Rural Development

Actions and initiatives taken for socio-economic development of rural areas

Alleviate poverty
Development of infrastructural facilities
Improve standard of living
Generating employment opportunities
 Key Issues Involved in Rural Development

Human Capital
Formation

Development of
Productive Resources

Generation of
Employment Opportunities

Development of
Rural Infrastructure

Land and Technical

Reforms

Reducing
Poverty
 Key Issues Involved in Rural Development

Human Capital
Formation

Development of Lack of education & health care

facilities
Productive Resources

Generation of Low quality of human capital

Employment Opportunities

Development of Backward and under-developed

Rural Infrastructure rural areas

Land and Technical

Reforms Investment in education & health sector
to improve the quality of human capital
Reducing
Poverty
 Key Issues Involved in Rural Development

Human Capital
Formation

Development of Agriculture, the main occupation of people, suffers from

Productive Resources
Excessive burden, leading to low productivity
Generation of Lack of basic infrastructural facilities
Employment Opportunities Use of traditional techniques
Lack of irrigation facilities
Development of
Rural Infrastructure Difficulty in getting cheap loans

Land and Technical

Reforms Need for creation of alternative source of
income to reduce excessive burden on agriculture sector
Reducing
Poverty
 Key Issues Involved in Rural Development

Human Capital
Formation Problems Remedies
Development of
Lack of alternative Fisheries and Livestock
Productive Resources opportunities farming

Generation of Dependency on Horticulture

Employment Opportunities agriculture

Development of Low productivity Cottage industries

Rural Infrastructure

Land and Technical

Reforms Generating alternative employment sources will increase
income of rural poor and improve living standards
Reducing
Poverty
 Key Issues Involved in Rural Development

Human Capital
Formation

Development of
Productive Resources Rural areas have poor infrastructure

Generation of Poor connectivity with cities

Employment Opportunities No electricity
Absence of banking system
Development of
Rural Infrastructure Backward schools

Land and Technical

Reforms Development of basic infrastructural
facilities is a pre-requisite for rural development
Reducing
Poverty
 Key Issues Involved in Rural Development

Human Capital Pre-reform Scenario Post-reform Scenario

Formation
Small land holdings Consolidating land
Development of holdings
Productive Resources
Presence of Abolishing
intermediaries intermediaries
Generation of
Employment Opportunities
Dependence on Easy and cheap
money lenders availability of funds
Development of
Rural Infrastructure
Use of traditional Using HYV seeds,
outdated techniques fertilisers & pesticides
Land and Technical
Reforms Reforms lead to optimum land utilisation, thereby
increased productivity and improved standard of living
Reducing
Poverty
 Key Issues Involved in Rural Development

Human Capital
Formation
Problems Remedies
Development of Low income leading to
Productive Resources low living standards Free education

Generation of Less amount spent on Vocational training

Employment Opportunities education

Development of Low income generating Income generating

Rural Infrastructure capacity assets

Land and Technical

Reforms Reducing poverty levels would curb problems of
unemployment, inferior human capital and inequalities
Reducing
Poverty
 Rural Credit and Its Importance

Low income
Low income of
of No investment
No investment on
on Reduced productivity
Reduced productivity Importance of
Importance of
farmers
farmers farmlands
farmlands levels
levels Rural Credit
Rural Credit
 Rural Credit and Its Importance

Low income
Low income of
of No investment
No investment on
on Reduced productivity
Reduced productivity Importance of
Importance of
farmers
farmers farmlands
farmlands levels
levels Rural Credit
Rural Credit

Promotes commercialisation of
Low productivity, only No funds for
farming self consumption reinvestment

Availability of funds is a Room for investment in

Helps finance farming pre-requisite modern techniques
inputs

Easy and cheap availability of credit helps generate

Keeps farmers out of the vicious surplus for market, thereby increases income
circle of poverty

Protects farmers against natural

calamities
 Rural Credit and Its Importance

Low income
Low income of
of No investment
No investment on
on Reduced productivity
Reduced productivity Importance of
Importance of
farmers
farmers farmlands
farmlands levels
levels Rural Credit
Rural Credit

Promotes commercialisation of
farming Problem of time lag

Sowing of seeds Harvesting of crops

Helps finance farming
inputs

Investment of funds Receipt of income

Keeps farmers out of the vicious
circle of poverty
Easy and cheap availability of credit
helps arrange farming inputs
Protects farmers against natural
calamities
 Rural Credit and Its Importance

Low income
Low income of
of No investment
No investment on
on Reduced productivity
Reduced productivity Importance of
Importance of
farmers
farmers farmlands
farmlands levels
levels Rural Credit
Rural Credit

Promotes commercialisation of
farming

Small & landless farmers

Helps finance farming borrow at high interest rates
inputs Fall into
debt trap
Further borrow to meet interest
obligation
Keeps farmers out of the vicious
circle of poverty Availability of credit helps farmers
meet their general and specific needs easily

Protects farmers against natural

calamities
 Rural Credit and Its Importance

Low income
Low income of
of No investment
No investment on
on Reduced productivity
Reduced productivity Importance of
Importance of
farmers
farmers farmlands
farmlands levels
levels Rural Credit
Rural Credit

Promotes commercialisation of
farming

Helps finance farming

inputs Natural Calamities Adversely Affects Productivity

Floods
Keeps farmers out of the vicious Crop insurance and farm credit
Earthquake provide cushion against
circle of poverty
Monsoon natural calamities

Protects farmers against natural

calamities
 Classification of Rural Credit

On
Onthe
theBasis
Basis On
Onthe
theBasis
Basis
of Purpose
of Purpose of Duration
of Duration

Productive Unproductive Short-term Medium- term Long-term

For purchasing For meeting 6 months to 15 months to 5 years to

farming inputs personal expenses 15 months 5 years 20 years
(Purchase of ( Purchase of (Purcahse of
inputs) machinery, additional land
carrying out land modern
improvements and machinery like
purchasing farm tractors and
animals.) threshing
machines.)
 Sources of Rural Credit in India
Non-Institutional Institutional

Informal source of credit such as Formal source of credit such as

local money lenders, traders, banks, insurance companies and
landlords and relatives other such financial intermediaries

Non-institutional
source of credit
often lead to a debt
trap for the
farmers
 Sources of Rural Credit in India
Non-Institutional

Money Lenders Traders, landlords and relatives

• Most popular source of rural credit • Advance credit by purchasing
produce
• Easy lending of funds for productive
or non-productive purposes • Buy at low price and resell at high
margins
 Sources of Rural Credit in India
Co-operative banks & societies Voluntary association of Institutional
persons to meet mutual
financial needs

The Indian government passed the

‘Cooperative Credit Societies Act’
in 1904 which marked the
beginning of cooperative credit in
India.
People voluntarily come together to meet their
mutual financial needs
 Sources of Rural Credit in India
Co-operative banks & societies Voluntary association of Institutional
persons to meet mutual
financial needs

Objectives
Objectives Levels
Levels

• Eliminating moneylenders • Primary Agricultural Credit Societies (At village level)

• Easy access of credit to farmers • Central co-operative banks (At district level)

• Expand flow of rural credit • State co-operative banks (At state level)

Drawbacks
Drawbacks
• Insufficient financial sources
• Inclination towards large farmers
• Huge overdue amount
• Uneven growth
• Delay in advancing credit
 Sources of Rural Credit in India
Institutional

Commercial Banks Regional Rural Banks & Land Development Banks

• Work as per the central bank (RBI) • Operate at district level to provide credit

• Accepts deposits from its customers • Focus on weaker sections & backward areas

• Provides loan to urban & rural people • Provide credit only for productive purposes

 In 1969, fourteen banks were

nationalized for the purpose of
advancing credit to rural people
 Social banking was then used
and the financial needs of the
farmers were taken on a priority
basis
 Sources of Rural Credit in India
National Bank for Agricultural and Rural Development (NABARD)
Institutional

Controls & regulates the activities of rural banking

institutions

• Act as an apex agency for institutions granting rural credit

• Monitor, formulate, restructure institutions to improve credit delivery system

• Coordinating financing activities of institutions engaged in development at grass-root levels

• Refinancing institutions involved in rural credit sector

 Sources of Rural Credit in India
Reserve Bank of India
Institutional

The RBI has been playing a key role in

strengthening the rural credit since its
establishment in 1935.

RBI focuses on:

 Providing refinance facilities in rural sector
 Expansion of cooperative institutes to provide rural credit and their sources of funds
 Providing training to the professionals of cooperative credit organisation
 Establishing state partnership in cooperative credit organisation to provide long-term
funds
 Rural credit surveys have been organized to find the extent of the provision of rural
credit
 Advising on different matters like expansion programmes to provide rural credit in
a more efficient matter
Hence, the RBI is majorly playing the regulatory role in providing the rural
credit
 Miscellaneous Sources of Rural Credit in India
Micro Credit Kisan Credit Card Poor Women’s Bank

Credit services to poor through Short term credit needs of Promoting saving & banking
Self Help Groups & Non-Govt. farmers is meet by issuing a habits among poor women to
Org. Kisan Credit Card mobilise credit

• Savings of members are pooled • Bank issue a credit card based • Credit societies have been
to meet financial requirements on operational land holdings, formed to mobilise savings and
of other group members credit requirements etc. credit

• SHGs reduce transaction cost • Aims to increase farmers’ • A scheme called Kudumbashree
for both lenders and borrowers accessibility to credit was launched in Kerala in 1995

• Informal credit delivery • Option to reschedule loan in • Aims to reduce poverty levels
mechanism & minimum legal case of natural calamities or
formalities crop failure
 Critical Appraisal of Rural Banking in India
Positive Aspects Negative Aspects

• Provision for credit to rural folks at moderate rate • Providing securities against loan made availing
of interest credit difficult for all

• Establishment of NABARD ensures smooth • Lenient recovery mechanism adopted by the

functioning rural financial institutions government increased defaults

• Liberated the small and landless farmers from the

debt-traps

• Promoted commercialisation of agriculture

 Agricultural Marketing

Agricultural marketing includes

post-harvesting activities till
the time of final sale

Gathering the product

after harvesting

Selling the produce at

Processing the produce
attractive prices
Agricultural
Marketing
Storing the product for Grading the produce as
future use per quality norms

Packaging the produce

 Agricultural Marketing
Agricultural marketing includes
Gathering the product
post-harvesting activities till
after harvesting
the time of final sale
Selling the produce at Processing the produce
attractive prices
Agricultural
Marketing
Storing the product for Grading the produce as
future use per quality norms

Packaging the produce

Need for Agricultural Marketing

• Help fetch maximum price for agricultural produce

• Availability of storage and transportation facilities encourage increase in output levels

• Supply of raw material from agricultural sector to industries becomes smooth and efficient

• Mitigates the role of middlemen, thus reducing the exploitation faced by farmers
 Steps Taken by Government to Improve Agricultural Marketing

Organisation of Regulated
Markets

Infrastructural
Development

Setting up of Warehousing
Facilities

Improvement of
Transportation Facilities

Propagation of Market
Information

Minimum Support Price

Policy
 Steps Taken by Government to Improve Agricultural Marketing

Organisation of Regulated Sale and purchase of agricultural products are

Markets monitored by a market committee

Infrastructural Farmers Traders

Development
Market
Committee
Setting up of Warehousing
Facilities
Government Agents
Improvement of
Transportation Facilities
 Aim is to fetch maximum price for agricultural produce
Propagation of Market
 Prohibits unfair dealing and fraudulent trade practices
Information
 Market system becomes transparent
Minimum Support Price
Policy
 Steps Taken by Government to Improve Agricultural Marketing

Organisation of Regulated
Markets

Infrastructural Lack of proper infrastructure impedes agricultural

Development growth & productivity

Setting up of Warehousing Steps taken by Government

Facilities
 Set up warehouses to store agricultural produce

Improvement of  Advancement of Indian railways and roadways

Transportation Facilities

Propagation of Market
Opportunity to sell at right price and at right time
Information

Minimum Support Price

Policy
 Steps Taken by Government to Improve Agricultural Marketing

Organisation of Regulated
Markets

Infrastructural
Development

Setting up of Warehousing Encourages farmers to invest in crops, store

Facilities their produce and sell in future at a higher price

Improvement of Easy connectivity to urban areas increase the earnings

Transportation Facilities of farmers by selling the produce at higher price

Propagation of Market
Information

Minimum Support Price

Policy
 Steps Taken by Government to Improve Agricultural Marketing

Organisation of Regulated
Markets

Infrastructural
Development Special agriculture-based programmes were introduced to
safeguard the interest of farmers
Setting up of Warehousing
Facilities

Improvement of
Transportation Facilities Krishi Darshan Kisan Call Centre

Information related to market Any information can be sought

Propagation of Market
conditions, price and weather is and grievances can be sorted,
Information
broadcasted on TV and Radio enables to fetch maximum returns
Minimum Support Price
Policy
 Steps Taken by Government to Improve Agricultural Marketing
Minimum legislated price that a farmer can charge for its
Organisation of Regulated produce
Markets
Benefits of Minimum Support Price
Infrastructural
Development  Assures the farmers of a minimum price

 Increases farm productivity without fear of

Setting up of Warehousing
Facilities selling
The stock purchased by farmers on
MSP are kept as buffer stocks by
Improvement of the government.
Transportation Facilities And using in public distribution
system (PDS) during periods of low
Propagation of Market productivity
Information

Minimum Support Price

Policy
 Alternative Channels of Agricultural Marketing

Middlemen exploited small and marginal farmers by purchasing

farm products at very low prices and sell them at high prices

Alternative Channels

Apni Mandi Hadapsar Mandi Rythu Bazar Uzhavar Sandies

(Punjab, Haryana (Pune) (Andhra Pradesh) (Tamil Nadu)
& Rajasthan)

Also, national and international companies enter into contracts of direct

sale with farmers. They make advance payment for buying farm products
at pre-determined price, leading to reduced price risk and increased earnings