Chapter 6 - Rural Development

(Indian Economic Development)

Notes

Rural development
Rural development is a comprehensive term which essentially focuses on action for the development of areas
that are lagging behind in the overall development of the village economy.
It is a process of improving the standard of life and social economic welfare of the people living in rural
areas.

key issues in rural development in India

Some of the areas which are challenging and need initiatives for development in rural India are:

 Development of human resources: Rural human capital can be developed by providing quality
education and skill development and enabling them to better and more affordable access to healthcare
and sanitation facilities.
 Land reforms: It includes the objectives like realising the goal of land to the tiller, reducing the
concentration of land in few hands and increasing agricultural productivity and production.
 Development of Infrastructure: It is the key to any development process. It involves improvement in
electricity, irrigation, credit, marketing and transport facilities (including construction of village roads
and feeder roads to nearby highways); better facilities for agriculture research and extension and
information dissemination. There is a need for improving the quantity and quality of these basic
infrastructure facilities in rural areas to realise its true potential.
 Development of the productive resources of each locality: It is required to enhance opportunities of
employment (particularly other than farming) in order to increase income in rural areas.
 Alleviation of poverty: Special measures should be taken for alleviation of poverty and bringing about
significant improvement in the living conditions of the weaker sections of the population living in rural
areas. This can be done by emphasizing on greater access to productive employment opportunities.

Need for Rural Development in India

Mahatma Gandhi had always maintained that the real growth of India lies in the growth of villages.

The importance of rural development in India lies in the fact that −

 Agriculture is the main source of livelihood in the rural sector, with more than two-third of India’s
population still (directly or indirectly) depending on it and one-fourth of rural population in India
still living in abject poverty.
 Although the share of agriculture sector’s contribution to GDP was on a decline, the population
dependent on this sector did not show any significant change.
 During the 1991-2012 (i.e. After the initiation of reforms) the growth rate of agriculture sector
decelerated to about 3 per cent per annum due to decline in public investment, removal of fertiliser
subsidy and change in government policies.
 In recent years, this sector has become volatile. During 2014-15, the GVA growth rate of agriculture
and its allied sectors was less than one per cent.
 Inadequate infrastructure, lack of alternate employment opportunities in the industry or service
sector, increasing casualisation of employment etc., further impede rural development.

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Importance of (or Need for) credit in rural areas
 Growth of rural economy depends primarily on infusion of capital, from time to time, to realise higher
productivity in agriculture and non-agriculture sectors.
 Small and marginal farmers practise subsistence farming, they need credit as they have no surplus
production.
 Secondly, credit assumes a very important role in rural areas because of long gestation period. Long
gestation period means, the time gap between crop sowing and realisation of income after
production is quite long due to which farmers borrow from various sources to meet their initial
investment on seeds, fertilizers, implements (agricultural purpose) and for other purpose like family
expense of marriage, death, religious ceremonies (non-agricultural purpose).
 Thus, credit in rural economy is required for two purposes −

1. Agricultural
Purpose 2. Non-Agricultural
Purpose

Sources of credit in rural areas

Sources of Rural Credit in India

Non- Institutional
Sources Institutional Sources

1. Non- Institutional Sources: It includes money lenders, traders. Commission agents, landlords,
relatives and friends.
 Since independence these sources have been exploiting small and marginal farmers and landless
labourers by lending them on high interest rates and by manipulating the accounts so as to keep
them in a debt-trap.

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2. Institutional Sources: It is based on multiagency approach. India adopted social banking and
multiagency approach in 1969 to adequately meet the needs of rural credit.
 They are expected to provide adequate credit to farmers at cheaper interest rate and assist small
and marginal farmers in raising their agricultural productivity and maximising their income.
It includes institutions namely –
(i) Commercial Banks
(ii) Regional Rural Banks (RRBs)
(iii) Cooperative Credit Societies
(iv) Land Development Banks
(v) Self Help Groups (SHGs)
(vi) National Bank for Agriculture and Rural Development (NABARD)

National Bank for Agriculture and Rural Development (NABARD)

National Bank for Agriculture and Rural Development was set up in 1982 as an apex body to coordinate the
activities of all institutions involved in the rural financing system.

Micro-credit programmes/ system

 Micro credit refers to credit and other financial services provided to the poor through Self-Help Groups
(SHGs).
 Recently SHGs have emerged to fill the gap in the formal credit system because the formal credit delivery
mechanism has not only proven inadequate but has also not been fully integrated into the overall rural
social and community development. Since some kind of collateral is required, vast proportion of poor
rural households were automatically out of the credit network.
 SHGs are playing a crucial role in meeting credit requirements of the poor by inculcating saving habits
among the rural households.
 They promote thrift in small proportions by a minimum contribution from each member.
 From the pooled money, credit is given to the needy members to be repayable in small instalments at
reasonable interest rates.
 These Self-Help Groups have also helped in the empowerment of women in rural economy. However, the
borrowings are mainly confined to consumption purposes.

The Poor Women’s Bank – A SHG in Kerala

 ‘Kudumbashree’ is a women-oriented community-based poverty reduction programme being implemented
in Kerala.
 In 1995, a thrift and credit society was started as a small savings bank for poor women with the objective
to encourage savings.
 The thrift and credit society mobilised Rs 1 crore as thrift savings.
 These societies have been acclaimed as the largest informal banks in Asia in terms of participation and
savings mobilised.

Critical evaluation of the rural banking system

 Positive effects of the rural banking system (Achievements):

(i) The credit facilities helped farmers to avail services and a variety of loans for meeting their production
needs which helped in raising both farm and non-farm output.
(ii) Buffer stocks has been created and food security has been achieved; Famines became events of the
past.

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 Negative effects of the rural banking system (Drawbacks):
(i) The formal credit delivery mechanism has not only proven inadequate but has also not been fully
integrated into the overall rural social and community development. Since some kind of collateral is
required, vast proportion of poor rural households were automatically out of the credit network.
(ii) With the possible exceptions of the commercial banks, other formal institutions failed to develop a
culture of deposit mobilisation – lending to worthwhile borrowers and effective loan recovery.
(iii) Agricultural loan default rates have been chronically high. Since a major proportion of defaulters are
wilful defaulters.

Suggestions to improve the situation

(i) Banks need to change their approach from just being lenders to building up relationship banking with the
borrowers.
(ii) Farmers should also be encouraged to inculcate the habit of thrift and efficient utilisation of financial
resources.

Agricultural Marketing
Agricultural marketing is a process that involves the assembling, storage, processing, transportation,
packaging, grading and distribution of different agricultural commodities across the country.

Problems faced by farmers in agricultural marketing

(i) Prior to independence, farmers while selling their produce to traders, suffered from faulty weighing and
manipulation of accounts.
(ii) Farmers who did not have the required information on prices prevailing in markets were often
forced to sell at low prices.
(iii) They also did not have proper storage facilities to keep back their produce for selling later at a better
price. More than 10 per cent of goods produced in farms are wasted due to lack of storage.
(iv) Inadequate transportation facilities and bad weather roads have added to the problem of taking
agricultural produce to the nearby markets.

Despite government intervention, private trade (by moneylenders, rural political elites, big merchants and rich
farmers) predominates agricultural markets. Hence, state intervention became necessary to regulate the
activities of the private traders.

Measures taken by the government to improve agricultural marketing

(i) Regulation of markets to create orderly and transparent marketing conditions.
(ii) Provision of physical infrastructure facilities like roads, railways, warehouses, godowns, cold storages
and processing units. The current infrastructure facilities are quite inadequate to meet the growing
demand and need to be improved.
(iii) Cooperative marketing, in which farmers pool in their product, has been encouraged to ensure a fair
price to farmers.
(iv) Various policy instruments aimed at protecting the income of the farmers and providing food grains at a
subsidised rate to the poor, initiated by the government like (a) assurance of minimum support prices
(MSP) for agricultural products (b) maintenance of buffer stocks of wheat and rice by Food Corporation
of India and (c) distribution of food grains and sugar through PDS (public distribution system).

Short note on Cooperatives

 The aim of cooperative marketing is to realise fair price for farmers products.
 Under this, marketing societies are formed by farmers to sell the output collectively and to take the
advantage of collective bargaining, in order to obtain better price.

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 Milk cooperatives in Gujarat have been very successful in transforming the social and economic
conditions of Gujarat and some other parts of the country.
 However, cooperatives have received a setback during the recent past due to −
 inadequate coverage of farmer members;
 lack of appropriate link between marketing and processing cooperatives;
 inefficient financial management.

Emerging Alternate Marketing Channels

It has been realised that if farmers directly sell their produce to consumers, it increases their incomes. In this
context there arises need for alternate marketing channels.
1. Farmers set up their own mandis and sell their product directly to consumers that would fetch them
comparatively higher price, thereby, attractive profits. Some examples are Apni Mandi (Punjab,
Haryana and Rajasthan); Hadaspar Mandi (Pune); Rythu Bazars (vegetable and fruit markets in
Andhra Pradesh and Telangana) and Uzhavar Sandies (farmers markets in Tamil Nadu).
2. Several national and multinational fast food chains are increasingly entering into contracts/ alliances
with farmers wherein they directly sell produce of farmers to customers. They encourage farmers to
cultivate farm products (vegetables, fruits, etc.) of the desired quality by providing them with not only
seeds and other inputs but also assured procurement of the produce at predecided prices. Such
arrangements help in reducing the price risks of farmers and expanding the markets for farm products.

Diversification into productive activities (Agricultural Diversification)

Agricultural (or Rural) diversification includes two aspects –
1. Diversification of crop production i.e. change in cropping pattern
2. Diversification of production activities i.e. shift of workforce from agriculture to other allied activities
(livestock, poultry, fisheries etc.) and non-agriculture sector.

Need for agricultural diversification

The need for diversification (i.e. focus on allied activities, non-farm employment and other emerging
alternatives of livelihood) arises from the fact that –

(i) There is greater risk in depending exclusively on farming for livelihood. Thus, diversification towards
new areas (non-farm employment) is necessary to reduce the risk from agriculture sector and provide
productive sustainable livelihood options to rural people.
(ii) Much of the agricultural employment activities are concentrated in the Kharif season. However, during
the Rabi season, it becomes difficult to find gainful employment in areas where there are inadequate
irrigation facilities. Therefore, expansion into other sectors is essential to provide supplementary
gainful employment and in realising higher levels of income for rural people to overcome poverty
and other tribulations.
(iii) Agriculture is already overcrowded. Thus, a major proportion of the increasing labour force needs to
find alternate employment opportunities in other non-farm sectors.

Note:
 Non-farm activities have several segments. Some possess dynamic linkages that permit healthy growth
while others are in subsistence, low productivity propositions.
 The dynamic sub-sectors include agro-processing industries, food processing industries, leather
industry, tourism, etc.
 Those sectors which have the potential but seriously lack infrastructure and other support include
traditional home-based industries like pottery, crafts, handlooms etc.

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 Tamil Nadu Women in Agriculture (TANWA)
 It is a project initiated in Tamil Nadu to train women in latest agricultural techniques.
 It induces women to actively participate in raising agricultural productivity and family income.
 Women are forming Farm Women’s Group, which functions like SHG.
 Many other Farm Women’s Groups are creating savings in their group by functioning like mini banks
through a micro-credit system.
 With the accumulated savings, they promote small-scale household activities like mushroom
cultivation, soap manufacture, doll making or other income generating activities.

Different ways of diversifying into productive activities other than farming

Animal
Husbandry

Dairying Horticulture
Non-Farm
areas of
Employment

Fisheries Information
Technology

1. Animal Husbandry and Dairying

Animal Husbandry: Animal Husbandry (or Livestock farming) is that branch of agriculture, which is
concerned with the breeding, rearing and caring of farm animals.
 In India, the farming community uses the mixed crop-livestock farming system — cattle, goats, fowl
are the widely held species.
 Livestock production provides increased stability in income, food security, transport, fuel and nutrition
for the family without disrupting other food-producing activities.
 Today, livestock sector alone provides alternate livelihood options to over 70 million small and
marginal farmers including landless labourers of which a significant number is of women.
 In India, poultry accounts for the largest share with 58% in the distribution of livestock.

Dairying: It is that branch of agriculture which involves breeding, raising and utilization of dairy
animals for the production of milk and the various dairy products processed from it.
 Dairying is the business of producing, storing and distributing milk and its products.

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 Operation Flood
 In India milk production has increased by about ten times between 1951-2016 due to successful
implementation of ‘Operation Flood’ (also known as white revolution started by National Dairy
Development Board in 1970, under the expert guidance of then chairman, Dr. Verghese Kurien)
 It is a system whereby all the farmers canOOpool their milk produced according to different
grading (based on quality) and the same is processed and marketed to urban centres through
cooperatives.
 In this system the farmers are assured of a fair price and income from the supply of milk to
urban markets. The Gujarat state is held as a success story in the efficient implementation of
milk cooperatives like Amul, which has been followed by many other states.

Meat, eggs, wool and other by- products are also emerging as important productive sectors for diversification.

Measures that can be taken to improve livestock production:

a) It requires improved technology and promotion of good breeds of animals to enhance productivity.
b) Improved veterinary care and credit facilities to small and marginal farmers and landless labourers would
enhance sustainable livelihood options through livestock production.

2. Fisheries: It involves catching, processing and selling of fish and other aquatic animals.
 The fishing community regards the water body (sea, oceans, rivers, lakes, natural aquatic ponds,
streams etc.) as ‘mother’ or ‘provider’ as they provide life-giving source to the fishing community.
 In India, after progressive increase in budgetary allocations and introduction of new technologies in
fisheries and aquaculture, the development of fisheries has come a long way.
 In India, the total fish production contribution from inland sources is about 65 per cent and 35 per cent
comes from the marine sector (sea and oceans). Today total fish production accounts for 0.9 per cent
of the total GDP.
 West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu are the major fish
producing states in India.
 Even though women are not involved in active fishing, still, 60 per cent of the workforce in export
marketing and 40 per cent in internal marketing are women.
 A large proportion of fish worker families are poor. The fishing community today is facing major
problems such as rampant underemployment, low per capita earnings, absence of mobility of labour to
other sectors and a high rate of illiteracy and indebtedness.

Measures that can be taken to improve fisheries:

a) Problems related to over- fishing and pollution need to be regulated and controlled.
b) There is a need to increase credit facilities through cooperatives and SHGs for fisherwomen to meet the
working capital requirements for marketing.
c) Welfare programmes for the fishing community have to be changed in a manner, which can provide long-
term gains and sustainable livelihoods.

3. Horticulture: Horticulture refers to the branch of agriculture that deals with growing of fruits,
vegetables, tuber crops, flowers, medicinal and aromatic plants, spices and plantation crop for commercial
purposes. These crops provide food and nutrition besides providing employment.
 India has adopted horticulture as it is blessed with a varying climate and soil conditions.
 In India, the horticulture sector contributes nearly one-third of agriculture output and six per cent of
Gross Domestic Product (GDP).
 India has emerged as a world leader in producing a variety of fruits like mangoes, bananas, coconuts,
cashew nuts and a number of spices and is the second largest producer of fruits and vegetables.

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  The period between 1991-2003 is also called a period of 'Golden Revolution' because during this
period, the planned investment in horticulture became highly productive and the sector emerged as a
sustainable livelihood option.
 Horticulture has improved economic condition of many farmers and has become a means of improving
livelihood for many unprivileged classes.
 Flower harvesting, nursery maintenance, hybrid seed production and tissue culture, propagation of
fruits and flowers and food processing are highly remunerative employment options for women in
rural areas.

Measures that can be taken to improve Horticulture:

a) Horticulture has emerged as a successful sustainable livelihood option and needs to be encouraged
significantly. Enhancing its role requires investment in infrastructure like electricity, cold storage
systems, marketing linkages, small-scale processing units and technology improvement and
dissemination.

Green Revolution Vs Golden Revolution

Green Revolution:
 It refers to the large increase in production of food grains in the late 1960s, resulting from the use of high
yielding variety (HYV) seeds and increased use of fertiliser and pesticide with the correct quantities as
well as regular supply of water.
 It led to increase in the production, especially, of rice and wheat.
 As a result of this revolution, India became self-sufficient in the production of food grains (rice and
wheat).

Golden Revolution:
 The period 1991-2003 is referred to as the period of Golden Revolution as in this period planned
investment in horticulture became highly productive and the sector emerged as a sustainable livelihood
option.
 It led to increase in the production of fruits, vegetables, flowers, aromatic plants, spices etc.
 As a result of this revolution India became a world leader in the production of mangoes, bananas,
coconut and spices.
For rural people, diversification or focusing on associate activity is important as it gives them an opportunity
to earn extra income and overcome poverty.

Role of Information Technology (IT) in sustainable development and food security

IT has revolutionised many sectors in the Indian economy. It is widely accepted that IT can play a critical role
in achieving sustainable development and food security in the twenty-first century.

 Through appropriate information and software tools, government can predict areas of food insecurity
and vulnerability so that action can be taken to prevent or reduce the likelihood of an emergency.
 IT can also spread (circulate) information regarding emerging technologies and its applications, prices,
weather and soil conditions for growing different crops etc.
 IT can act as a tool for releasing the creative potential and knowledge embedded in the society. It also
has potential of employment generation in rural areas.

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Adoption of Village by Parliamentarians
 In October, 2014, the Government of India introduced a new scheme called Saansad Adarsh Gram
Yojana (SAGY).
 Under this scheme, Members of India's Parliament need to identify and develop one village from their
constituencies.
 To begin with, MPs can develop one village as a model village by 2016, and two more by 2019,
covering over 2,500 villages in India.
 According to the scheme, the village can have a population of 3,000-5,000 in the plains and 1,000-
3,000 in the hills and should not be MPs' own or their spouse's village.
 MPs are expected to facilitates village development plan, motivate villagers to take up activities and
built infrastructure in the areas of health, nutrition and education.

Conclusion -The rural sector continues to remain backward until and unless spectacular changes occur.
 There is a greater need today to make rural areas more vibrant through diversification into dairying,
poultry, fisheries, vegetables and fruits.
 Efforts should be made to link up the rural production centres with the urban and foreign (export) markets
to realise higher returns on the investments for the products.
 Efforts should be made to develop infrastructure elements like credit and marketing; state agricultural
departments; farmer friendly agricultural policies and a constant appraisal and dialogue between farmers’
groups to realise the full potential of the sector.
 There is need to invent or procure alternate sets of eco-friendly technologies that lead to sustainable
development in different circumstances.

Click on the following links for further explanation of the topics discussed above:

1. https://www.youtube.com/watch?v=dhotQib1rvA&feature=youtu.be
2. https://www.youtube.com/watch?v=6laJbYXmx-U&feature=youtu.be
3. https://www.youtube.com/watch?v=DSFJSxT4Jdg