Rural Economy : A Reality

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Introduction
 The economy was characterized by extensive
regulation, protectionism and public ownership
 This lead to pervasive corruption and slow growth
Economic scenario in Rural India
 The Rural Economy in India is wholly agriculture
based
 In India, agriculture accounts for almost 19% of
Indian GDP
 The Ministry of Agriculture, the Ministry of Rural
Infrastructure, and the Planning Commission of India
- Governing bodies
 A target of Rs 225,000 crores for farm credit has been set
for the financial year 2007-2008.
 50 lakh new farmers have been brought under the banking
system.
 Agricultural Insurance to facilitate agricultural loans to the
farmer.
 Allocation for the Rural Infrastructure Development Fund
to be increased substantially.
 In the financial year 2006-07, 35 projects were
successfully completed.
 Additional irrigation of 900,000 hectares has been targeted
in the financial year 2007 - 2008.
Revolutions
 Green revolution

 White revolution - Increase in the output of milk

 Blue revolution – Increase in fish products

Changing face of Rural India

 When we talk of rural economy we talk about mainly

economy, education and health
 Handloom weaving, oil pressing, bidi manufacturing
etc
 Generate more than half the national income
 Flow of agricultural credit
 Increase in rural literacy rate and social status
 Population below the poverty line

Period No. of % of
persons persons
(millions)
1983 252 46

1993-94 244 37
1999-2000 193 27
 Government, NGOs, social welfare organizations etc

 Microfinance and Micro credit

FIVE YEAR PLANS

 The economy of India is based in part on planning

through its five-year plans, developed, executed and
monitored by the Planning Commission.

 Montek Singh Ahluwalia is currently the Deputy

Chairman of the Commission.

 First five year plan (1951-1956) presented by

Jawaharlal Nehru.
THE FIVE-YEAR PLANS

SECTORAL ALLOCATIONS DURING THE 5-YR PLANS (Rs. billion)

Heads of development 7th plan 8TH Plan 9th Plan 10th Plan
(1985-90) (1992-97) (1997-02) (02-07)

1 AGRICULTURE 105 225 372 589

2 RURAL
89 344 890 1,219
DEVELOPMENT

Source: Planning Commission 2002

CURRENTLY..

 11TH five year plan (2007-2012)

 Objectives:

Income and poverty

GDP growth from 8% to 10%
Create 70 million new work opportunities
Education
Reduce dropout rates of children from elementary school from
52.2% in 2003-04 to 20% by 2011-12
Literacy rate for persons of age 7 years or above to 85%

Health, women and children

cont..
Infrastructure
Ensure electricity connection to all villages and BPL
households
Connect every village by telephone networks and
provide broadband connectivity to all villages by 2012

Environment
Increase forest and tree cover area by 5 %
Attain WHO standards of air quality in all major cities
by 2011-2012
Increase energy efficiency by 20% by 2016-2017
 PERCENTAGE SHARE OF THE DIFFERENT SECTORS IN GDP

PRIMARY SECONDARY TERTIARY TOTAL

YEAR (agri and (manufacturing) (services)
allied)

1950-51 57.2 14.8 28.0 100.0

1980-81 39.7 23.7 36.6 100.0

2001-02 23.9 26.6 49.5 100.0

SOURCE: National Account Statistics, 1951-2001

THE TRANSITION OF THE RURAL
ECONOMY

1. NON-FOOD GRAIN
1. FOOD GRAIN CROPS, CASH
CROPS CROPS

2. OFF-LAND ALLIED
2. ON-LAND ACTIVITIES
ACTIVITIES (livestock, fisheries)

3. NON-FARM
3. FARM ACTIVITIES
ACTIVITIES (manufacturing and
services)
THE RURAL ECONOMIC STRUCTURE
RURAL ECONOMY

FARM SECTOR NON-FARM SECTOR

(agri & allied)

RURAL INDUSTRIES RURAL SERVICES

AGRICULTURE

ANIMAL HUSBANDRY AGRO-PROCESSING RETAILING & TRADING

(dairy, poultry) (sugarcane, oilseed)
MANUFACTURING COMMUNITY &
HORTICULTURE (handloom, handicrafts) SOCIAL SERVICE

TRANSPORT &
FORESTRY MINING &QUARRYING STORAGE

FISHING CONSTRUCTION COMMUNICATION

Farm sector: Agriculture and Allied Activities

 Ranks second in farm output

 Contributed nearly 19% of the GDP in 2007,emplyed 60% of the
workforce
 Second largest producer in the world of milk, cashew nuts, coconuts,
tea, ginger, turmeric and black pepper.
 World’s largest cattle population: 193 million
 Second largest producer of wheat, rice, sugar, cotton, silk, peanuts, and
inland fish
 Second largest producer and consumer of silk in the world
 Third largest producer of tobacco
 Largest fruit producer accounting for 10%of the world fruit production.
Non-farm sector and Rural industries

 Industry accounts for 26.6% of the GDP and employs

17% of the total work force

 Textile manufacturing second largest source of

employment after agriculture
RURAL ENTERPRISES
RURAL ENTERPRISES IN INDIA
1980 1990 1998

AGRICULTURAL ENTERPRISES 1.27 2.08 3.18

(million)

NON AGRICULTURAL 9.74 12.28 14.01

ENTERPRISES (million)

11.01 14.36 17.19

TOTAL RURAL ENTERPRISES
(million)

TOTAL NUMBER OF WORKERS 24.23 32.17 38.13

EMPLOYED (million)

GROWTH OF WORKERS (%) --- 2.88 2.15

Source: CSO, Economic Census 1998, All India Report.

 FIFTH ECONOMIC CENSUS, 2005.
S.No. ITEM RURAL COMBINED
(RURAL+URBAN)

1 a) Number of enterprises ( in 000) 25809 42124

b) Percentage share 61.3 5 100.0 %

2 Percentage of agricultural enterprises 23.2 % 15.3 %

a) Number of enterprises (in 000)

3 5384 7912
i) With out premises
ii) Having 10 or more workers 225 583

b) Percentage share in total enterprises

i) Without premises 20.9 % 18.8 %
ii) Having 10 or more workers 0.9 % 1.4 %

Sl.No ITEM RURAL
COMBINED
(RURAL+URBAN)

4 Average annual growth rate (%)

5.53 % 4.80 %
in enterprises over Economic
Census 1998
5 a) Number of persons employed 50186 98968
(in 000)
b) Percentage share 50.7 % 100.0 %

Percentage to hired workers in 52.4 %

6 41.6 %
the total persons employed

7 Percentage of total adult female 24.3 % 19.3 %

workers in the total persons
employed

8 Average annual growth rate (%) 3.33 % 2.49 %

in total employment over
Economic Census 1998

Source: CSO, Economic Census 2005, All India Report.

Rural Occupation pattern and Employment Structure
 Non agricultural activities increased by 7%

 Migration down from 62.2% to 56.5%

 Size and distribution of rural assets

50% (poor households) – owned 10% of the
assets
10% (rich households) – owned 50% of the
assets
40% of the middle income group households
more than 40 % of the total assets.

 Land ownership
Landholdings increased by 50%
 Labour Force Characteristics

Urban Share (in %) Rural Share (in %)

  Male Female Total   Male Female Total

1. Employed 51.8 13.9 33.7 1. Employed 53.1 29.9 41.9

2. Unemployed 2.4 0.8 1.6 2. Unemployed 0.9 0.3 0.6

3. Labour Force 3. Labour Force

(Total) 54.2 14.7 35.3 (Total) 54 30.2 42.5

4. Not counted in 4. Not counted in

the labour force 32.8 71.7 51.4 the labour force 30.3 53.9 41.7

5. Working age 5. Working age

population (Total) 87 86.4 86.7 population (Total) 84.3 84.1 84.2
6. Non-working 6. Non-working age
age population 13 13.6 13.3 population 15.7 15.9 15.8
7. Population
(Total) 100 100 100 7. Population (Total) 100 100 100
 Rural income (farm + non farm) contributes around 57% of the total
income in India

 Considering (93 – 94) per capita income for rural sector increased from Rs.
5783 to 9481 Rs in (99 – 00).

 Share of non farm income has increased rapidly from 32% to 47%

 Rural employment is classified into 1. Self employed

2. Wage labourers

 Self employment – farmers purchasing power has increased, since value of

output increased by 9.2% compared to past 7.7% increase in input.

 Distribution of land holdings and the cropping pattern are the key
determinants of farm profitability

 Wage laboureres – 33% of the total rural workforce works as agricultural

work labourers
 Rural income –
1st – non farm sector
2nd – farmer
3rd – wage earner

 Over the last 20 years non food expenditure has gone up 5 times
where as food expenditure increased by 4 times.

 Rural spending per person is 5830 Rs per annum compared to urban

- Rs 10260
Rural Infrastructure :
1. Transport and communication

 Road connectivity
- Pradhan Mantra Gram Sadak Yojna

 Post Offices
- Largest postal network in the world
(1,55,000 + offices)
- Postal Circle , Divisions
- Categorized as head, sub, branch post office

 Radio
- Coverage to 98 % of the population.
- Broadcast farm programs and home programs
 Television
- Doordarshan (one of the largest terrestrial networks in the
world)
- Reach 87% of the population.

 Print and Press Media

- Registrar of Newspaper for India (RNI)
- Not reaching rural areas.

 Telecom Services , Mobile Services

- Villages connected through Village Public Telephones
(VPT).
- More than 84% of villages covered
- 3.6 crore mobile users ,15% in rural areas.( as per 2005)
- Mobile Postman Scheme
 Rural Health Services:3 tier system

1. Sub Centres
- Contact Point b/w PHC & community
- One multi purpose worker (male) and
Auxilary Nurse-midwife (ANM)

2. Primary Health Centres (PHC)

- First contact point b/w community & a
medical officer.
- Medical officer and 14 paramedical and
other staffs.
- Referal unit for 6 sub centres, 6 beds.
3. Community Health Centres (CHC)
- 4 medical specialists
(Surgeon,physician,gynaecologist &
paediatrician) and 21 paramadecial and
other staffs.
- Referal unit for 4 PHC , 34 beds

 Education

 Electricity
PUBLIC DISTRIBUTION SYSTEM

 PDS means the distribution of essential commodities to a large number of

people through a network of fair prices shops on a regular basis.
 PDS with a network of about 4.76 lakh FPS is the largest distribution
network of its kind in the world.
 80% (i.e 3.8 lakh) FPS are in rural areas.
 Targeted Public Distribution System - to reform and improve the PDS
by focusing on the poor and needy sections of the society.
 There should be a Fair Price Shop within a radius of 3kms Per every 2000
card population in rural areas
Agri Infrastructure

 Govt of India’s intervention in the agricultural marketing

system is limited to protecting the interests of producers
and consumers and promoting the organized marketing
of agricultural commodities.

 7161 regulated markets to which the central government

provides assistances in the establishment of infrastructure

 Various central government organizations are involved in

agricultural marketing.
Mandis

 They are agricultural markets set up by state governments to procure

agricultural products directly from framers.

 Located in high production centres of different crops, these markets

may be categorized as grain mandis, cotton mandis etc

 Most agricultural area with a population of more than 10,000 have

mandis
Marketing Infrastructure

Haats
 Periodic markets still play an important role in the rural
economy as well as in the social life of villagers
 First point contact for villagers with the market
 A means of distributing local products and exchanging
rural surplus
 An opportunity for buying daily necessities
Melas
 These occasions serve as the meeting ground for people
from different communities and religious groups , for
livelihood and agricultural commodities , for crafts and
craftsmen and for displaying various skills
Commercial Infrastructure

Regional rural banks

 Set under an Act of parliament in 1976
 Objective – Developing the rural economy through the
promotion of agriculture, trade and commerce , industry
by extending credit , particularly to small and marginal
farmers, agricultural labourers and small entrepreneurs.
 Credit provided by a combination of central government,
state government and the sponsoring commercial bank

Scheduled commercial banks

Cooperative banks
Government Policies And The
Rural Face Of Reforms
Who is responsible for Rural developmental
activities in India?
Areas Focused and Programs

1. Changing Rural Infrastructure

Prime Minister’s Village Development Program
 Primary Health Care
 Universalisation of primary education
 Safe drinking water
 Public housing assistance to all shelter less poor families
 Nutrition
 Connectivity of all villages and habitations by roads, and
streamlining of the public
 Distribution system with a focus on the poor.
2. Employment Opportunities

 New credit linked subsidy programme called Prime Minister’s

Employment Generation Programme (PMEGP)

 Merged two schemes that were in operation till 31.03.2008

namely Prime Minister’s Rojgar Yojana (PMRY) and Rural
Employment Generation Programme (REGP) for generation of
employment opportunities through establishment of micro
enterprizes
3. District Rural Development Agency

 Aims at alleviating Poverty

Different Wings
* Self Employment Wing
* Wage Employment Wing
* Engineering Wing
* Accounts Wing
* Monitoring and Evaluation Wing
* General Administration Wing
Land Reforms
 Economic Holding
One that could provide a reasonable standard of living

 Land Ceiling
No individual farmer should own more than three times
the economic holding
CURRENT BUDGET PROVISIONS For Rural Development

 Swarnajayanthi Gram Swarozgar Yojana

 This scheme is to provide self-employment

to the poor.
 Objective of the SGSY is to bring the assisted poor families
above the Poverty Line by providing them income-generating
assets through a mix of Bank Credit and Governmental
Subsidy.
 Monitoring-programme is monitored from the Central level
down to the grassroot level.

 Indira Awaz Yojana

 The objective of this scheme is to provide dwelling units
to the homeless Scheduled Castes and Scheduled Tribes
 Priority in Selection of Beneficiaries
 SC/ST households who are victims of atrocity.
 SC/ST households, headed by widows and unmarried woman.
 SC/ST households affected by flood, fire, earthquake, cyclone and
similar natural calamities.
 Other SC/ST households
 Non- SC/ST households
 Physically handicapped

 Appropriate Construction Technology and local

materials
 Drinking Water Supply
 Sanitation and Sanitary
Conclusion

 Analysis of the rural economy- 5 year plans

 It takes a close look at rural economic structure.
 Growth in purchasing power.
 Government policies and rural economies and their impact.
 Pace of progress has been set. It needs to be accelerated.