AGRICULTURE AND RURAL
ECONOMY
• RURAL PRODUCTION SYSTEM AND
RESOURCES:
• Production System :- Under Production system,
various crops are produced.
• BASIC NEEDS : (i) Land (own)
• (ii) Land on Tenancy. (Private or Govt. Land).
• Crops are (i) Food-grains (ii) Other Crops for
sale to get Cash. Farmers produce food-grain-
crops for own use or for sale in market.
• Farmers are producing those crops which
give more benefits called CASH-CROPS
e.g. Cotton, Sugarcane, Mustard etc.
• Production system is based on the Agro-
Climatic condition.
• Every Crop cannot be raised every-where,
because the requirements are different for
every crop along-with climate.
• ESSENTIALS FOR PRODUCTION OF
CROPS:-
• 1. Land(Fertile soil)
• 2. Water
• 3. Inputs (Seed and Fertilizers)
• 4. Pesticides & Insecticides
• 5. Cutting of Crops & Storage
• 6. Marketing of Crops (Mandi, KUMS)
TYPES OF CROPS
• 1. Kharif Crops (Rain-fed Crops).
• 2. Rabi Crops (Irrigated area crops)
• Time Period for Crop raising:
• 1. For Kharif –April to September.
• 2. For Rabi -- October to March
• Classification of Crops: (1) Food-grain
(2)Oilseeds (3) Cash-Crops (4)
Vegetables and (5) Horticulture-Fruit crops
• FOOD-GRAINS: - Wheat, Rice, Maize,
• Bajra. (Cereals)
• OIL-SEEDS: - Ground Nut, Mustard,
• Soyabean, Sesamum etc.
• CASH CROPS: - Cotton, Sugarcane,
• Tobbacco, Vegetables,Chilli,
• Onion, Garlic etc.
• VEGETABLES :All types of Vegetables.
• FRUITS: Citrus, Gauwa, Mango, Orange,Grapes
• Norms of Crops : Scale of Finance- DLTC
• Land-holding and Kharif-Rabi Crops.
• Maximum Limit for Finance for raising
Crop.
• Average Crop Finance is Rs. 25,000/- in
India.
• To Big Farmers Finance : Rs.3 Lacs Max.
• Maximum Loan Amount Rs. 50,ooo to
70,000 per farmer.
• Total Geographical Area of India is 329
Million Hectares of Land.
• Total Cropped area & net sown-area is
190 Million Hectare (62%)
• Double cropped area is 49 Million Hectare
i.e. 16% only.
• Food Requirement is 350 MT
• Food Production is 330 MT (There is a
need to grow more).
• CROPPING PATTERN : Distribution of the
cropped area over different crops is known
as pattern of cropping. There is no major
change in cropping pattern in India.
Presently the coverage of Land is as
under :--
• 1. Food-grains 40% cropped area
• 2. Oil-seeds 5% ,,
• 3. Cotton 2%
• 4. Sugarcane 8%
• 5. Vegetables 5%
• 6. Fruits 8%
• 7. Other crops 30%
• 8. Jute 2%
• -------------------------------
• Total 100
• RESOURCES FOR PRODUCTION
SYSTEM:-- Production system is a part of
Rural Development. RD is now looked
into by NABARD: NABARD is Apex Rural
Development Bank in India.
• AGENCIES FOR AGRIL. FINANCE:
• (Financing Institutions):
• I Institutional Agencies
• II Non-Institutional Agencies.
• I-INSTITUTIONAL AGENCIES:
• R.B.I. | N.A.B.A.R.D.
• Comm. Banks | Comm. Banks -SCB
Nationalised- Private| [Link]. - DCCB
• Branches-Branches.| Branches PLDB
• Farmers Farmers | Farmers PACS
• Farmers
• NON-INSTITUTIONAL AGENCIES:
• - Relatives & Friends,
• - Land-Lords,
• - Money-lenders,
• - Traders & Commission Agents.
• RBI IS THE LENDER OF LAST RESORT.
• FLOW OF FUNDS FOR [Link]:
• Funds availability to Banks
• Finance to Farmers
• Rate of Interest and Margin of Banks.
• Govt. is making available the Agril. Loan to
farmer at 7% rate (subsidised).
• INSURANCE OF CROPS.(10-15% Farmers are
covered under Insurance)
• PROCUREMENT OF CROPS :
1.
• Procurement by Govt. (through FCI)
• Procurement by Agents of FCI/Govt.
• Procurement by Coop. Mkg. Societies.
• Procurement by Mandi Samities (KUMS)
• Procurement by Private Agents/Dealers.
• MINIMUM SUPPORT PRICE (MSP):
• For common variety of Food-grains,
MSP were as under :--
MSP of Important Food-grains: A Comparison:
2003-04 2008-09
1. Wheat Rs.630/- Rs.1080/-
2. Rice Rs.550/- Rs. 900/-
3. Bajra Rs.450/- Rs. 600/-
Like wise for other crops the MSP have been fixed
by the Central Govt. and increased from time to
time.
Storage is done at following places by
Govt.:
1. State FCI Godowns
2. Central Warehousing Corporation
3. Govt. Market Yards.
4. Cooperative Marketing Society’s
Godowns.
5. Military Barracks and Air Strips
(vacant)
• CONTRIBUTION OF AGRIL. IN
NATIONAL INCOME
– 1950-51 56.5%
– 1990-91 34.O%
– 2006-07 20.5%
– 2007-08 17.8%
– 7008-09 17.1% (Reducing year after year)
• PATTERN OF LAND-HOLDING:
1. Marginal holdings: Maximum farmers are
covered under this type of holding.
(a) Marginal (< 1 Hect.) 0.40 Hect.(1 Ac)
(b) Small (1 to 2 Hect.) 1.41 Hect.
(c) Semi-medium(2 to 4 H) 2.72 Hect.
(d) Medium (4 to 10 H) 5.80 Hect.
(e) Large (10 Hect. & above) 17.18 Hect.
Source: Ministry of Agriculture-Annual Report 2007
• Thus land-holdings are :
• 1. Marginal holding
• 2. Small holding
• 3. Semi-medium holding
• 4. Medium holding and
5. Large holdings.
Average size of holding in India is 2.3 Hectare
and operational holding is 1.32 hactres.
• Causes for small size of holdings in India:
• (i) Growing population in the country.
• (ii) The Law of inheritance – Division of
holding is reducing the size of holding.
• (iii) The Decline of joint family system:
Joint families have broken down – so
division and sub-division of holding is
going on.
• (iv) The decline of handicrafts and village
industries. Artisans have to leave their work due
to machine-made goods. The Artisan have
reverted to Agriculture activity hence size of
land holding have reduced.
• (v) Rural indebt-ness and money-lenders :The
money-lender has only one interest to lend to
farmers and grab the land. Plot of land pass
from the farmers to the money-lenders in lieu of
debt payment.
• REMEDIES FOR SUB-DIVISION OF
LAND OF FARMERS:
• 1. Creation of Economic holdings.
• 2. Setting up of new Industries in rural
area to provide employment.
• 3. Shifting from small holding to other
occupational work – allied to agril. work.
• 4. Consolidation of holdings (compact
land holding – from scattered holdings.
• 5. Cooperative Farming. It can be a
permanent solution to small holding.
– (a) Collective cooperative farming.
– (b) Cooperative joint farming.
– (c) Cooperative tenant farming.
– (d) Cooperative better farming (by improved
methods of operation. Ploughing, weeding,
harvesting is done in a combined system.
Mechanical equipments are used. ====== **
3
• ROLE OF AGRICUFLTURE AND ALLIED
ACTIVITIES IN INDIAN ECONOMY:
• 1. Indian Agricultural have reached the
stage of development and Maturity.
• 2. Earlier Agriculture was done for own
use (Food-grains)- It is pre-independence
period.
• 3. Green Revolution in 1966.
• 4. Agril. on Commercial Basis.
Role of Agri. In Indian Economy
can be discussed in following way:
• (i) Share in National Income.
• (ii) Large Employment Providing sector.
• (iii) Provision of Food-surplus to the
expanding population.
• (iv) Contribution to Capital Formation.
• (v) Providing Raw Materials to industries.
• (vi) Market for industrial products.
• (vii) Importance in International Trade.
(i) SHARE IN NATIONAL INCOME:
•(a) In 1950-51 Share of Agril. in NI-55.1%
•(b) In 1981-82 Share of Agril. in NI -37.6%
•(c) In 2006-07 Share of Agril. in NI -18.5%
•(d) In 2008-09 Share of Agril. in NI -17.8%
Developed Economies are less depedent on
Agriculture as compared under/developing
countries.
• In USA & U.K. the contribution to GDP by agriculture is
2%.
• As the country progresses, the dependence on
Agriculture declines.
• (ii) AGRIL. IS LARGEST EMPLOYMENT PROVIDING
SECTOR.:-
• (a) In 1950-51 – 69.5% working population was engaged
in Agril.
• (b) In 1991-92- 66.9% working population was engaged
in Agriculture. And (c) in 2001- 56.7% working population
was engaged in Agriculture.
(iii) PROVISION OF FOOD
SURPLUS TO THE EXPANDING
POPULATION.
• a) There is heavy pressure of population
so there is increasing demand for food
also.
• b) There is regular need of surplus food
grains in our country. Thus there is regular
demand of food in India.
DOMESTIC DEMAND :
• YEAR DOMESTIC DEMAND
• 2004-05 207.00 Million Tonnes
• 2007-08 215.00 Million Tonnes
• 2011-12 235.40 Million Tonnes.
• 2020-21 280.60 Million Tonnes
• Required growth rate of Food-grain is
1.86% p.a. to meet out the growing
demand of future.
(iv) CONTRIBUTION TO CAPITAL
FORMATION:
• Economic development of a country is
assessed by is increase in Capital
Formation also. Without high-degree
Capital formation, it cannot be said as
Economic Development is there.
• Agriculture is the largest industry in India
so it plays very important role in pushing
up the rate of Capital Formation.
(v) PROVIDING RAW MATERIALS
TO INDUSTRIES:
• a) Agril. provides raw-materials to various
industries of National Importance.
• Examples are (1) Sugar (2) Jute (iii)
Cotton Textile (4) Vanaspati Oil (5) Food-
processing industries (Tomato, Potato
etc).
• Thus the role of Agriculture is important.
(vi) MARKET FOR INDUSTRIAL
PRODUCTS:
• (a) The majority of population lives in rural
area and they are the buyers for products
produced by various industries.
• (b) Due to Green Revolution, the Big
farmers have good income out of Agril.
Production and they need not to pay Tax
on their income. So these big farmers
have more purchasing power and they are
buying Industrial goods in Rural area.
• Manufacturers of Household items, such as
items of daily use are :-
• i. Soap
• Ii Tea/Coffee
• Iii Detergents
• Iv Clothes
• V Cycles/ Motor cycles.
• Vi Radio-TV- Mobiles, Jeep/Car. Computers
etc.
(vii) IMPORTANCE IN
INTERNATIONAL TRADE:
• Agril. based Exports of India :(1950 to 1960)
• (i) Cotton Textile|
• (ii) Jute |-- More than 50%
• (iii) Tea | of export earnings.
• Other items are : Cashew Kernels, Sugar,
Tobacco, Coffee, Vegetable Oil,>--20%
Share of Agriculture is about 70%.
( in total export).
• With economic progress & diversification
of production base, now the share of Agril.
goods to total exports has constantly
fallen. The present possition is as under :
• 1960-61 44.2% share % of Agril.
• 1980-81 30.7% share % of Agril.
• 2006-07 10.3% share % of Agril.
• 2007-08 11.6% share % of Agril.
• During drought conditions in the country,
India imports – Food-grains, Dairy
Products, Fruits, Vegetables, Vegetable
Oils and Raw materials.
• Population engaged in Agriculture:
• Agril. provides livelihood to 127.3 million
people as cultivators. And another 106.8
million people as Agricultural
labour.============ ****
AGRICULTURAL PLANNING AND
REFORM
• Contents : Agricultural Planning and
Reform –Planning Commission—Various
reforms in Agril—MSP for Agri. Produce
and Minimum Wage for labour.
• OBJECTIVES OF ECONOMIC
PLANNING FOR THE AGRICULTURAL
SECTOR :(During First Plan 1951-56):
• (a) To increase Agricultural production.
• (b) To increase employment opportunities.
• (c) To reduce the pressure of population
on land.
• (d) To reduce inequality of incomes in the
rural sector.
• The above 4 objectives are generally
followed in all our five year plans.
• Strategy used in the agricultural sector:
• (a) Setting up of Community Development
Programmes and Agricultural Extension
Services throughout the country;
• (b) Expansion of irrigation facilities,
fertilizers, pesticides, agricultural
machinery, High-yielding varities of seeds
• (c) Expansion of Transportation, power,
marketing and of Institutional credit.
• (d) To Set-up of Agro-based industries
and handicrafts in rural areas;
• (e) To promote rural transport and
communications;
• (f) To encourage the movement of
people from agriculture to industries and
service sectors.
• (g) To protect the tenants through
tenancy legislation, ceiling of land holding,
• And to distribute the surplus land of ceiling
to land less labourers and small and
marginal farmers.
• GREEN REVOLUTION DURING 1965-66
TO 1975-76.
• Fourth plan failed to achieve the
agricultural targets.
• Fifth plan (1974-79) was given more outlay
• In budget to the tune of Rs. 39,430 Crores,
Rs. 8740 crores (24% of total plan) was
given for Agriculture. Plan targets were
achieved after 1973-74. Agricultural
progress was steady and plan targets
were almost realized during 1975.
• Sixth plan (1980-85) was hailed as a great
success particularly in Agricultural front.
• The growth rate was 4.3% as against
3.8% in previous plan periods.
• During Sixth plan Oilseed programme was
successful in Agril sector.
• The Seventh plan (1985-90) was not so
successful (except cotton production) so
faar as Agril. sector is concern.
• The Eighth Plan (1992-97) was sound and
in Agril. production area,In Oilseeds,
Sugarcane, Cotton and Jute the
achievement was more than targets. But
the food grain production was little bit on
lower side of the target. (Target was 210
MT but production was 199 MT)
• The IXth Plan(:1997-2002): During ninth
plan there was not a success in
Agricultural targets.
• The Xth Plan (2002-2007) : During tenth
plan period, the Agricultural production
had increased to 216 MT. There was
clear growths in OILSEEDS, Sugarcane,
and Cotton. In general, it is estimated that
the Annual rate of Growth in Agriculture ...
• Was 2.3 per cent as against the targeted
4% growth rate.
• Eleventh Plan : (2007-12):-
• The Planning Commission (PC) has fixed
the target of 4%, rate of growth in
Agriculture.
VARIOUS REFORMS IN
AGRICULTURE:
• . Economic Reform in Terms of Trade:
– Reform policy has Two phases in its impact
on agriculture.
– Ist Phase: Economic Libralisation (1985-95).
– 2nd Phase: (from 1995 ) when India joined the
WTO and signed the agreement on
Agriculture. Trade in Agriculture has been
liberalised. We see a change in price of
Agriculture products.
• Major Agricultural crops are competitive.
Economic reforms by liberalization in
trade of Agriculture products have shown
a favourable condition.
• The average annual percentage change of
gross terms of trade for the year 1980s is
0.87 as against 2.68 in the 1990s. It
means due to liberalization the trade in
• Agriculture was 3 time (increased) in 10
years period.
• MINIMUM SUPPORT PRICE OF
AAGRICULTURE PRODUCTS:
• The Govt. has been announcing MSP for
24 major crops. The main objectives of
announcing MSP are :-
• 1. To prevent fall in prices in the situation
of over production.
• 2. To protect the interest of farmers by
ensuring them a minimum price for their
crops in the situation of a price fall in the
market.
• 3. MSP is that price at which Govt. is
ready to purchase the crop from the
farmers directly if crop price becomes
• Lower to MSP.
• 4. As a result, market price of the crfop
never comes down from the level of MSP.
• 5. This minimum price security gives
incentives to farmers to increase their
production.
• These MSPs of various crops are
announced on the basis of
recommendations made by Agriculture
• Cost & Price Commission (ACPC) which
takes into consideration the inputs costs
and favourable return to the farmer while
recommending MSP.
Crops 2007-08 2008-09 Increase
• Paddy 745 900 155
• Paddy Gr.A 775 930 155
• Maize 620 840 220
• Crops 2007-08 2008-09 Increase
• Bajra/Jwar 600 840 240
• Arhar (Tur) 1590 2000 410
• Moong/Urad 1740 2520 780
• Ground-nut 1550 2100 550
• Soyabean(B)910 1350 440
• Soyabean(Y)1050 1390 340
• Sunflower 1510 2215 705
• Seasmum 1580 2750 1170
• Nigerseed 1240 2405 1165
• Cotton (Med)1800 2500 700
• Cotton (Long)2030 3000 970
• Wheat 950 1080 130