Rural Development

Mahatma Gandhi once said that the real progress of India did not simply mean the growth and expansion of industrial
urban centers but mainly the development of villages. India is a country of villages, about 50% of the villages have very
poor socio-economic conditions. More than two-third of India’s population depends upon agriculture. One-third of rural
India still lives in the poverty. If our country has to realize real progress, we have to develop rural India.

MEANING OF RURAL DEVELOPMENT

Rural Development refers to continuous and comprehensive socio-economic process attempting to improve all aspects of
rural life.

In India, agriculture is the major source of livelihood in the rural sector, with more than two-third of India’s population
depending on it. So, development in agriculture will contribute to the betterment of rural areas and rural people. However
the term rural development includes not only agricultural development, but it involves all those aspects which improves
quality of life of people. It aims at improving the economic and social conditions of people living in villages.

Some of the areas which are challenging and need fresh initiatives for development in rural India are:
1. Development of Human Resources including literacy, education, skill development, public health, sanitation, etc.
2. Land Reforms leads to distribution and usage of land, development of productive resources of each utility.
3. Infrastructural Development like electricity, irrigation, transport, etc.
4. Special measures for alleviation of poverty and bringing out significant improvement in the living conditions of the
weaker sections of the society.

Although the share of agricultural sector to the GDP declined but the population dependent on it did not show much change.
After the economic reforms 1991 growth rate of agricultural sector declined to 2.3%. Reasons for this decline are:
A. Decline in Public Investment
B. Lack of Employment Opportunities
C. Casualization of Labour

Significance of Labour
a) Majority of the population belongs to rural India. So the prosperity of India could be possible only with a prosperous
rural area.
b) Rural Development will generate employment opportunities for rural people and solve the problem of unemployment.
c) It will decrease the unemployment and increase the income of poor people and hence eliminate poverty.
d) It will check the migration of people from rural to the urban areas.
e) It will improve efficiency, productivity and standard of living of the people.
f) Literate and skilled people will prove to be a valuable asset for country.

Important Terms
a) Agricultural Credit: Timely and adequate finance or credit at reasonable rates to the farmers is vital for increasing
the production and productivity as the time gap between crop sowing and realisation of income after production is
quite long.
1) Credit Requirement of the farmers are of two types:
 On the basis of purpose:
Productive Purpose: (assuring food security to buffer stocks)
 To purchase agricultural inputs such as seeds, fertilizers, pesticides, etc.
 To make permanent improvements on land. These credits are productive since they help farmers in
increasing agricultural production and productivity.
Non-Productive Purpose:
 Credit Requirements for purposes such as marriages, religious ceremonies, settling old debts and spending
on occasions like birth or death. Such credits do not help to raise agricultural production and productivity
 Litigation
 To meet the consumption needs.

Conceptualized by Mohit Rohida Page 1 of 6

 Rural Development
 On the basis of time period:
Credit Requirements of farmers can be classified into 3 types:
 Short term credit: The credit requirement for buying tools, seeds, fertilizers, etc. The credit is given to the
borrower by cooperative banks and money lenders for a period of 6–12 months.
 Medium term credit: The credit required for buying machinery, digging wells, etc. for a period of 1–5 years.
 Long term credit: The credit required for acquiring assets like land, tractors, costly equipment for a period
of 5–20 years.

➢ Informal Sector: This is the most ancient way of credit creation. They include money lenders, landlords, traders,
relatives and friends.

MERITS OF INFORMAL SECTOR

1. In this one can get loan quickly as when required (timely available).
2. Collateral is not required.
3. As farmers are illiterate, there is less documentation or no documentation.

DEMERITS OF INFORMAL SECTOR

1. There is high rate of interest charged.
2. Farmers are forced to pay the money which leads to debt trap and they can commit suicide.
3. They exploit farmers and indulge in malpractices as the farmers are illiterate, accounts are generally manipulated.
4. Moneylenders force farmers to sell their products to them only.
5. Gives rise to debt trap.

➢ Formal Sector: It includes the banks which are nationalized i.e. registered by the government and private i.e. owned
by individuals.
Private Banks Nationalised Banks
ICICI Bank Andhra Bank
HDFC Bank Punjab National Bank
Axis Bank State Bank of India
It also includes Cooperative societies and other financial institutions permitted by government. These institutions consists
of a set of multi-agency institutions to dispense adequate credit at cheaper rate.

Sources of Rural Credit

Institutional Non-Institutional
Banks Moneylenders
NABARD Commission Agents
Financial institutions Landlords
Cooperative societies Friends & relatives

Regional Rural Bank

➢ These RRB’s are under the control and regulation of NABARD.
➢ RRB’s grant loans to the weaker section of the rural areas for productive purposes at concessional lending rates.
➢ Moreover, these banks mobilize rural savings and channelize for supporting the productive activities especially in rural
areas.

Conceptualized by Mohit Rohida Page 2 of 6

 Rural Development
NABARD (National Bank for Agriculture and Rural Development) and Role:
➢ NABARD was set up in July 12, 1982 as an open body to coordinate the activities of all institutions involved in the rural
financing system.
➢ It provides re-finance assistance to cooperative societies and RRB’s.
➢ It was established with multiple objectives for providing credit for agriculture promotion, small scale industries, cottage
and village industries, handicrafts and other aligned activities in rural areas.

Role of NABARD:
➢ It serves as an open financing agency for the institutions providing investment and production credit.
➢ It coordinates the rural financing activities of all the institutions engaged in developmental work.
➢ It undertakes monitoring and evaluation of projects refinanced by it.
➢ It also keeps a check on its client institutes (RRB’s, commercial banks)
➢ It provides training facilities to the institutions working in the field of rural upliftment.
➢ It regulates the cooperative banks and RRB’s and manages talent equisition through IBPS, CWE.
➢ NABARD is also known for its SHG bank linkage program which encourages India’s bank to lend to SHG.

Commercial Banks:
These banks have made deep inroads in rural areas by opening branches in rural area.
➢ Commercial banks caters credit facilities to productive sectors of an economy which are significantly contributing to
GDP (final goods and services produced within domestic territory at a particular period of time).
➢ They also provide loan for activities related to agriculture like poultry, fisheries, livestock, etc.

Self Help Groups (SHG’s):

Recently SHG have emerged to fill the gap in the formal credit system.
➢ The SHG’s promote thrift (finance) in small proportions by a minimum contribution from each member. From that pooled
money, credit is given to the needy members to be repayable in small instalments at reasonable interest rate.

Rural Banking:
Rapid expansion of the banking system has a positive effect on rural farm and non-farm output, income and employment.
➢ It helped farmers to avail services and credit facilities and a variety of loans for meeting their production needs.

AMS (Agriculture Marketing System):

It is a process that involves the assembling, storage, processing, transportation, packaging, grading and distribution of
different agricultural products across the country.
➢ This would motivate the farmer to increase agricultural produce by adopting to improve farm practices.

Problems of AMS:
1. Lack of storage facilities.
2. Inadequate transport facilities.
3. Lack of grading and standardization.
4. Malpractices of middlemen.
5. Lack of market information.
6. Low bargaining power of the farmers.

Conceptualized by Mohit Rohida Page 3 of 6

 Rural Development
Measures to improve AMS:
1. Regulation of Markets
➢ These are required to create orderly and transparent market conditions.
➢ This could benefit farmers and consumers.
2. Infrastructural facilities
➢ Transport facilities like roads and railways.
➢ Other facilities like warehouses, go-downs and cold storage.
3. Uniform standard weights
➢ In order to regulate the system of weights, the government of India passed the Standard Weights and measures
Act in 1958, making the use of government approved weights compulsory.
➢ These steps have helped in reducing the exploitation of farmers by agents and traders.
4. Cooperative marketing
➢ Cooperative marketing in realising fair prices for farmer’s product is the important aspect of government’s initiative.
5. Grading and Standardization
➢ Grading of agricultural products is alone under the provisions of agricultural produce Act. These goods are stamped
with the seal AGMARK, which is the hallmark of quality.
6. Policy Instruments
➢ Such as assurance of minimum support price.
➢ Maintenance of Buffer stock of Wheat and Rice by the government.
➢ Distribution of food grains and sugar through PDS. Protection of farmer’s income and providing food grains at
subsidized rates was the main aim of various policies.
➢ In spite of the government efforts hardly 10% of the total produce is handled by the government agencies and
cooperatives and rest by the private sector.
7. Market Information
➢ The government collects weekly data on regular market arrivals, sales, prices, etc. on regular basis. It provide
these information to the farmers through public media like radio, television, newspaper, etc.
➢ It can help farmers in planning their production and sales and also to ensure that they get fair prices for their
products.

Emerging Alternate Market Channels:

1. Selling produce directly to the consumers increases the share of the income of farmers. Example: Apni Mandi
(Punjab, Rajasthan, Haryana); Hadaspur Mandi in Pune.
2. Several National and Multinational fast food chains are making purchases at pre-decided prices which protects
them against price risks.
3. Off desired quality products especially vegetables and fruits which encourages the farmers to cultivate farm
products of the desired quality.
4. At times quality seeds and other inputs are also provided to these farmers.

Agricultural Diversification Or Diversification into Productive Activities:

It refers to reallocation of productive resource such as land, labour, capital, farm equipments etc. in the agriculture sector
into new activities. It is regarded as an important means to increase output to generate more employment and to ensure
sustainability of natural resources.

Forms of Diversification
A. Change in Cropping Pattern
➢ It implies substitution of one crop for another or one product for another. It gives a wider choice in the production
of variety of crops.
➢ It implies switch over from the production of food crops like wheat and rice to the production of commercial crops
like cotton, oil, seeds, sugarcane, etc. (shift from subsistence farming to commercial farming).

Conceptualized by Mohit Rohida Page 4 of 6

 Rural Development
B. Diversification of Productive Activities
➢ It implies shift of workforce from agriculture to other allied activities such as livestock, poultry, fisheries, etc.
➢ As agriculture is already overcrowded, a major proportion of the increasing labour force need to find alternate
employment opportunities in other non-farm sector.

Non-farm economy has several segments in it.

i. Dynamic Sub Sectors: It includes Agro-processing industries, food processing industries, leather industries, tourism
industries, etc.
ii. Traditional Household Industries: Majority of rural women find employment in agriculture while men generally look
for non-farm employment. Important non-farm areas are:

 Animal Husbandry:
o In India the farming community used mixed crop livestock of cow, goat, sheep in farming system.
o Livestock such as goats, sheep, cattle are widely held species.
o Livestock production increases stability in income, food security, fuel and nutrition for the family without disturbing
the other food producing activities.
o Milk production has increased by more than four times between 1960 to 2002 due to the successful implementation
of operation Flood from 1966 onwards.
o A system of milk cooperative especially in Gujarat was very successful in which all the farmers can pool their milk.
o According to different grading (based on quality) milk is being processed and then marketed to the urban centres.
o With the help of this the farmers are assured of fair price and income.

 Horticulture:
o Horticulture crops are vegetables, fruits, flowers, spices, etc.
o These crops are important in producing employment and nutrition.
o The period between 191-2003 is called Golden Revolution Period due to
1) Planned investment in Horticulture.
2) Sustainable livelihood option.
o India has become one of the largest producers of mangoes, bananas, coconuts, cashew nuts and many fruits and
vegetables.
o Economic conditions of many farmers have improved.
o However horticulture sector in India faces various problems – low productivity of small farms, huge post harvest
losses and damages during transportation of horticulture products, inadequate transport facilities and storage
facilities and low export competitiveness of the Indian producers are some of the difficulties faced by the fruits and
vegetables growers.

 Fisheries:
o This sector is an important source of livelihood for people in the country particularly for the people belonging to
the states of Kerala, Maharashtra, Gujarat and Tamil Nadu.
o Fisheries and allied activities provided livelihood to over 14 million people in 2013-14. This sector contributed 5.4%
of GDP from agriculture and allied activities.
o This sector faces the problems of low productivity, low income, under employment and slow up gradation of
technology.

 Information Technology (IT):

o IT is capable of generating access to new International market in many ways:
1) Providing information regarding emerging technologies and its application about the prices and soil condition
for growing crops.
2) IT can act as a tool for releasing the creative potential and knowledge embedded in our people.
3) It has potential in employment generation in rural area.

Conceptualized by Mohit Rohida Page 5 of 6

 Rural Development
 Organic Farming:
Meaning:
➢ It is a process of producing food naturally. In other words it is a system of farming that maintains, enhances and
restores the ecological balances.
➢ Main idea behind Organic farming is ‘Zero Impact’ on the environment and producing safe and healthy food.
➢ In Organic farming farmers use organic manure, Bio-fertilizers and organic pesticides.

Why Organic Farming / Need of Organic Farming:

1) To control the ill-effects of Modern / Conventional agriculture system.
2) To achieve sustainable agricultural development.
3) To promote consumer welfare.
➢ Consumers get the agricultural products in meeting the safety, quality and hygienic standards.
4) Organic farming is economic farming technology.
➢ Even small and marginal farmers can purchase and use the technology.

Advantages of Organic Farming

1) Economic:
It offers a means of substitute costlier agricultural inputs such as HYV seeds, chemical fertilizers, pesticides, etc.
with locally produced organic inputs that are cheaper and so generate more ROI (Return on Investment).
2) Income Generation:
It generates income through International Exports as the demand for these goods is increasing in the International
market.
3) Employment Generation:
Organic farming is labour intensive in nature as compared to conventional farming. It will increase more
employment opportunities.
4) More Nutritional and Healthier Food:
The organically grown food has more nutritional values than the food grain with chemical farming. Consequently,
it provides us with healthy food.
5) Suitable for Environment:
Organic food is pesticide free and is produced in a environmentally sustainable way.

Drawbacks of Organic Farming

1) Less Popular:
It requires awareness and willingness on the part of farmers to adopt new technology.
2) Inadequate Infrastructure:
Inadequate infrastructure and problem of marketing the products are the major concern which needs to be
addressed.
3) Low Level of Output:
It has been observed that the output or produce from organic agriculture are less than modern agricultural
farming. Therefore small and marginal farmers may find it difficult to adopt to large scale production.
4) Shorter Shelf Life:
Organic produce may also have more blemishes and a shorter shelf life than spray produced.

Importance of Organic Farming in India

1) It is a labour intensive process. India is having large labour force seeking employment. It will be suitable for India
to take up organic farming on large scale.
2) Organic farming is eco-friendly technology for sustainable development, so India has absolute advantage in
producing organic products for both domestic and international trade.
3) Their realization of nutritional value of organic food is growing all over the world. It has resulted into a significant
increase in demand for such food items.
Since we are a low chemical fertilizer consuming country, India has excellent opportunity to take up production of organic
foods for exports and domestic use.
***************

Conceptualized by Mohit Rohida Page 6 of 6