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Introduction

1. Rural economics deals with the application of economic principle in understanding

and developing rural area
2. The basic unit for rural area is the revenue village
3. Rural areas having problems like backwardness of agriculture, low income, low
employment opportunities, poverty, low infrastructure development, low literacy, low
labour productivity, lower prices for agricultural Products, surplus labour force, larger
population, high level of migration and high dependency on natural resources and
nature
4. According to 2011 population census, there are 6,40,867 villages in India and
68.84% of the 121crore total population live in rural area

Features of rural economy

1. The village is a primary institution and it satisfies almost all the needs of the rural
community
2. The rural people have the feeling of Unity towards each other

1. The agricultural economy depends much on nature and agricultural activities

2. Agriculture and allied activities are the main occupation in rural areas

1. The lifestyles in villages are very simple

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2. Public services like education, housing, health and sanitation, transport and
communication, banking, road and Markets are limited and unavailable
3. People rely on superstitions and traditional cultural practices
4. Rural sector is extremely backward and weak
5. In recent years the incident of alcohol drinking has gone up

1. The population density is very low and the houses are scattered in the entire
villages

1. There exists unemployment, seasonal unemployment and underemployment in rural

areas
2. Unemployment refers to people are willing to work and ability to work but they are
not getting employed
3. Underemployment is also called disguised unemployment
4. Disguised unemployment refers to people work but no increase in production
5. Both both situations are common in rural areas

1. Poverty is a condition where the basic needs of the people like food, clothing and
shelter are not being met
2. According to 2011-12 about 20 crores of people in rural areas are poor and live
below the poverty line

1. People in rural areas are highly indebted owing to poverty and under employment,
lack of farm and non-farm employment opportunities, low wage employment,
seasonal production, poor marketing network etc
2. Formal loan facilities are not available to the villages
3. They depend on local money lenders they squeeze the villagers and finally they
commit suicide
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1. The income of the rural people is constrained as the rural economy is not
sufficiently vibrant to provide them with jobs or self-employment opportunities
2. Large portion of labourers and skilled workers are underemployed and the scope of
increasing their income is limited

1. The rural households are largely depending on social grants and remittance from
family members working in urban areas and cities

1. Dualism means the coexistence of two extremely different features like the
developed and underdeveloped, organised and unorganised, traditional and modern,
regulated and unregulated, poor and rich, skilled and unskilled, these characters are
very common in rural areas

1. The distribution of income, wealth and assets are highly unequal in rural areas
2. This is because of social, economic and political reasons

Rural people are forced to migrate from villages to urban areas in order to see
gainful employment for their livelihood
Enmity and lack of basic amenities in rural areas also push the people to migrate
to urban areas this is called double poisoning by Schumacher one side villages are
empty on the other side towns are congested
A book named "small is beautiful" written by Schumacher

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Need for rural development

1. A Major share of population lives in rural areas, their development and contribution
are very much supportive for the nation building
2. Rural economy supports the Urban Sector by supplying drinking water, milk, food
and raw material
3. Improvements in education, health and sanitation in villages can help avoid many
urban problems namely begging, rack picking, and roadside slumming
4. Development of agriculture and allied activities are necessary for providing gainful
employment in rural areas and improving food production
5. The evils of brain drain and rural urban migration can be reduced the rural areas
are developed
6. In order to better utilise the unused and underutilized resources there is a need to
develop the rural economy
7. Rural development should be minimise the gap between rural and urban areas in
terms of the provision of infrastructural facilities
8. It was called as PURA by former president Abdul Kalam
9. In order to improve the nation's status in the Global Arena in terms of economic
indicators like human Development Index, women empowerment index, gender
disparity index, physical quality of life index, and gross national happiness index
should be given due attention.

Problems of rural development

The rural areas are facing number of problems they are

1. People related problems
2. Agriculture related problems
3. Infrastructure related problems
4. Economics related problem
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5. Leadership related problems

6. Administrative problems

People related problems

1. The standard of living of an individual problem consist of illiteracy, lack of technical

knowledge, low level of confidence, dependence on sentiments and beliefs etc

Agriculture related problems

1. Lack of expected awareness, knowledge, skill and attitude, Availability of inputs.

2. Poor marketing facility, Insufficient extension staff and services,
3. Multidimensional task to extension personnel
4. Small size of land holding, Subdivision and fragmentation of land Holdings
5. Absence of infrastructure to work and stay in rural areas
6. Primitive Technology and the low adoption of modern technologies
7. Reduced public investment and absence of role for farmers in fixing the prices for
their own products

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Infrastructure related problems

1. Water, electricity, transport, educational institutions, communication, health,

employment, storage facility, Banking and Insurance are not profound in rural area

Economics related problems

1. Inability to adopt high cost Technology

2. High cost of inputs
3. Under privileged rural industries
4. Low income
5. Indebtedness
6. Existence of inequality in land holdings and assets

Leadership related problems

1. Leadership among the hands of inactive and incompetent people

2. Self-interest of leadership
3. Biased political will
4. Less bargaining power and negation skills
5. Dominance of political leaders

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Administrative problems

1. Political interference
2. Lack of motivation and interest
3. Low wages in villages
4. Improper utilisation of budget
5. Absence of monitoring and implementation of rural development programme

Rural poverty

1. Existence of poverty in rural areas is called rural poverty

2. Individual fails to earn sufficient income to buy the basic minimum of subsistence
3. Poverty line is a hypothetical line which divides the population as below poverty
line and above poverty line
4. Persons consuming less than 2400 calories per day in rural area are treated as
they are under rural poverty

5. As per the planning commission the percentage of people living below poverty line
in rural areas was 54.10%
6. Which accounted for 33.80 percent during 2009-10
7. The poverty is deepest among the members of scheduled caste and Scheduled
Tribes in the rural areas
8. In 2015 more than 80 crores of India's people lived in villages out of 80 crore 22
crores of people listed below the poverty line
9. India is the home to 22 % of the world's poor
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10. The government has been successful in reducing the proportion of poor people in
spite of increasing of population

Causes for rural poverty

Various forces responsible for rural poverty are

Distribution of land

1. The distribution of land is highly skewed in rural areas

2. Majority of rural people work hired labour to support their families

Lack of non-farm employment

1. Non-farm employment opportunities do not match the increasing labour force

2. The excess supply of labour in rural areas reduces the wages and increase the
incidents of poverty

Lack of public sector Investment

1. The root cause of rural poverty of our country is lack of Public Sector Investment
on human resource development

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Inflation

1. Steady increase in price effects the purchasing power of the rural people leading to
rural poverty

Low productivity

1. Low productivity of rural labour and farm activities is a cause as well as the effect
of poverty

Unequal benefit of growth

1. Major gains of economic development are enjoyed by the rural rich leading to
concentration of wealth
2. The government policies are not reaching to the targeted people and the
contributions of poor people are not accounted properly

Low rate of economic growth

1. The rate of growth of India is always below the target and it has benefited the rich
2. The poor always been denied of the benefits of the achieved growth and
development of the country

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More emphasis on large industries

1. Huge investment in large industries catering to the needs of middle and upper
classes in urban areas are Made in India
2. Such industries are capital intensive and do not generate more employment
opportunities
3. poor not in a position to get employed and to come out from the poverty in
villages

Social evils

1. Social evils prevalent in the society like customs, beliefs, etc increase unproductive
expenditure

Remedial measures to rural poverty

1. Rural unemployment and rural poverty are interrelated, creation of employment

opportunities would support elimination of poverty
2. Poverty alleviation schemes and programs have been implemented but still we can
see unemployment, begging, rag picking and slumming continues

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Poverty eradication schemes

1. 20-point programme- 1975

2. Integrated rural development Program- 1976
3. Training rural youths for self-employment- 1979
4. Food for work programme- 1977
5. National Rural Employment programme- 1980
6. Rural landless Employment Guarantee programme-1983
7. Jawagar Rozgar Yojana- 1989
8. Mahatma Gandhi National Rural Employment Guarantee scheme- 2006

Development schemes

1. Pradhanmantri Adarsh gram Sadak Yojana- 2010

2. Bharat Nirman Yojana - 2005
3. Indira Aawas Yojana - 1985
4. Jawaharlal Nehru National urban Renewal mission- 2005
5. Rajiv Awas Yojana- 1985
6. National Rural Health Mission- 2005
7. National rural livelihood mission- 2011
8. National Food Security Scheme- 2013

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Rural unemployment

1. Employment is a situation in which a person is actively searching for employment

but unable to find work at the prevailing wage rate
2. It is a tragic waste of Manpower and underutilisation of human resources
3. As long as unemployment is there, social problems cannot be stopped
4. Rural unemployment is less than the urban unemployment

Rural unemployment in India is categorised into three classes

1. Open unemployment
2. Concealed unemployment or underemployment
3. Seasonal unemployment

Open unemployment

1. Unemployed persons are identified, they remain without work

2. This type of unemployment found among agricultural labour, rural artisans and
literate people

Concealed unemployment

1. It is difficult to identify who are underemployed

2. Many are employed below their productive capacity
3. Even if they are removed from the output will not be diminish
4. It is also called disguised unemployment or underemployment
5. In rural India 25 percentage to 30% are underemployed
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Seasonal unemployment

1. Employment occurs only on a particular season supported by natural circumstances

2. Remaining period of a year, the rural people are unemployed or partially employed
3. A farmer who cultivates one crop in a year usually goes without a job for almost 5
to 7 months and ultimately commit suicide
4. According to the agriculture labour enquiry Committee report, the extent of
underemployment is on the average 82 days of unemployment in a year for 84
percentage of Agricultural labourers

Causes for Unemployment

Absence of skill development and Employment generation

1. Lack of government initiative to give required training and then to generate

employment opportunities

Seasonal nature of agriculture

1. Agricultural operations are seasonal in nature and depend much on nature and
rainfall

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Lack of subsidiary occupation

1. Not able to start subsidiary occupations such as poultry, rope making, piggery, etc
2. Due to shortage of funds and lack of proper marketing arrangements
3. Government must arrange fund for these people

Mechanisation of agriculture

1. The landlords are the principal source of employment to the farm labour
2. Mechanisation of agriculture operations like ploughing, irrigation, harvesting,
threshing etc reduces employment opportunities for the farm labourers

Capital intensive Technology

1. The expanding private industrial sector is largely found in urban areas and not
creating additional employment opportunities due to the application of capital
intensive Technologies
2. Government must establish firms to absorb surplus labour power

Defective system of education

1. The present system of education as also aggravated the rural unemployment

problem
2. Large number of degrees producing Institutions has come in the recent years
3. Students want only degree not any skills

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4. Degree should be awarded on the basis of skills acquired

5. The unemployed youth should get sufficient facilities to update their skills

Remedial measures for rural unemployment

Subsidiary occupation

1. To reduce the seasonal unemployment rural people should be encouraged to adopt

the subsidiary occupation
2. Loans should be granted and proper arrangements should be made for marketing
their products

Rural works programme

1. Construction and maintenance of roads, digging of drains, canals, etc

2. This process should be planned during off season to provide gainful employment to
the unemployed

Irrigation facilities

1. Since rainfall is uncertain irrigation facilities should be expanded to enable the

farmers to adopt multiple cropping
2. The increased cropping intensity creates additional demand for labour

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Rural industrialisation

1. To provide employment new industry should be set up in rural areas

2. This will provide employment and also changed the attitude of rural people towards
work

Technical Education

1. Employment oriented courses should be introduced in schools and colleges to

enable the youth to start their own unit

Rural industries

The industries run by rural people in rural areas

The rural Industries can be broadly classified into
1. Cottage industries
2. Village industries
3. Small industries
4. Tiny industries
5. Agro based industries

Cottage industries

1. Cottage industries are generally associated with agriculture and provide both part time
and full-time jobs in rural areas
Important characteristics of this type of industries are
1. These industries are carried out by artisans in their own home at their own risk
and for their own benefit
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2. They combine this work with another regular job

3. No or little labour is employed
4. Members of the household provide the necessary labour
5. These industries are generally hereditary and traditional in character
6. No or little power is used
7. These Industries usually serve the local market and generally work on the orders
placed by Other industries

Examples are
Mat, coir, basket making industry
Principal cottage industries of India Handloom weaving, pottery making, washing
soap making, conch shell, handmade paper, horn button, mother-of-pearl button,
cutlery, lock and key manufacturing industry

Village industries

1. They depend upon local raw material

2. They cater to the needs of local population
3. Example Gur and Khandsari, cane and Bamboo Basket, shoe making, pottery and
Leather tanning

Small scale industries

1. Small scale industries are located near urban centres

2. They produce goods for local as well as foreign markets
3. Example sports goods, electric fans, footwear, sewing machine and Handloom
weaving
4. Small scale industries are also known as micro, small and medium enterprises
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5. They are categorised by the micro small and medium enterprises development act
2006
6. These industries are categorised under investment in plant and machinery in case of
manufacturing industries and on the basis of investment in equipment

Agro based industries

1. These industries are based on the processing of Agricultural produce

2. They may be organised on a cottage scale, small scale and large scale
3. These Industries tend to develop house hold settlements around them as they
employ more on a regular basis
Example textile, sugar, paper, vegetable oil, tea and coffee industries

Rural Indebtedness

1. It refers to the situation of the rural people unable to repay the loan accumulated
over a period
2. It is a weak financial infrastructure of our country
3. Farmers borrow loans for various purposes like agriculture operations, supporting
family in lean seasons or purchase of equipment in the recent years
4. Expenses on celebration, liquor consumption and medicines go on increasing
without any limit
5. Due to low income the villagers are unable to repay the loans
6. According to the Government of India's socio-economic and caste census, 2015
around 73 percentage of households in India are rural
7. Of these 18.5% are scheduled caste household and 11 % belong to schedule tribe
category

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8. The date of the national sample Survey organisation 2002-2003 reveals that only
about 30 percentage of the poor borrowers can get credit from the formal Bank
9. All India debt and investment survey 2002, the share of institutional credit had
declined from 66.3% in 1991 to 57.1 % in 2002 with the corresponding increase in
informal credit.

Features of rural indebtedness

1. Nearly three fourth of the rural families in the country are in debt
2. Most of them are indebted to private agencies particularly moneylenders

Causes of rural indebtedness

poverty of farmers:

1. The circle of poverty force the farmers to borrow for consumption, cultivations and
celebrations
2. High rate of interest holds the farmers in the grip of money lenders

Failure of monsoon
1. Frequent failures of monsoon are a curse to the farmers
2. The farmers find it difficult to repay the debts

Litigation
1. Due to land dispute litigation in the court compels them to borrow heavily

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Money lenders high rate of interest

1. The rate of interest charged by the local money lenders is very high and the
compounding of interest leads to perpetuate indebtedness of the farmers

Measures to remove rural indebtedness

Several Remedial measures have been introduced to reduce the rural indebtedness
1. It includes regulation of money lenders
2. Development of rural banks
3. Regional rural banks
4. Microfinance
5. Formation of self-help group
6. Primary Cooperative Bank land and Land Development Banks scheme
7. Micro units’ development and refinance agency Bank (MUDRA)

Regional rural bank

1. Regional rural bank came into existence based on the recommendation made by a
working group on Rural Bank appointed by the government of India in 1975
2. It is to develop rural economy by providing credit and other facilities particularly to
the small and marginal farmers, agricultural labourers, artisans small entrepreneurs
3. At present there are 64 RRB, their lending rates are par with the prevailing rates
of cooperative society

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Micro finance

1. Microfinance is also known as micro credit

2. It is a financial service that offers loans, saving and insurance to entrepreneurs and
small business owners, who do not have access to traditional source of capital like
banks or investors
3. The role of microfinance is to provide individuals with money to invest in
themselves or their business
4. Micro Finance is available through microfinance institutions, which range from small
non-profit organisation to larger Bank

Self-help groups

1. It is an informal voluntary Association of poor people from the similar socio-

economic background of 20 women (average size 14)
2. The self-help group promote small savings among its members
3. They save small amount rupees 10 rupees to 50 rupees a month
4. Saving for 6 months, lend money to their members for interest
5. Self-help group bank linked programs started in 1992, it covers all aspects of self-
employment, organisation of the rural poor and their capacity building, planning of
activity clusters, infrastructure build up, technology, marketing and credit
6. Objective of this program is to bring the beneficiaries above the poverty line by
assisting them through bank credit and government subsidy
7. NABARD Estimates there are 2.2 million self-help group in India

Major features of self-help group are

1. It is an economically homogenous group form of self-selection based on the affinity

of its members
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2. Most self-help group are women's group membership ranging from 10 to 20

3. They have well defined rules and bylaws, holding regular meetings and maintain
records and saving and credit discipline
4. They are self-managed characterized by participatory and collective decision making

Micro units development and refinance agency Bank (MUDRA)

1. It is a Public sector financial institution it provides loans at low rates to

microfinance institution and non-banking Financial Institutions which then provide
credit to micro, small and medium enterprises
2. It was launched on 8th April 2015

The principal objectives of the Mudra Bank of the following

1. Regulate the lender and the borrower of microfinance and bring stability to the
microfinance system
2. Extend finance and credit support to the microfinance institutions agencies that lend
money to small businesses, retailers, self-help groups and individuals
3. Register all microfinance institutions and introduce a system of performance waiting
and accreditation for the first time
4. Offer a Credit guarantee scheme for providing guarantees to loan being offered to
micro businesses
5. Introduce appropriate Technologies to assist in the process of efficient lending
borrowing and monitoring of distributed capital.

Good Luck
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