Sr.No.

Modules
01 Introduction Agricultural Sector

02 Industrial Sector

03 Service Sector and External Sector

04 Money and Banking

 India is a developing country and our economy is a mixed
economy where the public sector co-exists with the private
sector.
 For an overview of Indian Economy, we should first go
through the strengths of Indian economy.
 India is likely to be the third largest economy with a GDP
size of $15 trillion by 2030.
 The economy of India is currently the world’s fourth largest in
terms of real GDP (purchasing power parity) after the USA,
China and Japan and the second fastest growing major
economy in the world after China.
 Introduction to Indian Economy:-
• Low per capita income.
• Inequalities in income distribution.
• Predominance of agriculture. (More than 2/3rd of India’s
working population is engaged in agriculture. But in USA only
2% of the working population is engaged in agriculture.)
• Rapidly growing population with 1.2% annual change.
• Chronic unemployment (A person is considered employed if he
/ she works for 273 days of a year for eight hours every
day.)Unemployment in India is mainly structural in nature.
• Low rate of capital formation due to less saving rate.
• Dualistic Nature of Economy (features of a modern economy,
as well as traditional).Mixed Economy
• Follows Labour Intensive Techniques and activities.
 Agriculture in Indian economy:-
 While Indian economy introduction is started, the major focus is
always on the agriculture sector. This is because Indian
economy is based on agriculture.52% of the total population of
India depends on agriculture.
 According to the 2011-2012 survey of Indian agriculture
contributes 14.1% of the Gross Domestic Product (GDP). It was
55.4% in 1950-1951.
 India is the second largest sugar producer in the world (after
Brazil).
In tea production, India ranks first. (27% of total production in
the world).
 Sectors of Indian Economy:-
1. Primary Sector: When the economic activity depends mainly
on exploitation of natural resources then
that activity comes under the primary sector. Agriculture and
agriculture related activities are the primary sectors of
economy.
2. Secondary Sector: When the main activity involves
manufacturing then it is the secondary sector. All industrial
production where physical goods are produced come under
the secondary sector.
3. Tertiary Sector: When the activity involves providing
intangible goods like services then this is part of
the tertiary sector. Financial services, management consultancy,
telephony and IT are examples of service sector
  Salient Features of Indian Economy
 Indian economy is termed as the developing economy of the
world. Some features like low per capita income, higher
population below poverty line, poor infrastructure, agriculture
based economy and lower rate of capital formation, tagged it
as a developing economy in the world.
 Some features of Indian economy are given below:
 1. Low per Capita Income: India’s per capita income is very
less as compare to developed countries. As per the estimates
of the Central Statistics Office (CSO), the per capita net
national income of the country at current prices for the year
2015-16 is estimated to attain the level of Rs. 93231/-.
 2. Agriculture Based Economy: Agriculture and allied
sectors provide around 14.2% of Indian GDP while 53% of
total Indian population is based on the agriculture sector.
 3. Over population: in every decade Indian population get
increased by about 20% . During the 2001-11 population
increased by 17.6%. Currently India is adding the total
population of Australia every year. India is the possessor of
around 17.5% population of the whole world.
 4. Income Disparities: a report released by Credit Suisse
revealed that the richest 1% Indians owned 53% of the
country’s wealth, while the share of the top 10% was 76.30%.
To put it differently, in a manner that conveys the political
economy of this stunning statistic, 90% of India owns less than
a quarter of the country’s wealth.
 5. Lack of Capital Formation: Rate of capital formation is low
because of lower level of income. Gross domestic capital formation
was 23.3% in 1993-94 increased upto the level os 38.1% in 2007-
08 but declined upto 34.8% in 2012-13.
 6. Backwardness of Infrastructural Development: As per an
recent study, 25% of Indian families don’t have reach of electricity
and 97 million peoples don’t have reach of safe drinking water and
840 million people in India don't have sanitation services. India
needs 100 million dollar for infrastructural development upto 2025.
 7. Market Imperfections: Indian economy doesn’t have good
mobility from one place to other which hinders the optimum
utilization of resources. These market imperfections create the
fluctuations in the price of commodities every year.
 8. Economy is Trapped in the Vicious Circle of Poverty: Prof.
Ragner Nurkes says that ‘a country is poor because it is poor’. It
means poor countries are trapped in the vicious circle of poverty.
 9. Use of Outdated Technology: It is very clear that Indian
production technique is more labour oriented in nature. So it
increases the cost of production of the products made in these
countries.
 10. Traditional Set Up of Society: Indian societies are
trapped in the menace like casteism, communalist, male
dominated society, superstitions, lack of entrepreneurship, and
‘chalta hai attitude’ of the peoples. These all factors hindered
the growth of the country as a whole.
 Demographic features mean the characteristics of population like, size, composition, diversity,
growth and quality of population etc.

 To have basic understanding of the population problem of a specific country, one should have a
complete knowledge regarding the basic features of population of that country.
 The following are features of India’s population
 1. Large Size and Fast Growth:
 The first main feature of Indian population is its large size and rapid growth. According to 2001
census, the population of India is 102.87 crore. In terms of size, it is the second largest population
in the world, next only to China whose population was 127 crore in 2001. India’s population was
23.6 crore in 1901 and it increased to 102.7 crore in 2001.
 In addition to its size, the rate of growth of population has been alarming since 1951. At present,
India’s population is growing at a rate of 1.9 percent per annum; 21 million people are added
every year which is more than the population of Australia. This situation is called population
explosion and this is the result of high birth rate and declining death rate.
 2. Second Stage of Demographic Transition:
 According to the theory of demographic transition, the population growth of a country passes
through three different stages as development proceeds. The first stage is characterised by high
birth rate and high death rate. So in this stage the net growth of population is zero. Till 1921,
India was in the 1st stage of demographic transition.
 3. Rapidly Rising Density
 Another feature of India’s population is its rapidly rising density.
Density of population means to the average number of people
living per square kilometer. The density of population in India
was 117 per square km. in 1951 which increased to 324 in 2001.
This makes India one of the most densely populated countries
of the world. This adversely affects the land-man ratio.
 4. Predominance of Rural Population:
 Another feature of Indian population is the dominance of rural
population. In 1951, rural population was 82.7% and urban
population was 17.3%. In 1991 rural population was 74.3% and
urban population was 257. In 2001, the rural population was
72.2% and urban population was 27.8. The ratio of rural urban
population of a country is an index of the level of
industrialisation of that country. So process of urbanisation slow
and India continues to be land of villages.
 5. Low Quality Population:
 The quality of population can be judged from life expectancy, the level of
literacy and level of training of people. Keeping these parameters in mind,
quality of population in India is low.
 (a) Low Literacy Level:
 Literacy Level in India is low. Literacy level in 1991 was 52.2% while male-
female literacy ratio was 64.1 and 39.3 percent. In 2001, the literacy rate
improved to 65.4 percent out of which made literacy was 75.8 and female
literacy was 52.1 percent. There are 35 crore people in our country who are still
illiterate.
 (b) Low level of Education and Training:
 The level of education and training is very low in India. So quality of population
is poor. The number of persons enrolled for higher education as percentage of
population in age group 20-25 was a percent in 1982. It is only one fourth of the
developed countries. The number of doctors and engineers per million of
population are 13 and 16 respectively. It is quite less as compared to advanced
countries.
 (c) Low Life Expectancy:
 By life expectancy we mean the average number of years a person is expected
to live. Life expectancy in India was 33 years. It was increased to 59 in 1991 and
in 2001, life expectancy increased to 63.9.
 6. Low Work Participation Rate:
 Low proportion of labour force in total population is a
striking feature of India’s population. In India, Labour force
means that portion of population which belongs to the age
group of 15-59. In other words, the ratio of working
population to the total is referred to as work participation
rate.
 7. Symptoms of Over-population:

 The concept of over-population is essentially a quantitative

concept. When the population size of the country exceeds
the ideal size, we call it over-population. According to T.R.
Malthus, the father of demography, when the population of a
country exceeds the means of substance available, the
country faces the problem of over-population.
 1. High Birth Rate
 High Birth rate is a major cause responsible for the rapid growth of population.
In India, although the birth rate has declined from 45.8 per thousand during the
period 1891-1900 to about 25.8 per thousand in 2001, it is still considered to be
substantially high. This shows that the birth rate has not come down
considerably in spite of the increase in the widespread propaganda of family
planning, family welfare programmes and population education campaigns.
 2. Low Death Rate
 The phenomenal fall in the death rate in recent years is another important
factor that has contributed to the rapid increase in population. The death rate
in India is about 8.5 per thousand in 2001. Due to advancement in medical
science, dreadful and chronic diseases such a small pox, cholera, plague,
typhoid are no longer dreaded. Better facilities for sanitation and cleanliness,
provision of pre-natal and post-natal care has reduced infant mortality rate.
 3. Early Marriage
 The practice of early marriage is another important reason for the rapid
increase in population in India. The mean age of marriage for girls is about 18
years, which is low, compared to the other countries of the world, which is
about 23 to 25 years. This results in a longer span for reproductive activity and
the increase in the number of children.
 4. Social and Religious reasons
 In India, every person has to marry because marriage is a compulsory institution as per
social norms. In joint family system, nobody feels individual responsibility and everybody
has access to equal level of consumption. Therefore, people do not hesitate to increase
the size of the family. Most of the people think that at least one male child should be
born in the family. In the expectation of getting a male child, they go on increasing the
family size.
 5. Poverty
 Poverty is another cause which contributes to the increase in population. Children are
source for income of the family. The children at a very young age help their parents in
work, instead of going to school and thus prove to be an asset for the family. Every
additional child will become an earning member and thus supplement the family income.

 6. Standard of living
 People whose standard of living is low tend to have more children because an additional
child is considered as an asset rather than a liability. Since a majority of the population
is uneducated, they are unable to understand the need for family planning. They are
unaware that a smaller size of family will help them enjoy a better standard of living.
 7. Illiteracy
 A major part of the population (about 60%) in India is either illiterate or has the
minimum education. This leads them to accept minimal work in which they cannot even
support themselves. Unemployment and under-employment further lead to poverty.
Moreover due to the prevalence of higher rate of illiteracy, there is widespread
ignorance in the form of social customs and beliefs like early marriage and preference
for a male child. As a result, there is high rate of population growth in the country.
  Population Explosion as an obstacle to Economic Development

India is facing the situation of population explosion. Although we need more labour supply for our
economic development, it is also true that if our population keeps on rising, the process of economic
development will be affected. The rising population in India affects economic development in the
following ways:
 (1) Food Shortage
 If the population of India goes on rising and there is no proportionate increase in agricultural
production, the country will face a serious food problem
 (2) Burden of unproductive Consumers
 The greater the increase in population, the greater is the number of children and old persons.
Children and old persons consume without their making any contribution to output. The increasing
number of children and old people increase the burden in terms of more requirements of nutrition,
medical care, public health and education that go unattended to a large extent.
 (3) Reduction in National and Per Capita Income
 The fast growing population retards the average growth rate of national income and per capita
income. This is because whatever is added to the national income is consumed by ever-increasing
population.
 (4) Low savings and investment
 The most serious consequences of a rapid increase in population is that it reduces the capacity to
save and invest. The national income and per capita income in India is very low to leave any
margin for the people to save. Further, there will be a fall in effective demand as the people's
purchasing power is low. Rapid population growth thus makes it difficult to increase the rate of
savings which determines the possibility of achieving higher productivity and incomes in a country.
 (5) Reduction in Capital Formation
 Capital formation is very essential for the economic development of a country, particularly for a
developing country like India. Capital formation depends upon saving and investment. This is not possible
when there is a rapid growth of population, which results in more unemployment and underemployment.
Thus, the fast-growing population affects the capital formation in the country adversely.
 (6). Unemployment and Underemployment
 Rising population aggravates the problem of unemployment. The labour force also increases with the
increase in population; and this increased labour force is not fully absorbed due to lack of employment
opportunities. Therefore, there are more unemployed and underemployed people.

 (7) Loss of Women's Labour

 Rapid and frequent childbirths make a large number of women unable to take part in productive activity
for longer periods. This is a waste of human resource, and it retards economic development.
 (8) Low Labour efficiency
 The increasing population adversely affects the national income and the per capita income. Due to this,
the people have a low standard of living, which makes them less efficient. This hinders the rapid
development of the country.
 (9) More Expenditure on Social Welfare Programmes
 A rise in population increases the number of children. This would demand more social expenditure on
medical care, public health, family welfare, education and housing, etc.
 (10) Agricultural Backwardness
 The increase in population has led to uneconomic holdings through subdivision and fragmentation of land
holdings in India. The size of holding is so small that mechanised farming is not possible. Although some
successful efforts towards development of agriculture have been made under the Five Year Plans,
agricultural production still far short of the requirements of the population and the agro-industries in the
country.
 Excessive population has various adverse effects including undue pressure on
natural resources. More people mean more consumption which in turn means
more exploitation of fixed and exhaustible resources. Also population is not a
universal challenge. It is specific to nations whose economies have yet not
achieved full potential and development.
. These measures can be classified into 3 categories.

 A)Social Measures

 Minimum age of marriage: The problem of child marriage is highly prominent

in certain countries with high population like India, Pakistan or Bangladesh. A
marriage at a tender age leads to a long span for giving birth. Also young age
marriage devoid people of the education and awareness required to be sensitive
towards and understand the consequences of raising too many children.

 Raising the status of women: There is still discrimination to the women. They
are confined to four walls of the house. They are still confined to rearing and
bearing children. So women should be given opportunities to develop socially
and economically. Free education should be given to them.
 Spread of Education: The spread of education changes the outlook of people. The
educated men prefer to delay marriage and adopt small family norms. Educated
women are health conscious and avoid frequent pregnancies and thus help in
lowering birth rate.
 Adoption: Some parents do not have any child, despite costly medical treatment. It
is advisable that they should adopt orphan children. It will be beneficial to orphan
children and children couples. Government should also provide incentives for
adopting.
 Social Security: More and more people should be covered under-social security
schemes. So that they do not depend upon others in the event of old age, sickness,
unemployment etc. with these facilities they will have no desire for more children.

 B) Economic Measures

 More employment opportunities: The first and foremost measure is to raise

employment avenues in rural as well as urban areas. Generally in rural areas there
is disguised unemployment. So efforts should be made to migrate unemployed
persons from the rural side to the urban side. When their income is increased they
would improve their standard of living and adopt small family norms. Another
method to check the population is to provide employment to women. Women should
be given incentive to give services in different fields. Women are taking an active
part in competitive examinations. As a result their number in teaching, medical and
banking etc. is increasing rapidly.
 Providing incentives: Incentives have proved to be an efficient policy measure in combating most
development issues including population. Providing a health, educational or even financial incentive can
be a highly effective population measure. There are certain incentive policies like paying certain money
to people with not more than two kids or free or discounted education for single children etc. which are
in place in most developing countries facing population related challenges and has also proved to be a
useful measure.
 3) Other Measures
 Medical Facilities: One big drawback of developing countries is that of limited and highly centric
medical facilities. Because of the high rural-urban divide in developing countries, availability of good
hospitals and doctors is limited to urban centers thus resulting in high infant mortality rate in rural
areas. Rural people, in order to ensure that at least some of their kids survive, give birth to more and
more kids thus contributing to the population growth. If provided with optimum medical facilities
population rate will almost certainly decline.
 Legislative Actions: Not much result can be achieved from these if family planning and use of
contraception remains optional instead of mandatory. Strict legal steps are required for child marriage,
education, abolition of child labor and beggary and family planning to reap significant benefits from it.
Proper enforcement of laws related to child labour, slavery and beggary will ensure that parents don’t
sell their children or send them out to work thus forcing them to raise lesser number of kids.
 Recreational Facilities: Birth rate will likely to fall if there are different recreational facilities like
cinema; theatre, sports and dance etc. are available to the people.
 Spreading awareness: People need to be told and made to understand the consequences of having too
many children. Government and non-government institutions can carry awareness campaigns informing
people how they will be unable to provide good nutrition, education or medical facilities to their
children if they have too many. Population is also a reason for illiteracy and diseases and malnutrition
and the negative effects of it are required to be communicated to the general public to expand their
reasoning and understanding.
 Introduction
 Two major problems that the developing countries of the world face are mass poverty and mass
unemployment. They are interconnected. People are poor because they do not have income. That is
because they are unemployed. There are also cases where people are employed and poor. For
centuries, the problem of poverty is there in India. Reducing poverty is one of the major goals of
planning in India. We must have knowledge about the poor and their precise social and economic
circumstances. Only then the government can adopt effective policies for removing poverty.
 Definitions of Poverty
 Poverty has been defined in a number of ways. The World Bank (1990) has defined poverty as 'the
inability to attain a minimal standard of living‘.
 In the words of Dandekar (1981) 'want of adequate income, howsoever defined is poverty' Thus,
lack of adequate income to buy the basic goods for subsistence living is an important element in
the definitions of poverty.
 Types of poverty
 Absolute poverty and Relative poverty

 When people do not have adequate food, clothing and shelter, we say they are in absolute poverty.

 Relative poverty refers to differences in income among different classes of people or people within
the same group or among people of different countries. If we divide the population of a country
into different class intervals based on income and if we compare say, the top 20 percent of
population with the bottom 20 percent of population, then we can say we are studying about
relative poverty.
  Causes of Poverty in India
 The main causes of rural poverty in India are as follows :

 (i) Heavy pressure of population: Population has been rising in India at

a rapid speed. This rise is mainly due to fall in death rate and more birth
rate. India’s population was 84.63 crores in 1991 and became 102.87
crores in 2001. This pressure of population proves hindrance in the way
of economic development.
 (ii) Unemployment and under employment: Due to continuous rise in
population, there is chronic unemployment and under employment in
India. There is educated unemployment and disguised unemployment.
Poverty is just the reflection of unemployment.
 (iii) Capital Deficiency: Capital is needed for setting up industry,
transport and other projects. Shortage of capital creates hurdles in
development.
 (iv) Under-developed economy: The Indian economy is under developed
due to low rate of growth. It is the main cause of poverty.
 (v) Increase in Price: The steep rise in prices has affected the poor
badly. They have become more poor.
 (vi) Net National Income: The net national income is quite low as compared to
size of population. Low per capita income proves its poverty. The per capita
income in 2003-04 was Rs. 20989 which proves India is one of the poorest
nations.
 (vii) Rural Economy: Indian economy is rural economy. Indian agriculture is
backward. It has great pressure of population. Income in agriculture is low and
disguised unemployment is more in agriculture.
 (viii) Lack of Skilled Labour: In India, unskilled labour is in abundant supply but
skilled labour is less due to insufficient industrial education and training.
 (ix) Deficiency of efficient Entrepreneurs: For industrial development, able
and efficient entrepreneurs are needed. In India, there is shortage of efficient
entrepreneurs. Less industrial development is a major cause of poverty.
 (x) Lack of proper Industrialisation: Industrially, India is a backward state. 3%
of total working population is engaged in industry. So industrial backwardness is
major cause of poverty.
 (xi) Low rate of growth: The growth rate of the economy has been 3.7% and
growth rate of population has been 1.8%. So compared to population, per capita
growth rate of economy has been very low. It is the main cause of poverty.
 (xii) Outdated Social institutions: The social structure of our country is full of
outdated traditions and customs like caste system, laws of inheritance and
succession. These hamper the growth of economy.
 The problem of poverty eradication is one of providing
employment and raising the productivity of low level of
employment. The following measures have been taken by the
government to remove poverty from the country.
 General
 Population Control:
 Population in India has been increasing rapidly. Growth rate
of population is 1.8%. For removal of poverty the growth rate
of population should be lowered.
 Increase in Employment:
 Special measures should be taken to solve the problems of
unemployment and disguised unemployment. Agriculture
should be developed. Small scale and cottage industries
should be developed in rural areas to generate employment.
 1. Integrated Rural Development Programme (IRDP):
 The Integrated Rural Development Programme (IRDP), which was introduced in
1978-79 and universalized from 2nd October, 1980, aimed at providing
assistance to the rural poor in the form of subsidy and bank credit for
productive employment opportunities through successive plan periods. On 1st
April, 1999, the IRDP and allied programmes were merged into a single
programme known as Swarnajayanti Gram Swarozgar Yojana (SGSY). The SGSY
emphasizes on organizing the rural poor into self-help groups, capacity-building,
planning of activity clusters, infrastructure support, technology, credit and
marketing linkages.
 2. Jawahar Rozgar Yojana/Jawahar Gram Samriddhi Yojana:
 Under the Wage Employment Programmes, the National Rural Employment
Programme (NREP) and Rural Landless Employment Guarantee Programme
(RLEGP) were started in Sixth and Seventh Plans. The NREP and RLEGP were
merged in April 1989 under Jawahar Rozgar Yojana (JRY). The JRY was meant to
generate meaningful employment opportunities for the unemployed and
underemployed in rural areas through the creation of economic infrastructure
and community and social assets. The JRY was revamped from 1st April, 1999,
as Jawahar Gram Samriddhi Yojana (JGSY). It now became a programme for the
creation of rural economic infrastructure with employment generation as the
secondary objective.
 3. Rural Housing – Indira Awaas Yojana:
 The Indira Awaas Yojana (LAY) programme aims at providing free housing
to Below Poverty Line (BPL) families in rural areas and main targets
would be the households of SC/STs. It was first merged with the Jawahar
Rozgar Yojana (JRY) in 1989 and in 1996 it broke away from JRY into a
separate housing scheme for the rural poor.
 4. Food for Work Programme:
 The Food for Work Programme was started in 2000-01 as a component of
EAS full form??. It was first launched in eight drought-affected states of
Chhattisgarh, Gujarat, Himachal Pradesh, Madhya Pradesh, Orissa,
Rajasthan, Maharashtra and Uttaranchal. It aims at enhancing food
security through wage employment. Food grains are supplied to states
free of cost, however, the supply of food grains from the Food
Corporation of India (FCI) godowns has been slow.
 5. Sampoorna Gramin Rozgar Yojana (SGRY):
 The JGSY, EAS and Food for Work Programme were revamped and
merged under the new Sampoorna Gramin Rozgar Yojana (SGRY) Scheme
from 1st September, 2001. The main objective of the scheme continues
to be the generation of wage employment, creation of durable economic
infrastructure in rural areas and provision of food and
 6. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
2005:
 It was launched on February 2, 2005. The Act provides 100 days assured
employment every year to every rural household. One-third of the proposed
jobs would be reserved for women. The central government will also establish
National Employment Guarantee Funds. Similarly, state governments will
establish State Employment Guarantee Funds for implementation of the
scheme. Under the programme, if an applicant is not provided employment
within 15 days s/he will be entitled to a daily unemployment allowance.
 7. National Food for Work Programme:
 It was launched on November 14, 2004 in 150 most backward districts of the
country. The objective of the programme was to provide additional resources
available under Sampoorna Grameen Rojgar Yojna. This was 100% centrally
funded programme. Now this programme has been subsumed in the MGNREGA
from Feb....... 2, 2006.
 8. National Rural Livelihood Mission: Ajeevika (2011)
 It is the skill and placement initiative of Ministry of Rural development. It is a
part of National Rural Livelihood Mission (NRLM)–the mission for poverty
reduction is called Ajeevika (2011). It evolves out the need to diversify the
needs of the rural poor and provide them jobs with regular income on monthly
basis. Self Help groups are formed at the village level to help the needy.
 9. Pradhan Mantri Kaushal Vikas Yojna:
 The cabinet on March 21, 2015 cleared the scheme to provide skill
training to 1.4 million youth with an overall outlay of Rs. 1120
crore. This plan is implemented with the help of Ministry of Skill
Development and Entrepreneurship through the National Skill
Development Corporation. It will focus on fresh entrant to the
labour market, especially labour market and class X and XII
dropouts.
 10. National Heritage Development and Augmentation Yojna
(HRIDAY):
 HRIDAY scheme was launched (21 Jan. 2015) to preserve and
rejuvenate the rich cultural heritage of the country. This Rs. 500
crore programme was launched by Urban Development Ministry in
New Delhi. Initially it is launched in 12 cities: Amritsar, Varanasi,
Gaya, Puri, Ajmer, Mathura, Dwarka, Badami, Velankanni,
Kanchipuram, Warangal and Amarvati.
These programmes played/are playing a very crucial role in the
development of the all sections of the society so that the concept
of holistic development can be ensured in the real sense.
Causes:
 In India, inequality in the distribution of income has increased for various reasons.
 The main reasons are the following:
 1. Unemployment:
 The main reason for low level of income of the majority of Indian people is
unemployment and underemployment and the consequent low productivity of
labour. Low labour productivity implies low rate of economic growth which is the
main cause of poverty and inequality of the large masses of people. In fact,
inequality, poverty and unemployment are interrelated. Since sufficient
employment could not be created through the process of planned economic
development, it was not possible to increase the income levels of most people.
 2. Inflation:
 Another cause of inequality is inflation. During inflation, few profit earners gain and
most wage earners lose. This is exactly what has happened in India. Since wages
have lagged behind prices, profits have increased. This has created more and more
inequality. Moreover, during inflation, money income increases no doubt but real
income falls. And this leads to a fall in the standard of living of the poor people
since their purchasing power falls.
 3. Tax Evasion:
 In India, the personal income tax rates are very high. High tax rates encourage
evasion and avoidance and give birth to a parallel economy. This is exactly what has
happened in India during the plan period. Here, the unofficial economy is as strong
as (if not stronger than) the official economy. High tax rates are responsible for
inequality in the distribution of income and wealth. This is due to undue concentra-
tion of incomes in a few hands caused by large- scale tax evasion.
 4. Regressive Tax:
 The indirect taxes give maximum revenue to the government. But they are
regressive in nature. Such taxes have also created more and more inequality over
the years due to growing dependence of the Government on such taxes.
 5. New Agricultural Strategy:
 No doubt, India’s new agricultural strategy led to the Green Revolution and raised
agricultural productivity. But the benefits of higher productivity were enjoyed
mainly by the rich farmers and landowners. At the same time, the economic
conditions of landless workers and marginal farmers deteriorated over the years.
Most farmers in India could not enjoy the-benefits of higher agricultural produc-
tivity. As a result, inequality in the distribution of income in the rural areas has
increased.
 Reducing Inequality:
 Various measures have been adopted by the Government during the plan period to
reduce inequality in the distribution of income.
 Four important measures are the following:
 1. Payment of Bonus:
 Firstly, the payment of bonus (called annual payment) has been made
compulsory in every industry.
 2. Ceiling on Land Holding:
 Secondly, a ceiling on landholdings has been imposed in the rural areas.
Each household (or family) is allowed to hold a certain amount of land.
Any surplus above this is taken over by the Government and is
redistributed among the landless workers and marginal farmers.
Moreover, in 1976 a ceiling on urban property has also been imposed.
 3. Self-Employment Projects:
 Moreover, various self-employment projects have been taken both in
rural and urban areas to solve the growing unemployment problem.
 4. Transfer Payments:
 Finally, various types of transfer payments (such as unemployment,
compensation, soft loans, pensions to freedom fighters, concessions to
senior citizens, etc.) have been made for improving the welfare of cer-
tain weaker sections of the society.
 The term unemployment is used to describe anyone who is able to work, but
doesn’t have an occupation.
 Unemployment is one of the most common and chronic problems worldwide. It
is a concern for individuals as well as global communities.
 Unemployment is expressed as percentage of the total available work
force that is unemployed, but actively seeking employment and willing to work
which is known as the unemployment rate.

 The causes of unemployment in India.

The following are the main causes of unemployment:
 (i) Caste System:
 In India caste system is prevalent. The work is prohibited for specific castes in
some areas.In many cases, the work is not given to the deserving candidates but
given to the person belonging to a particular community. So this gives rise to
unemployment.
 (ii) Slow Economic Growth:
 Indian economy is underdeveloped and role of economic growth is very slow.
This slow growth fails to provide enough unemployment opportunities to the
increasing population.
 (iii) Increase in Population:
 Constant increase in population has been a big problem in India. It is one of the
main causes of unemployment. The rate of unemployment is 11.1% in 10th Plan.
 (iv) Agriculture is a Seasonal Occupation:
 Agriculture is underdeveloped in India. It provides seasonal employment. Large part
of population is dependent on agriculture. But agriculture being seasonal provides
work for a few months. So this gives rise to unemployment.
 (v) Joint Family System:
 In big families having big business, many such persons will be available who do not
do any work and depend on the joint income of the family. Many of them seem to
be working but they do not add anything to production. So they encourage disguised
unemployment.
 (vi) Fall of Cottage and Small industries:
 The industrial development had adverse effect on cottage and small industries. The
production of cottage industries began to fall and many artisans became
unemployed.
 (vii) Slow Growth of Industrialisation:
 The rate of industrial growth is slow. Though emphasis is laid on industrialisation
yet the avenues of employment created by industrialisation are very few.
 (viii) Less Savings and Investment:
 There is inadequate capital in India. Above all, this capital has been judiciously
invested. Investment depends on savings. Savings are inadequate. Due to shortage
of savings and investment, opportunities of employment have not been created.
 (ix) Causes of Under Employment:
 Inadequate availability of means of production is the main cause of under
employment. People do not get employment for the whole year due to shortage of
electricity, coal and raw materials.
 (x) Defective Planning:
 Defective planning is the one of the cause of unemployment. There is wide gap
between supply and demand for labour. No Plan had formulated any long term
scheme for removal of unemployment.
 (xi) Expansion of Universities:
 The number of universities has increased manifold. There are 385 universities. As a
result of this educated unemployment or white collar unemployment has increased.
 (xii) Inadequate Irrigation Facilities:
 Even after the completion of 9th five plans, 39% of total cultivable area could get
irrigation facilities.
 2. Types of Unemployment:
 i. Frictional Unemployment:
 Frictional unemployment is a temporary condition. This
unemployment occurs when an individual is out of his current job and
looking for another job. The time period of shifting between two jobs
is known as frictional unemployment. The probability of getting a job
is high in a developed economy and this lowers the probability of
frictional unemployment. There are employment insurance programs
to tide over frictional unemployment
 ii. Structural Unemployment:
 Structural unemployment occurs due to the structural changes within
an economy. This type of unemployment occurs when there is a
mismatch of skilled workers in the labour market. Some of the causes
of the structural unemployment are geographical immobility
(difficulty in moving to a new work location), occupational immobility
(difficulty in learning a new skill) and technological change
(introduction of new techniques and technologies that need less
labour force). Structural unemployment depends on the growth rate
of an economy and also on the structure of an industry.
 iii. Classical Unemployment:
 Classical unemployment is also known as the real wage
unemployment or disequilibrium unemployment. This type of
unemployment occurs when trade unions and labour organization
bargain for higher wages, which leads to fall in the demand for
labour.
 iv. Cyclical Unemployment:
 Cyclic unemployment when there is a recession. When there is a
downturn in an economy, the aggregate demand for goods and
services decreases and demand for labour decreases. At the time of
recession, unskilled and surplus labours become unemployed. Read
about causes of economic recession.
 v. Seasonal Unemployment:
 A type of unemployment that occurs due to the seasonal nature of
the job is known as seasonal unemployment. The industries that are
affected by seasonal unemployment are hospitality and tourism
industries and also the fruit picking and catering industries
 Following are the suggestions to solve unemployment problem:
 (i) Change in industrial technique:
 Production technique should suit the needs and means of the
country. It is essential that labour intensive technology should be
encouraged in place of capital intensive technology.
 (ii) Policy regarding seasonal unemployment:
 Seasonal unemployment is found in agriculture sector and agro
based industries.
 To remove it:
 (a) Agriculture should have multiple cropping,
 (b) Plantations, horticulture, dairying and animal husbandry
should be encouraged,
 (c) Cottage industries should be encouraged.
 (iii) Change in education system:
 Educational pattern should be completely changed. Students who
have liking for higher studies should be admitted in colleges and
universities. Emphasis should be given on vocational education.
Qualified engineers should start their own small units.
 (iv) Expansion of Employment exchanges:
 More employment exchanges should be opened. Information
regarding employment opportunities should be given to people.
 (v) More assistance to self employed people:
 Most people in India are self employed. They are engaged in
agriculture, trade, cottage and small scale industries etc. These
persons should be helped financially, providing raw materials and
technical training.
 (vi) Full and more productive employment:
 The main objective of county’s employment policy should be to
increase employment opportunities and productivity of labour.
Govt. should adopt a policy that provides employment to all
people.
 (vii) Increase in Production:
 To increase employment, it is essential to increase production in
agriculture and industrial sectors. Development of small and cottage
industries should be encouraged.
 (viii) More importance to employment programmes:
 In five year plans more importance should be given to employment. The
programmes like irrigation, roads, flood control, power, agriculture, rural
electrification can provide better employment to people.
 (ix) High rate of capital formation:
 Rate of capital formation in the country should be accelerated. Capital
formation should be particularly encouraged in such activities which
generate greater employment opportunities. Capital output ratio should be
kept low.
 (x) Industries in co-operative sector:
 Industries in co-operative sector should be encouraged. Kerala Govt.’ set
up a textile mill covering 600 unemployed persons on co-operative basis.
This is a novel approach to fight against unemployment. Different State
Govt. should take necessary steps in this direction.
 (xi) Decentralisation of industrial activity:
 Decentralisation of Industrial activity is necessary to reduce
unemployment. If industrial activities are centralised at one
place, there will be less employment opportunities in the under
developed areas. So Govt. should adopt such policies which
encourage decentralisation of industrial activity.
 (xii) Population control:
 The growth of population should be checked in order to solve
unemployment, problem. Family planning programme should be
implemented widely and effectively.

Urbanisation has become a common feature of Indian society. Growth of Industries has
contributed to the growth of cities. As a result of industrialisation people have started
moving towards the industrial areas in search of employment. This has resulted in the
growth of towns and cities.
 Causes of Urbanisation:
 Various reasons have led to the growth of cities. They are as follows:
 i. Industrialization: Industrialization is a major cause of urbanization. It has expanded
the employment opportunities. Rural people have migrated to cities on account of better
employment opportunities.
 ii. Social factors: Many social factors such as attraction of cities, better standard of
living, better educational facilities, need for status also induce people to migrate to
cities.
 iii. Employment opportunities: In rural sector people have to depend mainly on
agriculture for their livelihood. But Indian agriculture is depending on monsoon. In
drought situations or natural calamities, rural people have to migrate to cities.
 iv. Modernization: Urban areas are characterized by sophisticated technology better
infrastructure, communication, medical facilities, etc. People feel that they can lead a
comfortable life in cities and migrate to cities.
 V.Rural urban transformation: It is an interesting aspect that not only cities
are growing in number but rural community is adopting urban culture, no longer
rural communities are retaining their unique rural culture. Rural people are
following the material culture of urban people. Urban rural transformation can
be observed in the following areas.
 Vi-Spread of education: The literacy rate has increased among the rural
people. They have become more modernised.
 i. Change in Dress habits.
 ii. Adoption of modern Technology
 iii. Enlightenment of women.
 iv. Modern transport and communication. E.g.: Cell phones have become
common even among rural people.
 v. Active involvement in politics.
 vi. Growth of infrastructure like Banks, Post office.
 vii. Awareness among rural consumers.
 viii. Increasing demand for sophisticated products like cosmetics etc.
 Thus it can be noticed that there are significant changes in the life style of
village people. Indian villages have adopted urban culture and urban style of
living. However, all villages in India are not transformed. Only certain villages
situated close to the cities have been transformed.
 Effect of Urbanisation:

 With a high rate of urbanization significant changes have

taken place. The effect of urbanisation can be summed up as
follows:
 Positive effect:
 i. Migration of rural people to urban areas.
 ii. Employment opportunities in urban centres.
 iii. Transport and communication facilities.
 iv. Educational facilities.
 v. Increase in the standard of living.
 Negative effects
 Urbanization can yield positive effects if it takes place up to a desirable limit. Extensive
urbanisation or indiscriminate growth of cities may result in adverse effects. They may be as
follows:
 i. Problem of over population: Concentration of population is a major problem of cities. It
has resulted in accommodation problem, growth of slums etc.
 ii. Disintegration of Joint family: Joint family can’t be maintained in cities on account of
high cost of living: People prefer to live in the nuclear type of families.
 iii. Cost of living: High cost of living is a major problem of cities. In Metro cities like
Mumbai, Bangalore etc. it is very difficult for lower income groups to maintain a decent
standard of living.
 iv. Increase in Crime rates: Urban centres are known for high rate of crimes. Theft, Dacoity,
Murder, Cheating, Pick pocketing, rape etc. are common in urban centres.
 v. Impersonal relations: Urban centres are characterised by highly secondary relations. The
concept of neighbourhood, community life are almost absent in cities. Urban life is highly
monotonous. This may have an adverse psychological effect on individuals. People are often
self centred and they have no concern for the fellow human beings.
 vi. Problem of Pollution: In industrialized cities pollution is a major problems. It may be
caused by industries or by excessive movement of vehicles.
 viii. Stress: Urban life is characterised by stress which may even strain family relations. In
cities employment of women is almost inevitable to meet the increasing cost of living.
Changing role of women in the family creates stress in the family which may result in
divorce or strained relations.
 Thus urbanisation has its own merits and de-merits. Urbanization can’t be avoided. But the
negative effect of urbanization can be minimised.
 Agriculture Sector of Indian Economy is one of the most
significant part of India. Agriculture is the only means of
living for almost two-thirds of the employed class in India.
 As being stated by the economic data of financial year 2006-
07, agriculture has acquired 18 percent of India's GDP.
 The agriculture sector of India has occupied almost 43
percent of India's geographical area.
 Agriculture is still the only largest contributor to India's GDP
even after a decline in the same in the agriculture share of
India.
 Agriculture also plays a significant role in the growth of
socio-economic sector in India.
 The agriculture sector employs more than 50 per cent of the
workforce in India. It plays a vital role in our overall economy.
 1. Contribution to National Income -Agriculture and its related
activities have always held a significant share in our national
income. In recent years, the share of contribution has declined
gradually with the growth of other industrialized sectors in the
country. In 1950-51, agriculture and allied activities contributed
about 59 per cent of the total national income. This number
declined to 40 per cent in 1980-81 and then to 18 per cent in
2008-09. But the agriculture share in India still remains very high
as compared to many developed countries of the world. For
example, agriculture contributes only 3 per cent to the national
income in U.K. and U.S.A.
 2. Source of Livelihood -Over two-thirds of the working
population in India is engaged directly in the agricultural sector.
As per estimate, about 57 per cent of the working population is
engaged in agriculture, as opposed to 2 to 3 per cent in U.K. and
U.S.A. and 6 per cent in France.
 3. Source of Food Supply -Agricultural products are the major source
of food supply for the huge population of our country. As per certain
estimates, it meets about 60 per cent of household consumption.
 4. Role of Agriculture for Industrial Development- There are several
important industries in India such as cotton and jute textiles, sugar
manufacturing, edible oils, plantation industries (tea, coffee, rubber)
and many agro-based cottage industries that depend on the
agricultural sector for the supply of their raw materials. These agro-
based industries generate about 50 per cent of income in the
manufacturing sector, thus, agriculture helps in the industrial
development of this country.
 5. Commercial Importance -Agricultural products constitute a large
part of the total exports of this country. Some of the main items in
our export list include tea, coffee, sugar, tobacco, spices, cashew
nuts, etc. These contribute to about 50 per cent of the total exports
from India. In addition to agricultural products, products from agro-
based industries like jute and cotton textiles also contribute another
20 per cent to the country’s total exports. Hence, the agriculture
sector is vital to the country’s international trade and commerce
activities.
 6. Source of Government Revenue -Both the Central and State
Governments of the country earn significant revenues from the
agriculture sector. The rising land revenue contributes towards a
substantial income. There are also other sectors like railways and
roadways that derive a good part of their income from the movement
of agricultural goods.
7. Contribution to capital formation:
 There is general agreement on the necessity capital formation. Since
agriculture happens be the largest industry in developing country like
India, it can and must play an important role in pushing up the rate of
capital formation. If it fails to do so, the whole process economic
development will suffer a setback.
 8. Supply of raw material to agro-based industries:
 Agriculture supplies raw materials to various agro-based industries
like sugar, jute, cotton textile and vanaspati industries. Food
processing industries are similarly dependent on agriculture.
Therefore the development of these industries entirely is dependent
on agriculture.
 9. Market for industrial products:
 Increase in rural purchasing power is very necessary for
industrial development as two- thirds of Indian population
live in villages. After green revolution the purchasing power
of the large farmers increased due to their enhanced income
and negligible tax burden.
 10. Influence on internal and external trade and
commerce:
 Indian agriculture plays a vital role in internal and external
trade of the country. Internal trade in food-grains and other
agricultural products helps in the expansion of service sector.

 Pre Independence
 Under the British Raj, the farmers did not have the ownership of the lands they
cultivated, the landlordship of the land lied with the Zamindars, Jagirdars etc.
 Several important issues confronted the government and stood as a challenge in
front of independent India.
 Land was concentrated in the hands of a few and there was a proliferation of
intermediaries who had no vested interest in self-cultivation.
 Leasing out land was a common practice.
 The tenancy contracts were expropriative in nature and tenant exploitation was
almost everywhere.
 Land records were in extremely bad shape giving rise to a mass of litigation.
 One problem of agriculture was that the land was fragmented into very small parts
l for commercial farming.
 It resulted in inefficient use of soil, capital, and labour in the form of
boundary lands and boundary disputes.
 Post Independence
 A committee, under the Chairmanship of J. C. Kumarappan
was appointed to look into the problem of land. The
Kumarappa Committee's report recommended comprehensive
agrarian reform measures.
 The Land Reforms of the independent India had four
components:

 The Abolition of the Intermediaries

 Tenancy Reforms
 Fixing Ceilings on Landholdings
 Consolidation of Landholdings.
 These were taken in phases because of the need to establish
a political will for their wider acceptance of these reforms.
 Abolition of the Intermediaries
 Abolition of the zamindari system: The first important legislation was the
abolition of the zamindari system, which removed the layer of intermediaries
who stood between the cultivators and the state.
 The reform was relatively the most effective than the other reforms, for in
most areas it succeeded in taking away the superior rights of the zamindars
over the land and weakening their economic and political power.
 The reform was made to strengthen the actual landholders, the cultivators.

 Advantages: The abolition of intermediaries made almost 2

crore tenants the owners of the land they cultivated.

 The abolition of intermediaries has led to the end of a parasite class.

More lands have been brought to government possession for
distribution to landless farmers.
 A considerable area of cultivable waste land and private forests
belonging to the intermediaries has been vested in the State.
 The legal abolition brought the cultivators in direct contact with the
government.

 Disadvantages: However, zamindari abolition did not wipe out
landlordism or the tenancy or sharecropping systems, which
continued in many areas. It only removed the top layer of
landlords in the multi-layered agrarian structure.
 It has led to large-scale eviction. Large-scale eviction, in turn, has
given rise to several problems – social, economic, administrative
and legal.
 Issues: While the states of J&K and West Bengal legalised the
abolition, in other states, intermediaries were allowed to retain
possession of lands under their personal cultivation without limit
being set.
 Besides, in some states, the law applied only to tenant interests
like sairati mahals etc. and not to agricultural holdings.
 Therefore, many large intermediaries continued to exist even
after the formal abolition of zamindari.
 It led to large-scale eviction which in turn gave rise to several
socio-economic and administrative problems.
 Tenancy Reforms

 After passing the Zamindari Abolition Acts, the next major problem was of tenancy
regulation.
 The rent paid by the tenants during the pre-independence period was exorbitant;
between 35% and 75% of gross produce throughout India.
 Tenancy reforms introduced to regulate rent, provide security of
tenure and confer ownership to tenants.
 With the enactment of legislation (early 1950s) for regulating the rent payable by
the cultivators, fair rent was fixed at 20% to 25% of the gross produce level in all the
states except Punjab, Haryana, Jammu and Kashmir, Tamil Nadu, and some parts of
Andhra Pradesh.
 The reform attempted either to outlaw tenancy altogether or to regulate rents to
give some security to the tenants.
 In West Bengal and Kerala, there was a radical restructuring of the agrarian structure
that gave land rights to the tenants.
 Issues: In most of the states, these laws were never implemented very effectively.
Despite repeated emphasis in the plan documents, some states could not pass
legislation to confer rights of ownership to tenants.
 Few states in India have completely abolished tenancy while others states have given
clearly spelt out rights to recognized tenants and sharecroppers.
 Although the reforms reduced the areas under tenancy, they led to only a small
percentage of tenants acquiring ownership rights.
 Ceilings on Landholdings
 The third major category of land reform laws were the Land Ceiling Acts. In simpler terms, the ceilings on
landholdings referred to legally stipulating the maximum size beyond which no individual farmer or farm
household could hold any land. The imposition of such a ceiling was to deter the concentration of land in
the hands of a few.
 In 1942 the Kumarappan Committee recommended the maximum size of lands a landlord can retain. It was
three times the economic holding i.e. sufficient livelihood for a family.
 By 1961-62, all the state governments had passed the land ceiling acts. But the ceiling limits varied from
state to state. To bring uniformity across states, a new land ceiling policy was evolved in 1971.
 In 1972, national guidelines were issued with ceiling limits varying from region to region, depending on
the kind of land, its productivity, and other such factors.
 It was 10-18 acres for best land, 18-27 acres for second class land and for the rest with 27-54 acres of land
with a slightly higher limit in the hill and desert areas.
 With the help of these reforms, the state was supposed to identify and take possession of surplus land
(above the ceiling limit) held by each household, and redistribute it to landless families and households in
other specified categories, such as SCs and STs.
 Issues: In most of the states these acts proved to be toothless. There were many loopholes and other
strategies through which most landowners were able to escape from having their surplus land taken over
by the state.
 While some very large estates were broken up, in most cases landowners managed to divide the land
among relatives and others, including servants, in so-called ‘benami transfers’ – which allowed them to
keep control over the land.
 In some places, some rich farmers actually divorced their wives (but continued to live with them) in order
to avoid the provisions of the Land Ceiling Act, which allowed a separate share for unmarried women but
not for wives.
 Consolidation of Landholdings

 Consolidation referred to reorganization/redistribution of fragmented lands into one plot.

 The growing population and less work opportunities in non- agricultural sectors, increased
pressure on the land, leading to an increasing trend of fragmentation of the landholdings.
 This fragmentation of land made the irrigation management tasks and personal supervision of
the land plots very difficult.
 This led to the introduction of landholdings consolidation.
 Under this act, If a farmer had a few plots of land in the village, those lands were
consolidated into one bigger piece of land which was done by either purchasing or
exchanging the land.
 Almost all states except Tamil Nadu, Kerala, Manipur, Nagaland, Tripura and parts of Andhra
Pradesh enacted laws for consolidation of Holdings.
 In Punjab and Haryana, there was compulsory consolidation of the lands, whereas in other
states law provided for consolidation on voluntary basis; if the majority of the landowners
agreed.
 Advantages: It prevented the endless subdivision and fragmentation of land Holdings.
 It saved the time and labour of the farmers spent in irrigating and cultivating lands at
different places.
 The reform also brought down the cost of cultivation and reduced litigation among farmers
as well.
 Result: Due to lack of adequate political and administrative support the progress made in
terms of consolidation of holding was not very satisfactory except in Punjab, Haryana and
western Uttar Pradesh where the task of consolidation was accomplished.
 However, in these states there was a need for re-consolidation due to subsequent
fragmentation of land under the population pressure.
 Technology has played a big role in developing the agricultural industry. Today it
is possible to grow crops in a desert by use of agricultural biotechnology. With
this technology, plants have been engineered to survive in drought conditions.
Through genetic engineering scientists have managed to introduce traits into
existing genes with a goal of making crops resistant to droughts and pests.
 Below is a summary on the use of Technology in agriculture:
 Use of machines on farms. Now a farmer can cultivate on more than 2 acres of
land with less labor, and can cut costs even more when they are looking for a
used tractor and other harvesting technology, versus new equipment. The use of
planters and harvesters makes the process so easy. In agriculture, time and
production are so important; you have to plant in time, harvest in time and
deliver to stores in time. Modern agricultural technology allows a small number
of people to grow vast quantities of food and fiber in a shortest period of time.
 Modern transportation: This helps in making products available on markets in
time from the farm. With modern transportation, consumers in Dubai will
consume a fresh carrots from Africa with in the same day that carrot lives the
garden in Africa. Modern transportation technology facilities help farmers easily
transport fertilizers or other farm products to their farms, and it also speeds
the supply of agricultural products from farms to the markets where consumers
get them on a daily basis.
 Cooling facilities: These are used buy farmers to deliver tomatoes and other
perishable crops to keep them fresh as they transport them to the market.
These cooling facilities are installed in food transportation trucks, so crops like
tomatoes will stay fresh upon delivery. This is a win-win situation for both the
consumers of these agricultural products and the farmers. How? the consumers
gets these products while still fresh and the farmer will sell all their products
because the demand will be high.
 Genetically produced plants like potatoes, can resist diseases and pests, which
rewards the farmer with good yields and saves them time. These crops grow
very fast they produce healthy yields. Since they are resistant to most diseases
and pests, the farmer will spend less money on pesticides, which in return
increases on their (RIO) return on investment.
 Development of animal feeds. This has solved the problem of hunting for grass
to feed animals, now these feeds can be manufactured and consumed by
animals. The price of these feed is fair so that a low income farmer can afford
them. Most of these manufactured animal feeds have extra nutrition which
improve on the animals health and the out put of these animals will also
increase. In agriculture , the health of an animal will determine its output.
Poorly feed animals are always unhealthy and they produce very little results in
form of milk, meet , or fur.
 Breeding of animals which are resistant to diseases. Most of
these genetically produced animals will produce more milk or fur
compared to normal animals. This benefits the farmer because
their production will be high. Cross breeding is very good in
animal grazing, cross breed animals are more strong and
productive.
 Irrigation of plants. In dry areas like deserts, farmers have
embraced technology to irrigate their crops. A good example is in
Egypt, were farmers use water pumps to collect water from river
Nile to their crops. Most of these farmers grow rice which needs a
lot of water, so they manage to grow this rice using irrigation
methods enhanced by advanced technology. Advanced water
sprinklers are being used to irrigate big farms and this helps the
crops get enough water which is essential in their growth. Some
farmers mix nutrients in this water, so also improves on the
growth of these crops.

 Pricepolicy plays a pioneer role in the economic
development of a country. It is an important instrument for
providing incentives to farmers for motivating them to go in
for production oriented investment and technology.

 Objectives of Agricultural Price Policy:

The objectives of agricultural price policy vary from country to
country depending upon the place of agriculture in national
economy.
 (i) To Ensure Relation between Prices of Food-grains and
Agricultural Goods:
 The foremost objective of agricultural price policy is to
ensure the appropriate relationship between the prices of
food grains and nonfood grains and between the agricultural
commodities so that the terms of trade between these two
sectors of the economy do not change sharply against one
another.
 (ii) To Watch Interests of Producers and Consumers:
 To achieve the balance between the interest of producers
and consumers, price policy should keep a close eye the
fluctuations within maximum and minimum limits.
 (iii) Relation Between Prices of Crops:
 The price policy should be such which may sustain the relationship
between the prices of competing crops in order to fulfill the
production targets in respect of different commodities in
accordance of its demand.
 (iv) To Control Seasonal Fluctuations:
 Another object of price policy is to control cyclical and seasonal
fluctuations of price rise to the minimum extent.
 (v) Integrate the Price:
 The agricultural price policy should also aim at to bring the
greater integration of price between the various regions in the
country so that regular flow of marketable surplus could be
maintained and exports of farm products stimulated regularly.

 (v) Integrate the Price:
 The agricultural price policy should also aim at to bring the
greater integration of price between the various regions in the
country so that regular flow of marketable surplus could be
maintained and exports of farm products stimulated regularly.
 (vi) Stabilise the General Price:
 To stabilize the general price level, it should aim at increasing the
public outlay to boost economic development in the country.
 (vii) Increase in Production:
 The agricultural price should aim at to raise the production of
various commodities in the country. Therefore, it must keep
balance between output and input required by the cultivations.
 1. Incentive to Increase Production:
 Agricultural price policy has been providing necessary incentive to
the farmers for raising their agricultural output through
modernisation of the sector. The minimum support price is
determined effectively by the government which will safeguard
the interest of the farmers.

 2. Increase in the level of income of Farmers:

 The agricultural price policy has provided necessary benefit to the
farmers by providing necessary encouragement and incentives to
raise their output and also by supporting its prices. All these have
resulted in an increase in the level of farmers as well as its living
standards.

 3. Price Stability:
 The agricultural price policy has stabilized the price of
agricultural products to a greater extent. It has successfully
checked the undue fluctuation of price of agricultural products.
This has created a favourable impact on both the consumers and
producers of the country.
 4. Change in Cropping Pattern:
 As a result of agricultural price policy, considerable change in
cropping pattern of Indian agriculture is needed. The production
of wheat and rice has increased considerably through the
adoption of modern techniques by getting necessary support
from the Government. But the production of pulses and oilseeds
could not achieve any considerable change in the absence of
such price support.
 5. Benefit to Consumers:
 The policy has also resulted in considerable benefit to the
consumers by supplying the essential agricultural commodities at
reasonable price regularly.
 6. Benefit to Industrials:
 The agricultural price policy has also benefited the agro
industries, like sugar, cotton textile, vegetable oil etc. By
stabilizing the prices of agricultural commodities, the policy has
made provision for adequate quantity of raw material for the
agro industries of the country at reasonable price.
 1. Inadequate Coverage:
 Inadequate coverage of procurement facility has rendered the
price ineffective. The facility of official procurement reaches
only a handful of farmers—of the total food gains production,
procurement covers hardly 15 per cent.
 2. Remunerative Price:
 The remunerative price and/or subsidized inputs have failed to
keep pace with the rate of increase in costs. It has had two
consequences. The farmer is discouraged from producing the
maximum level of output; he tries to balance his output against
the level of costs, and settles for a lower level of output.
 3. Ineffective Public Distribution System:
 The public distribution has not been very effective. A large
section of the poor people are outside the purview of the
system. Even those who are covered under the system do not
necessarily get the benefit of issue prices. The system has
absolutely failed to serve the objective. Besides, the burned on
the national exchequer is increasing enormously.
 4. Difference in Prices:
 There is an important issue of wide difference between prices
received by the producers and prices paid by the consumers. In
this context, issues relating to the network of regulations and
costs associated with it, incidence of octroi, increase in
transportation costs, over fragmentation of the distribution
network etc. require careful study.
 5. Unaccompanied by Effective Policy:
 The efficacy of the price policy depends on a number of
other factors inherent in the system of agricultural
operations like land holding patterns, income distribution,
general disparities and cropping pattern. But, it is pity to say
that the price policy has not been accompanied by any
effective policy for a total development of agriculture.
 Finance is defined as the management of money and includes
activities such as investing, borrowing, lending, budgeting, saving,
and forecasting.

 Finance has been recognized as the life blood of all economic

activities. Like all other producers, agriculturist also needs credit.
 In underdeveloped countries farmers cannot expect their credit needs
to come from savings.
 It is so because their income from farm operations is sufficient to
provide minimum necessities of life.
 Therefore, they have to rely upon outside finance.
 Meaning:
 Agricultural finance generally means studying,
examining and analyzing the financial aspect
pertaining to farm business, which is the core sector
of India. The financial aspects include money
matters relating to production of agricultural products and
their disposal.
Definition of Agricultural finance:
Agricultural finance as “an economic study of borrowing
funds
 by farmers, the organization and operation of farm lending
agencies and of society’s interest in credit for agriculture .”
Agricultural. Finance “as a branch of agricultural economics, which
deals with and financial resources related to individual farm units.”
  1. Risks in Agriculture: In agriculture sector, it is difficult to foresee risks and
uncertainties. A farmer has to face numberless risks and uncertainties as droughts,
floods etc. It may cause considerable damage to the farmer. Moreover, agricultural
produce tends to deteriorate in storage due to lack of proper storage facilities to
hold back surplus when supply exceeds demand. It leads to further difficulties.
Thus, with so much uncertainties, agriculture has always been a risky affair to be
handled by the commercial banks and insurance companies.


 2.Difficulties of Co-operation in Agriculture: In agricultural sector, there is

a very little scope of co- operation. It is so because, farmers are mostly
individualistic and are suspicious of co-operating with each other for a common
purpose. This creates difficulties to the farmers in getting cheap credit.


 3 Economic Lags in Agriculture: In agricultural production process, there is a

long interval between the reward and effort specially during the period when costs
are incurred. During this period, demand for agricultural produce may change
upsetting the financial adjustments of the farmers. In this way, farmers have to bear
another uncertainty. This becomes an excuse for credit supplying agencies to refuse
credit for farm operations.

  Credit for Consumption Purpose: Indian farmers require credit not only
for production purposes but also for consumption purposes. In the case of
crop failure, small farmers need credit which they spend on consumption
requirements. Moreover, Indian farmers are accustomed to spend beyond
their means on social and religious functions. In addition to all this, litigation
is another important non-productive requirement for funds.


 5. Small Size of Farm: In India, size of farms is very small in comparison

to the amount of labour employed and the extent of the capital invested.
Moreover, there is no control over the yield and the quality of the produce.

Thus, there is a lack of security to be offered for loans.
 6. Lack of Proper Securities: The large farmers have their own
resources which enable them to raise funds from the credit institutions.
Small farmers find it extremely difficult to raise credit for their needs. It is
due to the reason that small farmers neither possess proper securities to
pledge against loans, nor they have adequate repaying capacity. As a result,
small farmers are forced to go to the money lenders.

Credit needs in Agriculture

 Agricultural credit is one of the most crucial inputs in all

agricultural development programmes.
 For a long time, the major source of agricultural credit was private
moneylenders. But this source of credit was inadequate, highly
expensive and exploitative. To curtail this, a multi-agency approach
consisting of cooperatives, commercial banks ands regional rural
banks credit has been adopted to provide cheaper, timely and adequate
credit to farmers.
The financial requirements of the Indian farmers are for,
1. Buying agricultural inputs like seeds, fertilizers, plant
protection chemicals, feed and fodder for cattle etc.
 2. Supporting their families in those years when the crops have not
been good.
 3. Buying additional land, to make improvements on the
existing land, to clear old debt and purchase costly agricultural
machinery.
 4. Increasing the farm efficiency as against limiting
resources i.e. hiring of irrigation water lifting devices, labor
and machinery.
 Credit is broadly classified based on various criteria:
This classification is based on the
repayment period of the loan. It is sub-divided in to 3 types
 • Short–term loans: These loans are to be repaid within a
period of 6 to 18 months.
 All crop loans are said to be short–term loans, but the length of
the repayment period varies according to the duration of crop.
 The farmers require this type of credit to meet the expenses of
the ongoing agricultural operations on the farm like sowing,
fertilizer application, plant protection measures, payment of wages
to casual labourers etc.
 Medium – term loans: Here the repayment period varies from
18 months to 5 years. These loans are required by the farmers for
bringing about some improvements on his farm by way of
purchasing implements, electric motors, cattle, sheep and goat,
etc. The relatively longer period of repayment of these loans is
due to their partially-liquidating nature.
 Long term loans: These loans fall due for repayment over a long
time ranging from 5 years to more than 20 years or even more.
These loans together with medium terms loans are called
investment loans or term loans. These loans are meant for
permanent improvements like levelling and reclamation of land,
construction of farm buildings, purchase of tractors, raising of
orchards ,etc. Since these activities require large capital, a longer
period is required to repay these loans.
 SOURCE OF AGRICULTURAL FINANCE
There are two broad sources of agricultural credit in India:

 (1) Non-Institutional Sources

 (2) Institutional Sources

 (1) Non-Institutional Sources: The non-institutional finance forms an

important source of rural credit in India, constituting around 40 percent of
total credit in India. The interest charged by the non-institutional lenders
is usually very high. The land or other assets are kept as collateral. The
important sources of non-institutional credit are as follows:
 Money lenders: Despite rapid development happening in rural
branches of different institutional credit agencies, village money
lenders still dominate the scene. Money lenders are of two types,
agriculturist money lenders who combine their money lending
jobs with farming and professional money lenders whose sole
job is money lending. Number of reasons have been attributed
for the popularity of moneylenders such as:
 they meet demand for productive as well as unproductive
requirements
 they are easily approachable even at odd hours; and
 they require very low paper work and advances are given against
promissory notes or land.
 Money lenders charge a huge rate of interest as they take advantage
of the urgency of the situation.
 Traders and Commission Agents: Traders and commission agents
advance loans to agriculturists for productive purposes against their
crop without completing legal formalities. It often becomes
obligatory for farmers to buy inputs and sell outputs through them.
They charge a hefty rate of interest on the loan and a commission
on all the sales and purchases, making it exploitative in nature.

 Landlords: Mostly small farmers and tenants depend on landlords

for meeting their production and day to day financial requirements.
 (2) Institutional Sources: The general policy on agricultural credit
has been one of progressive institutionalization aimed at providing
timely and adequate credit to farmers for increasing agricultural
production and productivity.
 Providing better access to institutional credit for the small and
marginal farmers and other weaker sections to enable them to adopt
modern technology and improved agricultural practices has been a
major thrust of the policy.
 National Bank for Agriculture and Rural Development (NABARD) is
an apex institution established in 1982 for rural credit in India. It
doesn’t directly finance farmers and other rural people. It grants
assistance to them through the institutions described as follows:
1. Rural Co-Operative Credit Institutions:

 Rural Credit cooperatives are the oldest and most extensive form of rural
institutional financing in India. The major thrust of these cooperatives in the area of
agricultural credit is the prevention of exploitation of the peasants by
moneylenders. The rural credit cooperatives may be further divided into short-term
credit cooperatives and long-term credit cooperatives.

 The short-term credit cooperatives provide short-term rural credit and are based
on a three-tier structure as follows:

 (a ) Primary Agricultural Credit Societies (PACs): These are organized at the

village level. These societies generally advance loans only for productive purposes.
The main objective of a PACS is to raise capital for the purpose of giving loans
and supporting the essential activities of the members such as supply of agricultural
inputs at cheap price, improving irrigation on land owned by members, encourage
various income-augmenting activities such as horticulture, animal husbandry,
poultry etc. In India, around 99.5 percent of villages are covered by PACs.
 (b) District Central Cooperative Banks: These cooperatives are
organized at the district level. The PACS are affiliated to the District
Central Co-operative Banks (DCCBs). DCCBs coordinate the
activities of district central financing agencies, organize credit for
PACs and carry out banking business.

 (c) State Co-Operative Banks: The DCCBs are affiliated to State

Co-operative Banks (SCBs), which coordinate the activities of
DCCBs, organize provision of finance for credit worthy farmers,
carry out banking business and act as leader of the Co-operatives in
the States.
 Long-term credit Cooperatives: These cooperatives meet long-term
credit of the farmers and are organized at two levels:

 (i) Primary Co-Operative Agriculture and Rural Development

Banks: These banks operate at the village level as an independent unit.

 (ii) State Co-Operative Agriculture and Rural Development Banks:

These banks operate at state level through their branches in different
villages.
 2. Commercial Banks:
 Commercial Banks (CBs) provide rural credit by establishing their branches in the
rural areas.
 The share of commercial banks in rural credit was very meager till 1969. The All
India Rural Credit Review Committee (1969) recommended multi agency
approach to the rural and especially agricultural credit. It suggested the increasing
role of the CBs in providing agricultural credit. Further, under the Social Control
Policy introduced in 1967 and subsequently the nationalization of 14 major CBs in
1969 (followed by another six banks in 1980), CBs have been given a special
responsibility to set up their advances for agricultural and allied activities in the
country. The major expansion of rural branches took place and CBs introduced
Lead Bank scheme and district credit plans for rural areas. However, during late
80’s, CBs suffered huge losses due to waiving of agricultural loans by the
government. The financial liberalization process with the adoption of Narasimham
Committee report in 1993 has necessitated the banks to focus on profitability and
adopt prudential norms. The proportion of bank credit to rural areas especially
small borrowers has come down steadily.
 3. Regional Rural Banks (RRBS):
 RRBs are the specialized banks established under RRB Act, 1976 to cater to the needs of
the rural poor. RRBs are set-up as rural-oriented commercial banks with the low cost
profile of cooperatives but with the professional discipline and modern outlook of
commercial banks. Between 1975 and 1987, 196 RRBs were established with over
14,000 branches. As a result of the amalgamation, the number of RRBs was reduced
from 196 to 133 as on 31 March, 2006 and to 96 as on 30 April 2007. RRBs covered 525
out of 605 districts as on 31 March
 2006. After amalgamation, RRBs have become quite large covering most parts of the
State. Increased coverage of districts by RRBs makes them an important segment of the
Rural Financial Institutions (RFI). The branch network of RRBs in the rural area form
around 43 per cent of the total rural branches of commercial banks. A large number of
branches of RRBs were opened in the un-banked or under-banked areas providing
services to the interior and far-flung areas of the country. RRBs primarily cover small
and marginal farmers, landless laborers, rural artisans, small traders and other weaker
sections of the rural community. However, even after so many years, the market share of
RRBs in rural credit remained low and have suffered huge losses. In recent years
Government has initiated reform process to improve the functioning of RRBs.
 Problems regarding Agricultural credit in India
• Insufficiency: In spite of the expansion of rural credit structure, the
volume of rural credit in the country is still insufficient as compared
to its growing requirement arising out of the increase in prices of
agricultural inputs.
• Inadequate amount of sanction: The amount of loan sanctioned to
the farmers by the agencies is also very much inadequate for
meeting their different aspects of agricultural operations.
Considering the amount of loan sanctioned as inadequate and
insignificant, the farmers often divert such loan for unproductive
purposes and thereby dilute the very purpose of such loan.
• Lesser attention of poor farmers: Rural credit agencies and its schemes have failed
to meet the needs of the small and marginal farmers. Thus, lesser attention has
been given on the credit needs of the needy farmers whereas the comparatively
well-to-do farmers are getting more attention from the credit agencies for their
better creditworthiness.
• Inadequate institutional coverage: In India, the institutional credit arrangement
continues to be inadequate as compared to its growing needs. The development of
co-operative credit institutions like Primary agricultural credit societies, land
development banks, commercial banks and regional rural banks, have failed to
cover the entire rural farmers of the country.
• Red tapism: Institutional agricultural-credit is subjected to red-tapism. Credit
institutions are still adopting cumbersome rules and formalities for advancing loan
to farmers which ultimately force the farmers to depend more on costly non-
institutional sources of credit.
 National Bank for Agriculture and Rural
Development (NABARD
 NABARD is a development bank focusing primarily on the rural sector of the country. It
is India‘s apex development bank. It is one of the most important institutions in the country.
 NABARD is responsible for the development of the small industries, cottage industries, and
any other such village or rural projects.
 Established on 12th July 1982, it had an initial capital of 100 crores. The bank is under the
supervision of a Board of Directors which the Government of India will appoint.
 The headquarters of NABARD is in Mumbai but it has many branches and regional divisions.
 Functions of NABARD
 It basically performs three kinds of roles, i.e. credit functions,
development functions, and supervisory functions.

 Frames the policy for rural credit in the country for all
financing institutions
 National Bank for Agriculture and Rural Development will
itself provide finance and refinancing facilities to the banks
and rural regional banks
 Identification of credit potential and preparation of the credit
plans for all districts
 It also helps all regional banks and institutes under its
governance with the preparation of their own credit plans
and policies

 Helps Regional Rural Banks establish an agreement with State
Governments and other Co-op Banks and institutions
 It will also monitor the implementation of such plans and track their
progress
 Helps banks improve their MIS system, modernize their technology,
develop human resources etc
 As per the Banking Regulation Act 1949, NABARD has to conduct the
inspection of Regional Rural Banks and other Co-op banks
 It communicates and consults the RBI in matters such as issuing of
licenses for new banks, the opening of branches of Rural Banks etc.
 From time to time it will also inspect the investment portfolios of
Regional Rural Banks and other State Co-op Banks
 Agricultural marketing brings producers and
consumers together through a series of activities and
thus becomes an essential element of the economy.
 The scope of agricultural marketing is not only
limited with the final agricultural produce.
 It also focuses supply of agricultural inputs (factors)
to the farmers
 Theterm agricultural marketing is composed of
two words- agriculture and marketing.

 AgriculturalMarketing is a process which starts with

a decision to produce a saleable farm commodity,
and it involves all the aspects of market structure or
system, both functional and institutional, based on
technical and economic considerations, and include
pre- and post-harvest operations viz., assembling,
grading, storage, transportation and distribution.
  Importance of Agricultural Marketing

 Agricutural marketing plays an important role not only in stimulating

production and consumption, but also in accelerating the pace of
economic development.
 1. Optimization of Resource use and Output
Management
 An efficient agricultural marketing system leads to the optimization of
resource use and output management. An efficient marketing system
can also contribute to an increase in the marketable surplus by scaling
down the losses arising out of inefficient processing, storage and
transportation.
 2. Increase in Farm Income
 An efficient marketing system ensures higher levels of
income for the farmers reducing the number of middlemen
or by restricting the cost of marketing services and the
malpractices, in the marketing of farm products.
 3. Widening of Markets
 An efficient and well-knot marketing system widens the
market for the products by taking them to remote corners
both within and outside the country, i.e., to areas far away
from the production points. The widening of the market
helps in increasing the demand on a continuous basis, and
thereby guarantees a higher income to the producer.

 4. Growth of Agro-based Industries
 An improved and efficient system of agricultural marketing helps in the
growth of agro- based industries and stimulates the overall development
process of the economy. Many industries like cotton, sugar, edible oils, food
processing and jute depend on agriculture for the supply of raw materials.

 5. Price Signals
 An efficient marketing system helps the farmers in planning their
production in accordance with the needs of the economy. This work is carried
out through transmitting price signals.

6. Adoption and Spread of New Technology
 The marketing system helps the farmers in the adoption of new scientific and
technical knowledge. New technology requires higher investment and farmers
would invest only if they are assured of market clearance at remunerative
price.


 7.Employment Creation
 The marketing system provides employment to millions of persons
engaged in various activities, such as packaging, transportation,
storage and processing. Persons like commission agents,
brokers, traders, retailers, weighmen, hamals, packagers
and regulating staff are directly employed in the marketing system.
This apart, several others find employment in supplying goods and

services required by the marketing system.


 8.Addition to National Income

 Marketing activities add value to the product thereby increasing


the nation's gross national product and net national product

 9. Better Living
 The marketing system is essential for the success of the development
programmes which are designed to uplift the population as a whole. Any
plan of economic development that aims at diminishing the poverty of
the agricultural population, reducing consumer food prices, earning more
foreign exchange or eliminating economic waste has, therefore, to pay
special attention to the development of an efficient marketing for food
and agricultural products.



 10. Creation of Utility

 Marketing is productive, and is as necessary as the farm production. It is,
in fact, a part of production itself, for production is complete only when
the product reaches a place in the form and at the time required by the
consumers. Marketing adds cost to the product, but, at the same time, it
adds utilities to the product.

 Problems in agricultural marketing in India


 Indian system of agricultural marketing suffers from a number of defects. As a

consequence, the Indian farmer is deprived of a fair price for his produce. The main
defects of the agricultural marketing system are discussed here.



 Improper Warehouses: There is an absence of proper ware

housing facilities in the villages. Therefore, the farmer is
compelled to store his products in mud-vessels, "Kutcha"
storehouses, etc. These unscientific methods of storing lead to
considerable wastage. Approximately 1.5% of the produce gets
rotten and becomes unfit for human consumption. Due to this
reason supply in the village market increases substantially and
the farmers are not able to get a fair price for their produce.
 Lack of Grading and Standardization: Different varieties of
agricultural produce are not graded properly. Thus the farmer
producing better qualities is not assured of a better price. Hence
there is no incentive to use better seeds and produce better
varieties.


 Inadequate Transport Facilities: Transport facilities are

highly inadequate in India. Only a small number of villages are
joined by railways and pucca roads to mandies. Produce has to
be carried on slow moving transport vehicles like bullock carts.
Obviously such means of transport cannot be used to carry
produce to far-off places and the farmer has to dump his produce
in nearby markets even if the price obtained in these markets is
considerably low.
 Presence of a Large Number of Middlemen: The chain of middlemen
in the agricultural marketing is so large that the share of farmers is
reduced substantially. For instance, a study revealed, that farmers obtain
only about 53% of the price of rice, 31% being the share of middle men
(the remaining 16% being the marketing cost). In the case of vegetables
and fruits the share was even less, 39% in the former case and 34% in the
latter.
 Malpractices in Unregulated Markets: Even now the number of
unregulated markets in the country is substantially large, brokers, taking
advantage of the ignorance, and illiteracy of the farmers, use unfair
means to cheat them. The farmers are required to pay for weighing the
produce, to unload the bullock-carts and for doing other miscellaneous
types of allied works, and a number of other undefined and
unspecified charges. Another malpractice in the mandies relates to the use
of wrong weights and measures in the regulated markets.
 Inadequate Market Information: It is often not possible for the
farmers to obtain information on exact market prices in different
markets. So, they accept whatever price the traders offer to them.
With a view to tackle this problem the government is using the radio
and television media to broadcast market prices regularly. The news
papers also keep the farmers posted with the latest changes in prices.
 Inadequate Credit Facilities: Indian farmer, being poor, tries to sell
off the produce immediately after the crop is harvested though prices at
that time are very low. The safeguard of the farmer from such "forced
sales" is to provide him credit so that he can wait for better times and
better prices. Since such credit facilities are not available, the farmers
are forced to take loans from money lenders, while agreeing to pledge
their produce to them at less than market prices. The co-operative
marketing societies have generally catered to the needs of the large
farmers and the small farmers are left at the mercy of the money
lenders.
 Agricultural policy of a country is mostly designed by the
Government for raising agricultural production and
productivity and also for raising the level of income and
standard of living of farmers within a definite time frame.

 This policy is formulated for all round and comprehensive

development of the agricultural sector.

 The first ever National Agriculture Policy was announced on

28th July, 2000.

Sustainable Agriculture.

 Thepolicy will seek to promote technically sound,

economically viable, environmentally non-degrading, and
socially acceptable use of country’s natural resources-land,
water to promote sustainable development of agriculture.
Rational utilization and conservation of the country’s
abundant water resources will he promoted.
 Food and Nutritional Security.
 Special efforts will be made to raise the
productivity and production of crops to meet the
increasing demand for food generated by
increasing population and raw materials for
expanding agro-based industries.
 Special attention will be given to development of
new crop varieties, particularly of food crops,
with higher nutritional value through adoption of
bio-technology.
 Development and Transfer of Technology:

 Thepolicy suggested that the Government should encourage

application of biotechnology, remote sensing technologies,
energy saving technologies, pre- and post-harvest
technologies, and technology for environmental protection.
The Government will also undertake special measures for
empowering women and also to build their capabilities for
improving their access to inputs, technology process and
other farming resources.
Inputs Management.

 Adequate and timely supply of inputs such as seeds,

fertilizers, plant protection chemicals, bio-pesticides,
agricultural machinery and credit at reasonable rates to
farmers will be the effort of the Government. Soil testing
and quality testing of fertilizers and seeds will be ensured.
Balanced and optimum use of fertilizers will be promoted
together with use of organic manures and bio-fertilizers to
optimize the efficiency of nutrient use.
 Incentives and Investment in Agriculture.

 The policy suggested that the Government should make

adequate efforts for improving the terms of trade for
agriculture along with associated manufacturing sector.
Accordingly, attempts will be made to review and rationalize
the structure of taxes on food grains, other commercial crops
and also excise duty on farm machinery and implements. The
Government has committed to keep agriculture outside
purview of taxes and decided to continue the present regime
of agricultural subsidies.

 Institutional Structure.
 Indian agriculture is characterized by dominance of small and
marginal farmers. Institutional reforms will be so pursued as
to channelize their energies for achieving greater
productivity and production.
 Redistribution of surplus lands and waste lands among the
landless farmers, unemployed youth. Tenancy reforms to
recognize the rights of the tenants and share croppers.
 Updating and improvement of land records, computerization
and issue of land pass-books to the farmers and Recognition
of women’s rights in land.
 Risk Management.

 Despitetechnological and economic advancements, the

condition of farmers continues to be unstable due to natural
calamities and price fluctuations. National Agriculture
Insurance Scheme covering all farmers and all crops
throughout the country with built-in provisions for protecting
farmers from natural disasters, price fluctuations, etc. to be
made effective. Endeavor will be made to provide a package
insurance policy for farmers, right from sowing of crops to
post-harvest operations, including market fluctuations in the
prices of agricultural produce.
Implication and analysis of the New Agricultural Policy:

The New Agricultural Policy (2000) has been considered as a

balanced one considering the present requirement. The new
policy has adopted a coordinated approach for bringing Green
Revolution, White Revolution (related to milk and dairy
products) and Blue Revolution (related to aqua/fish culture).
Therefore, the policy has been termed as a policy of promising
Rainbow Revolution.
 1.Considering the growing requirement of food for attaining food self-
sufficiency and to attain food security for the millions of people of the country
the policy has faced a great challenge. To fulfill this requirement attainment of
4 per cent growth rate in agricultural output is a must.

 2. Secondly, the New Policy has also failed to identify those backward states
which are still lagging in utilizing their agricultural potential. Therefore, a
balanced approach should be undertaken to remedy these loopholes.

 3.Thirdly, the New Policy argued in favour of encouraging private investment in

agriculture which would help the big farmers, but the large numbers of small
farmers are not going to be supported by such private investment which needs
to be promoted by public investment.
 Fourthly, the New Policy argued in favour of private sector
participation through contract farming by land leasing
arrangements. But introduction of such a step in a labour-
surplus economy is highly questionable.
 Lastly, there is a lack of co-ordination between the Central
and State Governments in implementing various promotional
steps for the development of agricultural sector.
 Thus, the centre and the states should co-ordinate in
implementing various provisions of new policy and should
develop a monitoring mechanism to evaluate the
implementation of the policy in a most rational manner.