Rural Development

❖ Rural development means an action- plan for the social and economic upliftment of the rural areas.
Rural development aims at comprehensive change and improvement of rural life in all the aspect
sum of the areas which a challenging and need fresh initiatives for development of India includes.

❖ The key issues of action plan for rural development are

• Development of infrastructure • Poverty alleviation
• Human capital formation • Land reforms
• Development of productive resources
1. Development of Human Resources:
The quality of the human resource needs to be improved through following measures
➢ Proper attention to literacy (specifically on female literacy), education and skill development;
➢ Better Health facilities for the physical growth
2. Development of Infrastructure:
It involves:
➢ Improvement in electricity, irrigation, credit, marketing and transport facilities (including
construction of village roads and feeder roads to nearby highways);
➢ Better facilities for agriculture research and extension and information dissemination.
3. Land Reforms:
It includes the following objectives:
➢ Elimination of exploitation in land relations;
➢ Actualizations of the goal of land to the tiller’;
➢ Improvement of socio-economic conditions of rural poor by widening their land base;
➢ Increasing agricultural productivity and production.
4. Alleviation of Poverty:
As stated earlier, around 30% of total population is still below the poverty line. So, there is a
serious need for taking serious steps for alleviation of poverty and bringing significant improvement
in living conditions of weaker sections.

5. Development of the productive resources of each locality to enhance opportunities of employment

(particularly other than farming)

❖ Rural Development and Rural credit

Rural development is a comprehensive term which essentially focuses on action for the
development of areas that are lagging behind in the overall development of the village economy. It
is a process whereby the standard of living of rural people, especially poor people, rises
continuously.
The basic objectives of rural development are
• Increasing the productivity of the agricultural sector, so that the income of the formers
increase.
• 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.

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❖ Rural Credit
Credit is the life line of the farming activity. Rural credit means providing credit for the forming
community. Farmers need credit because
• Most farmers in India are small and marginal land holders who practice subsistence farming.
They have no surplus for further production.
• The gestation period between sowing and harvesting is quite high. So, farmers have to
borrow to fulfill their various needs during this period.
❖ Borrowings of a farmer can before the following purpose
• Productive Borrowings These borrowings include loans to buy seeds, fertilizers and
agricultural equipment’s and implements.
• Un-productive Borrowings These borrowings include loans for social purposes such as
marriage and festive occasions.
❖ Sources of Rural Credit
• Non-institutional sources
✓ The major non-institutional sources of rural credit are moneylenders, friends, relatives,
landlords, shopkeepers and commission agents. Moneylenders provided about 93.6% of total
financial requirement rural areas in 1951-52 and presently it is 30%. The short-term credit
needs of the formers are met from commission agents, friends and relatives which supply
roughly 50% of total rural borrowings, 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.
• Institutional sources
▪ Co-operative credit societies ▪ National Bank for Agriculture
▪ State Bank of India and Rural Development
▪ Regional Rural Bank (NABARD)

❖ The Poor Women’s Bank Kudumbashree is women-oriented community based poverty reduction
program being implemented in Kerala. In 1995, a thrift and credit society was started as a small
savings for poor women with an objective to encourage savings. These societies have been acclaimed
as largest informal banks in Asia in terms of participation and savings mobilized.

1. National Bank for Agriculture and Rural Development (NABARD) It was set up in 1982 as an apex
body to coordinate the activities of all institutions involved in the rural financing system. It has an
authorized share capital of Rs. 500 crore.
The RBI has contributed half of the share capital while the other half has been contributed by
Government.
❖ Functions of NABARD are
✓ To grant long-term loans to the State Government for subscribing to the share capital of
cooperative societies.
✓ To take the responsibility of inspecting cooperative banks, Regional Rural Banks (RRBs) and
primary cooperative societies.
✓ To promote research in agriculture and rural development.
✓ To serve as a refinancing agency for the institutions providing finance to rural and agricultural
development.
✓ To help tenant farmers and small farmers to consolidate their land holdings.

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❖ The national agricultural credit fundi’s been transferred from RBI to NABARD to form a part of
its national rural credit fund.

2. Self Help Groups (SHGs) Formal credit system has proven inadequate. It has also not been fully
integrated into the overall rural, social and community development.
Due to the demand of some kind of collateral, vast proportion of poor rural households were
automatically out of the credit networks. Self Help Groups emerged to fill this gap, created by formal
credit system.
• Self-help groups (SHGs) have proportion of poor rural households could not avail credit
facilities because of their inability to provide some kind of collateral.
• Self-help group (SHG) bank linkages programme for micro finance: SHG has emerged as the
major micro finance programme in the country in recent years.
• Their focus is largely on those rural poor, who have no sustainable access to the formal
banking system.
• So, their target groups comprise of small and marginal farmers, agriculture and non-agriculture
laborers, 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 at reasonable interest rates,
which is to be repaid in small proportion installments.
• By march 2012, more than forty three lakh SHGs had reportable been credit linked.
• SHGs have also helped in the empowerment of women. However, the borrowings are mainly
confined to consumption purpose and negligible proportion is borrowed for agricultural
purposes.
3. Regional Rural Banks (RRBs) As a supplement to commercial banks, the regional rural banks have
also been opened. These have been set up under the Regional Rural Banks Act-of 1976. Their
banking services are meant for small and marginal formers and artisans, etc. They cater exclusively
to the needs of weaker section. Nearly 90% of the loan of RRBs were provided to the weaker
section.
4. Commercial Banks They were inducted into the field of agricultural credit under the Banking Reforms
Act, 1972. The share of commercial banks in the supply of agricultural credit has considerably
improved.
It was 46.9% during the year [Link] banks disburse agricultural credit for the purchase
of inputs, cattle, tractors, dairy farming, installation of tube-wells, etc.
5. Cooperative Credit Societies The cooperative credit societies are actively engaged in addressing
credit needs of the farmers, besides offering a host of related services. Notably these societies
provide guidance in diverse agricultural operations with a view to raise crop productivity.

❖ Rural Banking: A Critical Appraisal

After the nationalization of commercial banks in 1969, the rapid expansion of the banking system in
rural areas has been witnessed. Rural banking has raised the level of rural farm and non-farm
output, income and employment especially after the green revolution.

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.

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 Limitations of Rural Banking
• Small and marginal formers receive only a very small portion of the institutional credit.
• Rural banking is suffering from the problems of large amount of over dues and default rate.
• The sources of institutional finance are inadequate to meet the requirements of agricultural
credit.
• There exist regional inequalities in the distribution of institutional credit.
It is suggestible that more and more regional rural banks should be set up to need the credit
need of the rural and backward areas of India.
❖ Agriculture Marketing
It includes all those activities or processes which help a former getting maximum price for his produce
among others, these processes include grading packaging and storage.
Agricultural marketing is a process that involves assemble, storage, processing, transportation,
packaging, grading and distribution of different agriculture commodities across the country.

❖ Problems faced by farmers

▪ Manipulations 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 often forced to sell at low prices due to lack of required
information on prices prevailing in markets.
▪ Lack of storage facilities: They also did not have proper storage facilities to keep back their
produce in farms are wasted due to lack of storage.

❖ Measures Initiated by the Government to Improve Market System

• Regulated markets • Subsidized transport
• Co-operative agricultural marketing • Dissemination of information
societies • MSP policy
• Provision of warehousing facilities
1. Regulated markets: The first measure was regulation of markets, to create orderly and transparent
marketing conditions. Regulated markets have been organized with a view to protect the farmers from
the malpractices of sellers and brokers. With a view to protect the farmers from the malpractice of
sellers and brokers this policy benefited farmers as well as consumers.
2. Infrastructural facilities: The government aims to provide physical infrastructure facilities like roads,
railways, warehouses, godowns, cold storage and processing units. The current infrastructure facilities
are quite inadequate to meet the growing demand and need to be improved.
3. Cooperative marketing: The aim cooperative marketing is to realize fair price for farmer’s products.
Under this, marketing societies are formed by farmers to sell the output collectively and to take
advantage of collective bargaining, in order to obtain better price.
4. Different policy instruments;
In order to protect the farmers, the government has initiated the following policies;
✓ Minimum supporter price (MSP) : to safeguard the interest of farmers government fixes the
minimum support prices of 24 agricultural products like wheat, rice ,maize , cotton, sugarcane
pulses , etc… such a price may be regarded as an offer price , at which government is willing
to buy any amount of grains from the farmers.
✓ Maintenance of buffer stocks: the food corporation of India (FCI) purchases wheat and rice
at the procurement prices, to maintain buffer stock. Buffer stock is created in the years of
surplus production and is used during shortages. It helps to ensure regularity in supply and
stability in prices.

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 ✓ Public distribution system (PDS): the public distribution system in our country operates
through a network of ratio shops and fair price shops. Fair price shops offer essential
commodities like wheat, rice, kerosene, etc... At a price below the market price, to the weaker
of the society.
5. 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.
❖ Diversification is an emerging challenge in the context of rural development. It has two aspects.
▪ Diversification of Crop Production It implies production of diverse variety of crops rather than
one specialized crop. It means a shift from single-cropping system to multi-cropping system.
▪ Diversification of Production Activity/Employment It implies a shift from crop farming to other
areas of production activity employment.
❖ Need of 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 overcrowded, a major proportion of the increasing
labour force needs to find alternate employment opportunities in other non-farm sectors.

❖ Non-Farm Areas of Production Activity/Employment for the Rural Population

▪ Animal Husbandry It is the most important area of employment in India different from crop
farming. It is also called livestock farming, poultry, cattle etc.
▪ Fisheries the fishing community in India depends almost equally on inland sources and marine
sources of fishing. Inland sources include rivers, lakes, ponds and streams etc.
▪ Horticulture Horticultural crops include fruits, vegetables and flowers besides several other. Over
time, there has been a substantial increase in area under horticulture.
▪ Cottage and Household Industry This industry has been dominated by such activities as
spinning, weaving, dyeing and bleaching.

❖ 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.
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’ Markets in Tamil Nadu).
▪ 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.
❖ Organic Farming and Sustainable Development
Conventional agriculture relies heavily on chemical fertilizers and toxic pesticides etc., which enter

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 the food supply, penetrate the water sources, harm the livestock, deplete the soil and devastate
natural eco-sisterly
❖ Meaning of Organic Farming
Organic farming is the form of agriculture that relies on techniques such as crop rotation, green
manure, compost and biological pest control. This method avoids the use of synthetic chemical
fertilizers and genetically modified organisms.
✓ Organic farming is the process of producing safe and healthy food, without leaving any
adverse impact on the environment
✓ In short, organic agriculture is a whole system of farming that restores, maintains and enhances
the ecological balance.
✓ There is an increasing demand for organically grown food, to enhance food safety throughout
the world.
❖ Benefits of Organic Farming
Organic Farming is beneficial because of following reasons:
1) 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.
2) Generate income through exports It generates income through international exports as demand
for organically grown crops is on a rise.
3) Provides Healthy Food: It provides healthy food as organically grown food has more nutritional
value than food grown through chemical farming.
4) Source of Employment: Organic farming generates more employment opportunities as it requires
more labour input than conventional farming.
5) Safety of environment: The produce of organic farming is pesticide-free and is produced in an
environmentally sustainable way.
❖ Challenges before Organic Farming
i. Less Popular: Organic farming needs to be popularized by creating awareness and willingness
on the part of farmers, for adoption of new technology. There is a serious need for an appropriate
agriculture policy to promote organic farming.
ii. Lack of infrastructure and marketing facilities: Organic farming faces problems of inadequate
infrastructure and marketing facilities.
iii. Low Yield: Organic farming has a lesser yield in the initial years as compared to modern
agricultural farming. As a result, small and marginal farmers find difficult to adapt to large-scale
production.
iv. Shorter food life: Organic produce has a shorter shelf life as compared to sprayed produce.
v. Limited choice of crops: The choice in production of off-season crops is quite limited in organic
farming. In Spite of all these limitations, organic farming helps in sustainable development of
agriculture and India has a clear advantage in producing organic products, for both domestic
and international markets.

❖ Benefits of organic farming are as follows

▪ Discards the use of non-renewable resources
▪ Environment friendly
▪ Sustains soil fertility
▪ Healthier and tastier food
▪ In expensive technology for the small and marginal farmers

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❖ Benefits of Organic Farming
▪ Organic forming substitutes costlier agriculture inputs like HYV seeds, chemical fertilizers,
pesticides, etc with locally produced organic inputs that are cheaper and thereby generate
good returns on investment.
▪ Organic forming also generates income through exports.
▪ Organically grown food has more nutritional value than chemical forming, thus providing us
with healthy foods. Produce pesticide free and produced in an environment sustainable way.
▪ Due to more labour requirement in organic farming, it is an attractive proposition for India.
❖ Sustainable Development and Organic Farming
Conventional agriculture uses chemical fertilizers and toxic pesticides, etc which enter the food supply,
penetrate the water resources, harm the livestock, deplete the soil and devastate natural eco-system.
❖ Due to these problems, an eco-friendly technology is required.
Organic farming is such technology which restores, maintains and enhances the ecological balance.
There is an increasing demand for organically grown food to enhance food safety throughout the
world.
❖ Limitations of Organic Farming
▪ Yields from organic forming are less than modern agricultural forming in the initial years.
Therefore, small and marginal formers may find it difficult to adapt to large scale production.
▪ Organic produce have shorter shelf life than sprayed produce.
▪ Choice in production of off-season crops in quite limited in organic forming.

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