CLASS

12
-------------------
INDIAN
ECONOMICS
------------------
RURAL
DEVELOPMENT

Q.1 What do you mean by Rural development ?

A.1 It means an action-plan for the social and economic growth of the rural areas. Action plan is to focus on:
1) Lingering challenges: problems which villagers have been facing from many years. They are:
(i) challenge of rural credit (ii) challenge of rural maketing
2) Emerging challenges: new problems which villagers are facing now.
(i) employment outside agriculture (ii) challenge of organic farming
3) Other challenges:
(i) development of means of transport (ii) provision of power/electricity
(iii) permanent means of irrigation (iv) agricultural research

Q.2 What is meant by rural credit ? Why do farmers need credit ? How are credit needs of farmers classified ?
A.2 Rural credit means credit for farming. They need credit because:
1) Most farmers in India are small & marginal holders who do subsistence farming (produce only for themselves). They don’t earn
enough money that can be saved and re-invested in farming for the next year. So, they depend on credit.
2) The gestation lag/ time-period between sowing and harvesting of crops is quite long. So, during this time period they need money
to meet their daily expenses like for household expenses, electricity bills, rent, wages, etc.

Their credit needs can be classified into 3 types:

1) Short-term credit: needed for 6-12 months. It is needed to buy inputs like seeds, fertilisers, pesticides & insecticides.
The gestation lag/ time-period between sowing and harvesting of crops is quite long. So, during this time period they need
money to meet their daily expenses like for household expenses, electricity bills, rent, wages, etc.

2) Medium-term credit: needed for 1-5 years. It is needed to purchase machines like tractors, tube-wells, etc; for construction of
fences; digging wells.

3) Long term credit: needed for 5-10 years. It is needed to purchase additional land and for carrying out permanent improvements
on the existing land.

Their credit needs can also be classified as:

1) Productive needs: for production purpose likefor buying inputs like seeds, fertilisers, pesticides & insecticides ; to purchase
machines like tractors, tube-wells, etc. ; to buy additional land.
2) Unproductive needs: for consumption purpose: to meet household expenses ; for marriages ; etc.

Q.3 What are the sources of rural credit ?

A.3 (1) Non-institutional sources:
i) They include landlords, moneylenders, village traders and commission agents.
ii) They accounted for 93% of total borrowings during 1st 5 year plan.
iii) They charge high rate of interest which puts farmers into a situation of debt-trap.
iv) Farmers still approach them because they usually give loans to farmers without any collateral and legal formalities.
iv) They are also called conventional/ traditional sources of rural credit.

(2) Institutional sources:

i) They include government, cooperatives, commercial banks and regional rural banks.
ii) They accounted for 7% of total borrowings during 1st 5 year plan. But their present share is 66%.
iii) Farmers fear in approaching them because they give loans to farmers with any collateral and legal formalities.
iv) They are also called modern/ emerging sources of credit.
Q.4 Describe some institutional sources offering rural credit in India ?
A.4 (1) Cooperative credit societies:
i) They gave loans to farmers at reasonable rates of interest.
ii) They provide timely and rapid flow of credit to farmers.
iii) They have eliminated money lenders as credit suppliers.
iv) They have spread credit facilities all over India. They contribute to 16-17% of rural credit flow.

(2) State bank of India & other commercial banks:

i) SBI was set up in 1955 to focus on rural credit. The government realised that rural credit could not be met by the cooperative
credit societies alone, so there was an urgent help needed from commercial banks. For this, nationalisation of banks took
place in 1969. It means branches of these banks were opened all over India.
ii) They gave loans directly to farmers and indirectly through cooperative societies. They contribute to 75% of rural credit flow.

(3) Regional rural banks (RRBs) & Land development banks:

i) They provide loans to weaker/poor sections of the rural population who live in remote and backward districts.
ii) They operate at district level.

MULTI- AGENCY SYSTEM

Cooperative credit societies, State bank of India & other commercial banks and Regional rural banks (RRBs) & Land development
banks together are called multi-agency system.

(4) National Bank for Agricultural & Rural Development:

i) It was set up on 12.7.1982 as an apex agency/bank to supply credit/money to all institutions that provide credit to rural i.e. to
cooperatives, commercial banks and RRBs.
ii) It coordinates rural financing activities of all credit institutions.
iii) It focuses on restructuring of all credit institutions.
iv) It takes measures to improve the credit delivery system.
v) It provides training to all persons/staff working in all credit institutions.
vi) It monitors & evaluates projects refinanced by it.
vii) It maintains liaison with Central government, State government, RBI and other national level institutions concerned with making
policies related to rural financing. It gives them advice and helps in making better plans & policies for rural development.

KUDUMBASHREE
1) Kudumbashree – the poor women’s bank was started in Kerala in 1995 as a small savings bank for poor women to encourage savings.
2) It is the largest informal bank in Asia in terms of participation and savings mobilised.
3) It has mobilised Rs. 1 crore as thrift savings.

Q.5 Write a short note on Social banking ?

A.5 1) The concept of social banking was to provide banking for the poor population, providing them with easy credit, minimal
requirements to open accounts (less legal formalities), no collateral, moderate interest rates, friendly staff, etc.
2) Nationalisation of commercial banks in 1969 marked the beginning of social banking.
3) It includes all schemes and institutions related to development of rural people. Example: cooperative banks, regional rural banks,
self-help groups, micro-credit schemes, Pradhan mantra jan dhan yojana, etc.

Q.6 Write a short note on Self-help groups (SHG) ?

A.6 1) A self-help group is a community based group with 10-20 members of age-group 18-40 years.
2) They are usually women belonging to similar social & economic backgrounds, all voluntarily coming together to save small sums of
money, on a regular basis.
3) They give loans to their members out of their collective savings according to their needs like in times of emergency, for social
events like marriages, to purchase raw materials and assets.
4) They provide loans at low interest rates without any collateral.
5) By May, 2019 there were 54 lakh SHG’s in our country with almost 6 crore women as members.
6) About Rs. 10-15000 per SHG and another Rs. 2,50,000 per SHG as a Community Support Fund (CISF) are provided as part of
renovating fund to take up self-employment for income generation.

Q.7 Write a short note on Micro-credit programmes ?

A.7 1) It means providing small amount of loans to people who live below poverty line.
2) They give loans to poor people so that they can start their own small business ventures like small scale cottage industries, for
agriculture purpose, etc.
3) They provide loans at low interest rates without any collateral.
4) Micro- credit scheme was officially launched in 1994.
5) The main organisation that worked towards it was SIDBI (Small industries development bank of India).
Q.8 Write a short note on Kisan credit card (KCC) scheme ?
A.8 1) KCC scheme is a credit scheme launched by Indian banks in August 1988. This scheme was prepared by NABARD.
2) Its objective was to meet short-term credit needs of agriculture sector (crop production), fisheries, animal husbandry, etc.
3) The validity period of the card is 5 years, with an option to extend it for 3 more years.
4) No collateral is taken by banks from villagers who are taking loan up-to Rs. 1,60,000.
5) Interest rate is only 7% p.a.
6) All cooperative banks, regional rural banks, commercial banks issue them.

Q.9 Write a short note on role played by RBI in rural credit ?

A.9 It focuses on: 1) short term refinance activities of agriculture and allied activities.
2) development of cooperative credit institutions.
3) training and professionalisation of cooperatives.
4) provision of long term funds to bring about state partnership in cooperatives.
5) helping branch expansion programmes so loans can be easily given to all villagers by banks.
6) conducting rural credit surveys to determine the coverage of rural households by credit institutions.
7) guidance to all concerned on matters relating to rural credit.

Q.10 Critically evaluate the role of rural banking system in the process of rural development in India ?
A.10 Rural banking in India has significantly expanded over time.
Its advantages are:
1) Nationalisation of commercial banks in 1969 marked the beginning of social banking in rural areas. It means availability of loans at
moderate rate of interest with minimum legal formalities.
2) Establishment of NABARD in 1982 has made the system of rural credit more organised and systematic.
3) Institutional credit (commercial banks, RRB’s, cooperatives) has helped the farmers come out of debt trap of moneylenders. They
have also promoted commercialisation of agriculture.

The problems/deficiencies in it are:

1) Banks give loans only to those people who have collateral to offer. But most of the farmers don’t have any collateral. So they are
unable to get loans from banks.
2) A lot of legal formalities/ paper work is to be done when a loan from bank is to be taken. Most of the farmers don’t have
necessary documents that a bank needs. So they are unable to get loans from banks. Even if some of them have necessary
papers then also it is a very time consuming process. Urgent credit needs of farmers can’t be fulfilled.
3) Due to political populism, the government is showing less strictness in recovery of loans. Due to this default rate (number of
people not repaying there loans) is rising. 50% people are found to be wilful defaulters. They have money but they don’t
want to repay their loans.
4) Banks have failed to develop habit of savings in rural.
5) After introduction of new economic policy (LPG) the concept of social banking failed to maintain its impact.
6) Due to non-repayment of loans, farmers fall into a debt trap. Due to this most of them suicide. It is mainly happening in Andhra
Pradesh and Maharashtra.
7) Due to heavy corruption in India most of the time farmers don’t get the actual benefit of different credit schemes launched by
government for them. Government transfers funds to commercial banks, cooperatives, etc to give loans to farmers at less
interest rates. But they give these loans to rich businessmen at high interest rates. So, farmers are being cheated.

Q.11 What have been the achievements of rural banking system till now ?
Q.11 What are the problems/deficiencies in rural banking system ?
A.11 Write from answer 10.

Q.12 Explain the concept of distress sale ?

A.12 It refers to a situation when the farmers are forced to sell their produce immediately after the harvest, no matter how low the price is.
It happens because:
1) the farmers need immediate cash to pay off their debts
2) they lack storage facilities or the cost of storage is very high like rent of warehouse.

Q.13 Explain the concept of agricultural marketing ?

A.13 It includes all the processes/steps between harvesting and final sale of the produce by the farmers.
Aim: to help the farmers in getting best price for his produce.
It is the process that involves:
1) gathering the produce after harvesting,
2) processing the produce (like separating the straw from grain),
3) grading the produce according to quality,
4) packaging the produce according to buyers’ prefrences,
5) storing the produce for future sale, and
6) selling the produce when the price is lucrative.
Q.14 What are the defects of agricultural marketing ?
A.14 1) Lack of transportation facilities. 2) Forced/ distress sale.
3) Lots of frequent changes in market. 4) Lack of credit facilities.
5) Lack of storage facilities. 6) Presence of middlemen
7) Lack of standard weights and scales. 8) Inadequate market information.
9) Only 10% is handled by government & cooperatives and rest 90% is handled by private agencies.

Q.15 What are the measures taken by government to improve marketing system ?
A.15
(1) Regulated markets:
i) They have been set up by government on the outskirts of most towns where sale and purchase of the produce is monitored by
Market Committee including representatives of government, farmers and traders.
ii) These committees ensure that farmers get fair price for their produce and use of proper scales & weights.
iii) They also provide storage facilities to farmers where they can store their produce for future sale, hoping for a better price.

(2) Subsidised transport:

Railways provide transport facilities at very low prices to farmers to bring their produce to urban markets where they can get
better price for their produce.

(3) Dissemination of information:

i) Electronic media (TV, radio, internet) and print media (newspapers & magazines) provide useful market information to farmers.
ii) They usually provide information related to price behaviour which helps farmers to decide how much to sell and when to sell.

(4) Provision of warehousing facilities:

i) To avoid distress sale, government is offering warehousing facilities to farmers. Central and state warehousing corporations do so.
ii) This storage facility helps the farmers to sell their produce when the market price is lucrative.

(5) Cooperative agricultural marketing societies:

i) It is a voluntary association/group formed by farmers to do joint sale of their farm products. In it, farmers pool up all or some of
their produce and sell it together so that their bargaining power rises and they get a better price for their produce.
ii) Milk co-operatives in Gujarat is an excellent example of it which have even led to White revolution.
iii) But they are facing some problems like poor financial management of cooperatives and poor coordination between marketing &
processing cooperatives.

(6) MSP policy:

i) Minimum support price is an assurance to the farmers that their produce would be purchased by the government at a specific price.
This is very necessary when supply is more than demand in market, because at this time farmers are left with unsold/idle
stock. So, government promises them to buy their unsold stock at a certain price which is called MSP.
ii) However, farmers can sell their produce at a price higher than MSP in open market.
iii) MSP purchases from farmers are kept as buffer stock by government. They are used next year if production is low or used in
PDS i.e. public distribution system/ration system. Govt even exports them to foreign countries to earn foreign exchange.

Q.16 Write a short note on Operation flood ?

A.16 1) It is a system of Milk Cooperatives launched in 1966. In it farmers pool/collect their produce of milk for collective sale in market.
2) This rises bargaining power of farmers and helps them in getting better price for their products, leading to rise in their income.
3) This also makes grading and processing economical i.e. reduces cost of production of farmers.
4) Its main centre is in Gujarat. It has led to 4 times increase in production of milk leading to White revolution.

Q.17 What are the emerging alternatives of agricultural marketing ?

A.17
1) Direct sale contract with companies:
i) Farmers are making direct sale contract with national and international companies like Reliance retails.
ii) These companies even provide advance payment to farmers to supply farms products to them at a specific price.
iii) This has reduced problems of farmers relating to finance/credit, unsold stock, fair price, storage problems, etc.
iv) This has helped them in expanding their market.

2) Direct sale by farmers to consumers:

The states of Punjab, Haryana and Rajasthan are launching this channel through ‘Apni Mandi’ and ‘Big Bazaar’ ; Andhra
Pradesh through ‘ Rythu Bazaars’, Pune through ‘Hadaspur Mandi’ and Tamil Nadu through ‘ Uzhavar Sandies’.
Q.18 What is meant by agricultural diversification ?
A.18 It means re-allocation of farm’s productive resources into new activities or crops reducing market risk.
1) Diversification of crop production:
i) It means production of different varieties of crops rather than producing only one specialised crop. It means shifting
from single-cropping system to multi-cropping system. This will reduce market risk of farmers. Because price of all crops
will not fall at the same time. If one crop provides low income, then the other may provide high income.
It also reduces the risk occurring due to monsoon failure.
ii) It also means shifting from subsistence farming to commercial farming. It means producing crops which leads to more income.

2) Diversification of production activity/ employment:

It means shifting from crop/farm production to non-farm areas of production/employment like animal husbandry, fisheries,
horticulture, cottage industries, information technology, etc.

Q.19 Write a short note on Animal husbandry/ livestock farming as an option of livelihood in rural areas ?
A.19 1) It is a branch of science that deals with the practise of breeding, farming and care of farm animals for milk, meat, eggs, fibre
(cotton and wool), dung, etc.
2) Poultry (hen, ducks), cattle, goats and sheep are important components of livestock in India. Poultry accounts for 61%, cattle &
buffaloes 22% and goats & sheep 16% share in total livestock in India. In 2019, India had 303 million cattle including 110
million buffaloes.
3) In many areas, farmers do both livestock and crop farming. This increases their income. This is called mixed crop-livestock
farming system.
4) It is most suitable in semi-arid and arid areas & in cases of monsoon failure.
5) It provides employment to 70 million small and marginal farmers in India.
6) But it suffers from problems like poor veterinary care and use of backward technology.

Q.20 Write a short note on Fisheries as an option of livelihood in rural areas ?

A.20 1) It is mainly done in Kerala, Maharashtra, Gujarat, Tamil Nadu, West Bengal and Andhra Pradesh.
2) India is the 2nd largest producer of fish in the world giving employment to 15 crore Indians.
3) Though women are not involved in fish production but there involvement in fish marketing is very high. About 60% of the
workforce in export marketing and 40% in internal marketing are women.
4) The fishing community depends on inland sources (rivers, lakes, ponds & streams) and marine sources (seas & oceans) for fishing.
Inland source contribute 65% of the total fish production & 35% comes from marine sources.
5) Problems: (i) Fishing communities are treated as backward people. This shows social biasness in our country.
(ii) Lots of farmers are committing suicides because they suffer from problem of debt-trap.
(iii) Huge unemployment problem due to weak mobility of labour to other sectors & high rate of illiteracy
(iv) There are lots of fishermen which leads to over-fishing which further leads to low per capita earnings.
(v) Life of fishermen is always in danger due sea perils like sea storms, etc.
6) Suggestions to overcome the problems faced by fishermen:
(i) Providing cheap credit to fishermen and micro-financing through SHGs.
(ii) Providing latest technology to fishermen.
7) The progressive increase in budget allocation by the Government of India and innovations in fisheries and aquaculture has led to
the development of this sector. At present, it contributes to 0.9% of the total GDP.

Q.21 Write a short note on Horticulture as an option of livelihood in rural areas ?

A.21 1) Horticultural crops include fruits, vegetables and flowers.
2) India is the 2nd largest producer of fruits & vegetables in the world. We are emerging as the leading producer of mangoes,
bananas, coconuts, cashew nuts and spices.
3) High production in horticulture crops has led to Golden revolution during the years 1991-2012. It refers to a series of research,
development and technological improvements in horticultural crops and honey that has increased its production.
4) It has increased to increase in income of farmers.
5) It provides employment to 20% of rural people, most of them being women.
6) It contributes 1/3rd of the value of agricultural output and 6% of GDP of India.
7) The only problem that has occurred is that it has taken over the area which was used for cultivation for pulses. This has reduced
supply of pulses and raised its price, which is not good for vegetarians in India.

Q.22 Write a short note on Cottage & household industry as an option of livelihood in rural areas ?
A.22 1) Traditionally, this industry was dominated by activities like spinning, weaving, dyeing and bleaching. But now these industries
have suffered huge downfall due to growth of textile industry in urban areas.
2) In recent years, some new household activities have risen in villages like soap manufacturing, doll-making, bee-keeping & mushroom
cultivation.
3) These activities are being promoted by Farm women’s groups which focus on increasing women employment & income generation.
4) TANWA (Tamil Nadu Women in Agriculture) is a project launched in Tamil Nadu with a view to train women in different
techniques of farming.
Q.23 Write a short note on Information technology (IT) as an option of livelihood in rural areas ?
A.23 1) An academy called Jamshedji Tata National Virtual Academy has been started in villages for rural development.
2) It will provide operational training to 10 lakh rural people to run ‘info-kiosks’.
3) These kiosks will have computers, scanners, printers and photocopiers.
4) They will provide services like e-mailing, video-conferencing and transfer of documents to different places.
5) By this every village will become a knowledge center and increase level of employment & income generation.

Q.24 Write a note on Organic farming ?

A.24 It is a system of farming that relies upon the use of organic inputs for cultivation.
Animal manures and composts are the basic organic inputs.
It is a system of farming that focuses on maintaining soil health (rather than plant health) so that farming becomes a ‘long period
sustainable process’ along with eco-friendly environment.

Advantages:
1) Discards the use of non-renewable resources:
It doesn’t use synthetic chemicals which are petroleum based like chemical fertilizers, insecticides, pesticides, etc.

2) Environment friendly:
Chemical fertilizers pollute the groundwater by raising its nitrate content. Nitrates cause health problems and pollute the
environment. Organic farming doesn’t use such fertilizers. So, it is environment friendly

3) Sustains soil fertility:

It maintains fertility of soil for a very long period of time as it uses animal manures and compost. It doesn’t use chemical
fertilizers. So, it focuses on soil health rather than plant health.
This also leads to sustainable development i.e. using resources in such a way that there availability for future generations
doesn’t get reduced.

4) Healthier and tastier food:

Organically grown food is more nutritious than the food from chemical farming.

5) Inexpensive technology for the small and marginal farmers:

Conventional farming includes a lot of items like HYV seeds, fertilizers, pesticides, insecticides, good irrigation facilities,
etc. Small and marginal farmers can’t afford all such inputs. On the other hand, in organic farming you don’t need to buy all
such inputs.
It is basically labour intensive and labour in India is available at a very cheap rate which acts as another advantage.

Disadvantages / Problems:
1) Low yield i.e. production per hectare of land is low as compared to conventional farming. This leads to high cost per unit of output.
2) Organic food is a bit expensive.
3) Organic produce has a shorter shelf life than sprayed produce.
4) Lack of awareness among farmers about it and lack of willingness in them to adapt this new technology.
5) Inadequate infrastructure and problem of marketing the products.
6) As it depends on labour intensive methods so it is beneficial only for rural areas where labour is available in plenty.
7) As it depends on cattle manure as an input so it is beneficial only for those countries where there is huge stock of cattle.

Q.25 India has an edge over other countries in the adoption of organic farming. Defend or refute.
A.25 The given statement is true because:
1) Organic farming labour intensive and labour in India is available at a very cheap rate.
2) Organic farming depends on cattle manure as main input. India has huge stock of cattle so cattle manure is available in plenty.

Q.26 Why was the scheme PM SVANidhi launched ?

A.26 PM Street Vendor’s AatmaNirbhar Nidhi was launched by the Ministry of Housing and Urban affairs.
Its aim was to provide loans to street vendors who got affected by Covid-19.

Q.27 Write a note on JAN DHAN YOJANA.

A.27 1) It was launched by Prime minister Narendra Modi on 28th August 2014.
2) The account holders will get Rs.1-2 lakh accidental insurance coverage and overdraft facility of Rs. 10,000.
3) The account holders can get their wages, old-age pension and other security payments of the government transferred to their
bank accounts directly.
4) There is no need to keep minimum bank balance.
5) This has led to 40 crore new account holders in the country promoting the habit of savings in people.
6) Banks have mobilised Rs. 1,40,000 crore through these accounts.