma Gandhi once said that the real progress of India mainly lies in
the development of villages. Rural development is very essential for
the overall development of India because of the following reasons:
(i) Agriculture is the major source of livelihood in the rural areas that
is yet to become productive for them. The share of agriculture in
country’s GDP is on decline.

(ii) About two-third of India’s population lives in rural areas.

(iii) One-third of rural India still lives in the abject of poverty.

Q19. Discuss the importance of credit in rural development.

Ans. Since there exists a time gap between crop sowing and realisation of
income after sale of agricultural produce, farmers need to take credit.

(i) Farmers need to borrow to purchase inputs like seeds, fertilizers

etc.

(ii) Farmers also borrow to buy costly inputs like tractors, pump-sets
and also to make permanent improvements on land.

(iii) They also borrow to meet their family expanses of marriage,

religious ceremonies etc. Such borrowings are for consumption
purposes.

Q20. What do you mean by institutional credit? Give three advantages of institutional credit.
Ans. Credit (loans) given to farmers by different institutions like banks, is
called institutional credit.

Advantage:

(i) Institutional credit is available to farmers at low rates of interest.

(ii) It frees rural poor farmers from clutches of village moneylenders

who charge high interest rates and also manipulates accounts.

(iii) It develops banking habits among the villagers.

Q21. Point out any three drawback of non-institutional credit.

Ans. In the past, rural people for most of their credit needs (93% of their
credit needs) were dependent on the moneylenders for their credit
requirements. This resulted in their exploitation in the following ways.

(i) Moneylenders charged high rates of interest ranging from 18% to

50% or even more.

(ii) Moneylenders often manipulated the accounts to their advantage

by not entering the money returned and interest paid in to the
account.

(iii) Moneylenders often forced the farmers to sell the agricultural

produce to them at low prices.

Q22. What were the reasons for the predominant position of moneylenders in providing rural
credit in the past?

Ans. Though moneylenders exploited the small and marginal farmers by

lending to them at high interest rates and also by manipulating
accounts, they continue to occupy the place of significance.

(i) The main reason for the dominant position of moneylenders was
that there was lack of institutional credit. So the farmers were
forced to borrow from them.

(ii) Moreover, they were willing to give loans for all purpose whereas
institutional sources provided loans only for productive purpose.

(iii) Above all, it is easy to approach the moneylenders as they know

each other personally.

Q23. What is Kisan Credit Scheme? Explain.

Ans. (i) To provide adequate and timely support to farmers, Kisan Credit
Card Scheme was introduced in August 1998.
 (i) This scheme is being operated through commercial banks,
regional rural banks, and cooperative banks.

(ii) Under this scheme, each farmer is provided with a Kisan Credit
Card and a passbook for providing cash credit facilities.

(iii) NABARD has accelerated the pace of issue of KCCs.

Q24. Explain the meaning of diversification of agriculture.

Ans. Agricultural diversification of agriculture has two aspects.

(a) Diversification of crop production:- Diversification of crop

production means production of variety of crops rather than one
crop. It implies a shift from single cropping system to multi-cropping
system.

(b) Diversification of Production activity:- Diversification of

productive activity means shift of workforce from agriculture to
other allied activates like animal husbandry, horticulture and non-
agricultural sector like cottage industries.

Q25. State three advantages of cooperative marketing.

Ans. Cooperative marketing refers to a system in which marketing societies

are formed by the farmers to sell their produce collectively.

Advantages: The main advantages of cooperative marketing are:

(i) Collective Bargaining: Instead of marketing their produce

separately, if they sell their produce through on agency, this will
increase their bargaining power.

(ii) Loans: Cooperative advance loans to the member farmers and

enable them to wait for better price.

(iii) Storage Facilities: Cooperative marketing societies generally

have storage facilities. Thus, there is no danger to their crops
from rains etc.

Q26. Demand for organic food is on rise all over the world. Explain why?

Ans. Reasons are as follows:

(i) Although organic foods command higher prices than conventional

foods, its demand is gaining popularity across the world.

(ii) It is because that it is produced by conventional method, instead

of chemical based methods.

(iii) It is of higher quality and possesses higher nutritional value.

Q27. What is organic farming? Explain its relevance to Indian conditions.

Ans. Organic farming is a system of farming that relies upon the use of
organic inputs for cultivation. It discards the use of chemical inputs.

Organic farming suitable to Indian conditions because of the following

(i) Use of Cheaper Inputs: Being a low chemical fertilizer

consuming country India has good opportunity to take up
production of organic foods for exports and domestic use. Organic
farming should be encouraged and facilities should be developed
for testing and certification of organically produced foods.

(ii) Utilisation surplus Labour: Organic farming is labour-intensive.

Since India has abundant labour force seeking employment, it will
be advantageous for India to take up organic farming on a large
scale.

Q28. Explain briefly the institutional sources of rural credit in India.

Ans. There are three institutional sources of rural credit. These are:

1. Co-operatives: -

In the earlier phase of economic planning, government depended

heavily on co-operatives to meet the rural credit requirements. It was
the first institutional source of rural credit.

Co-operatives were encouraged to ensure timely and increased flow of

credit to the farmers and to reduce and gradually eliminate
moneylenders from the rural areas. They were supposed to provide
adequate credit support to areas covered under the special
development programmes.

There are two separate wings of the co-operative credit structure, one
fulfilling the short- term needs and the other managing long-term
needs. These are:

(a) Primary agricultural credit societies: It operates at the

village level and maintains direct contact with the farmers to fulfil
their short-term needs. For its own requirements of finance, it is
linked to a Central Co-operatives Banks which operate at district
level.

(b) Land Development Bank: These come under the category of

long-term loan needs. Their other names are Land Mortgage Banks
and Agricultural Development Banks. Presently (2017-18)
cooperatives share in total credit is about 12.9 percent.
2. Commercial Banks:-

Upto 1970 the government policy was to depend entirely on the

development of cooperative banks as a major source of institutional
credit in rural areas. But the government now realized that co-
operative banks alone cannot meet the growing needs of agriculture
credit.

Thus, there was a shift in government policy. Our government adopted

social banking and multiple agency approach (from 1970) to
meet the needs of rural credit adequately.

Under social banking, credit needs of people are met on priority basis.
Loans are given at lower rates of interest.

And under multiple agency approach loans are provided by several

agencies such as cooperatives, commercial banks, regional rural
banks.

Fourteen commercial banks were nationalised in 1969 and 6 more

banks in 1980

These banks were asked to set up their branches in rural areas.

They provided loans both directly to the farmers and indirectly to other
agencies such as cooperatives societies who finance farmers.

There share in institutional credit to agriculture increased from 38.4

percent in 1980-81 to 75 percent in 2017-18.

3. Regional Rural Banks (RRBs):

To provide credit and other facilities, especially to the weaker sections

of rural community consisting of small and marginal farmers,
agricultural labourers, artisans and small entrepreneurs. RRBs were set
up in 1975.

RRBs provided about 12 percent of the total institutional credit in

2017-18.

Q29. Discuss the role of NABARD in rural development.

Ans. National Bank for Agricultural Development (NABARD) is an apex bank

in the field of credit for agriculture and other economic activities in
rural areas in India.

(i) It looks after credit for promotion of agriculture, small scale

industries, cottage and village industries and other allied
activities in rural areas.
 (ii) It provides short, medium and long-term credits to State Co-
operative Banks, Land Development Banks and other financial
institutions, which provide loans to promote productive activation
in rural areas.

(iii) It promotes research in agricultural and rural development.

Q30. Write a note on micro-finance.

Ans. Micro finance (or credit is a scheme under which fiancé is extended to
the poor through self-help groups.

 Micro-finance (which involves rural loans upto Rs. 25,000) has

emerged a viable alternative to banking with the poor which
required no collateral.

 A self-Help Groups (SHG) is a group of about 15-20 persons who

come together for a common cause.

 SHG promotes thrift in small proportions through some small

contribution by each member.

 From the pooled money, the needy members are given loans which
have to be repaid in small instalments over a period of time.

 Once the SHG achieves maturity in its financial behaviour (Which

generally takes a period of 6 months of its formation) it is
considered for linking to bank.

 Banks are encouraged to give loans to the SHGs in certain multiples

of their accumulated savings.

 Loans are provided to SHGs without any collateral.

 This is known as SHG-Bank linkage programme. It is also referred to

as micro credit programme.

 As on March 31, 2017 86 lakh SHGs held saving bank account. Out
of 86 lakh SHGs, 73 lakh SHGs were exclusively all women SHGs.
About 10 crore poor households were associated with banks under
SHG – Bank Linkage Programme.

Q31. Define agricultural marketing. What are the essential features of sound agricultural
marketing system?

Ans. Agricultural marketing is a process that involves assembling, storage,

processing, transportation, packaging, grading and distribution of
different agricultural commodities across the country.
 A well organised agricultural marketing system should have following
features:

(i) The number of intermediaries should be the minimum.

(ii) Interest of both producers and consumers should be safeguarded.

(iii) Transportation to carry the products to the market should be at

the minimum cost.

(iv) Grading and standardisation facility of the agriculture products

should be available so as to maintain the quality of the product.

(v) Prices of various varieties of the product should be kept different

to improving the quality of the product.

(vi) Farmers should have the holding capacity of agriculture products

so as to get fair price for the sale of their products.

(vii) Marketing related information should be provided to the farmers.

(viii) Storage facility should be provided to the farmers.

Q32. What measures have been taken by the government to revive the defects of agricultural
marketing?

Ans. Some important measures taken by the government to improve the

agricultural marketing are mentioned below:

1. Establishment of Regulated Market: Regulated markets have

been set up with a view to protect the farmers for the malpractices
of sellers and brokers. This policy benefited farmers as well as
consumers.

2. Encouragement to Co-operative Marketing: The government has encouraged the

organization of co-operative agricultural marketing societies.

3. Grading and Standardisation: Agricultural produce (Grading and Marketing) Act

was implemented in 1937. AGMARK stamp of the department of agricultural
marketing is marked on the graded goods. There is a wide market of AGMARK
goods. These goods are sold at higher prices.

4. Fixation of Minimum Support Price (MSP) : Our government announces minimum

support prices and procurement prices for 24 agricultural commodities from time to
time in a bid to ensure fair returns to the farmers. Government agencies like the Food
Corporation of India purchase agricultural commodities from the farmers at these
prices.
 5. Warehousing Facilities: To prevent forced sale by the farmers after the harvesting of
crops, our government has done much to provide warehousing facilities in towns and
villages.

The Central Warehousing Corporation was set up in 1957 to construct warehouse for
the storage of agriculture produce. The states have set up the State Warehousing
Corporation for this purpose. At present, the Food Corporations constructing its own
network of godowns in different parts of the country.

Q33. What are the alternative channels available for agricultural marketing? Give some
examples.

Ans. (i) Farmers sell their produce directly to the consumers. Some example
are:

(a) Apni Mandi in Punjab, Haryana and Rajasthan.

(b) Hadapsar Mandi in Pune

(c) Rythu Bazars in Andhra Pradesh

(d) Uzhavar Sandies (farmers market) in Tamil Nadu.

(ii) Several national and multinational fast food chains are entering into
contracts with farmers to encourage them to cultivate farm
products (vegetables, fruits, etc.) of thess desired quality.

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TRY TO SOLVE :-

Q1. What do you mean by rural development? Bring out the key issues in rural development.

Q2. Point out the defects of agricultural marketing in India.

Q3. Distinguish between ‘Green Revolution’ and ‘Golden Revolution.

Q4. Rural development is very essential for overall economic development of India.
Comment.

Q5. Point out any three drawbacks of non-institutional credit.

Q6. Innumerate any three problems faced by commercial banks in providing rural credit.

Q7. Critical evaluate the role of rural banking system in the process of rural development in
India.

Q8. Give two advantages and two disadvantages of organic farming.

Q9. Classify credit requirement of Indian farmers on the basis of prupose.

Q10. Giving suitable examples differentiate between productive loans and unproductive loans.
Q11. Explain the steps taken by the government in developing rural markets.

Q12. Mention some obstacles that hinder the mechanism of agricultural marketing.

Q13. Bring out the importance of animal husbandry, fisheries and horticulture as a source of
diversification.

Q14. Information technology plays a very significant role in achieving sustainable

development and food security’ Comment.

Q15. What is organic farming and how does it promote sustainable development?

Q16. Identify the benefits and limitations of organic farming.

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