MAHARISHI INSTITUTE OF MANAGEMENT

NOIDA

ASSIGNMENT ON:- RURAL MARKETING

SUBMITTED TO:- Mr. NITIN SINGH

SUBMITTED BY:- RANA YOGESH SINGH

ROLL NO. 15033
 ASSIGNMENT ON RURAL MARKETING

Q.1:- A sound agricultural marketing system leads to a greater volume of marketed

surplus. Comment.

Ans. Marketing infrastructure is most important not only for the performance of various
marketing functions and for expansion of the size of market but also for transfer of
appropriate price signals leading to improved marketing efficiency. The projection
production and marketable surplus of farm produce show that the volume of the
commodities to be handled will be quite large. The paddy output available for milling will be
around 155 million tones. The marketed surplus of cereals will be 102.74 million tonnes and
pulses will be 15.20 million tonnes. Row cotton output is projected to be 3.2 million tonnes.
The marketable surplus of perishable (fruits vegetables and livestock products) is
anticipated to go up for present 172.69 million tones by 2006-07. The capacity to clean
grade process store transport etc. to have to expand correspondingly to handle the
additional marketed quantities.

The specific areas identified for reforms in the State Agricultural Produce Marketing
Regulations Acts (APMC) are :-

(a) Promotion of integrated markets in Private /Co-Operative sector :-

Under the existing Act it is the state Govt. who are alone empowered to initiate the process
of setting up a market for certain commodities to be regulated for a defined area . in which
regulation is to be enforced under the provision of APMC Act . As a result of this provision
( under the chapter :- establishment of markets ) the process of initiation of a market the
service providers of agricultural marketing do not have any role . Thus the service
providers and / or any other individual or body of individuals can not take initiatives for
evaluation of viability and feasibility for setting up of a well developed market with
amenities and facilities required at a competitive cost . A ball has been set rolling in
Karnataka by providing additional chapter (XIII-A ) in the Karnataka Agricultural Produce
Marketing (Regulation ) Act 1966 to provide for the establishment of ‘ National Integrated
Produce Market’ owned and managed by the NDDB for the marketing of fruits vegetables
and flowers. It is high time that all other States follow suit by amending the APMC Act in
their respective states for providing establishment of alternate marketing structures in the
shape of ‘ National Integrated Produce Market ‘ to be owned and managed in the private
sector or co-operatives sectors or farmers self help groups farmers associations private
entrepreneurs or joint ventures . The service provider may be allowed to levy and collect
service charge from the users who may be the producers – sellers or from the market
users.
 The integrated market infrastructure services will in addition to the physical
infrastructure include: -

i.        Assembling

ii.       Cleaning Sorting Grading packaging and quality certification

iii.     Storage and finance

iv.     Transport

v.      Retailing and Wholesaling

vi.     E- trading

vii.   Warehousing and pledge financing

viii.  Value addition and

ix.     Market information exchange service.

(b) Direct Marketing: - 

The direct marketing enables farmers to meet the specific demands of wholesalers or traders
from the farmers inventory of graded and certified produce on one hand and of consumers based
on consumers preference on the other hand helps the farmers to dynamically take advantage of
favorable prices reduce marketing cost and thus their net margins. This encourages farmers to
under take cleaning sorting grading and quality marking at the farm gate. This will obviate the
need to haul the produce to the regulated markets which are not necessarily equipped with all
required services and facilities affecting the marketing efficiency adversely. It is reported that the
consumers prices declined by the 20 to 30 % and producers received the prices rose by 10 to 20
% in South Korea as a consequence of expansion of direct marketing of Agricultural Products.
This model has been experimented in Punjab and Haryana ( APNI MANDIS ) Andhra Pradesh
( Rythu Bazar ) and Tamil Nadu ( Uzhavar Santhaigal ) . All the provision exists in various states
market regulation act for direct marketing.

c) Contract Farming: -

Contract Farming may be defined as an agreement between processing & /or marketing firms for
production support at production support at predetermined prices. This stipulates a commitment
on the part of the farmers to provide a specific commodity in terms of quality & quantity as
determined by the purchaser & commitment on the part of company to support the farmer for
production through inputs & other technical support contract farming is becoming popular in
recent years & there are number of success stories like Maul NDDB PEPSI Co. etc. The Contract
farming needs to be further developed after identifying areas commodities & markets for market
oriented & demand driven production planning. However while providing for this system of
alternate marketing under the APMC Act it is necessary to draft any appropriate legislation
separately for ensuring definition of terms & conditions of the agreement keeping in view the
objectives.

 
d) Direct Contract between Producers & Processing Factories: -
 
Presently the farmers are not in position to enter into direct contract with the processors/
manufacturers located outside the market area as the commodity has to channels through
regulated markets. Or in other words producer is not free to sale his produce by entering
in to direct contract without attracting the provisions of this act whether inside or outside
the market area. The direct contract between the producers & processing factories or bulk
processors will provide monitory gains to the producers through improved
competitiveness & the consumers by way of reasonable prices. The provision has to be
made through an amendment in the present market act.

f) Notification of Commodities: -
 

Under the APM Act the State Govt. is empowered to notify agril. Commodities under the
provisions of the Act for the purpose of regulation of marketing. This has resulted into anamoly.
Even commodities not passing through the market yard or for which no services are provided are
also notified. It is logical that only such commodities be notified which pass through the market
yard or for which marketing infrastructure has been provided & the market fee should be in
proportion to the infrastructure & facilities provided.

 
(g) Single Point Levy of Market Fee:
 

At present by and large market fee is collected on a particular lot whenever it is transacted. These
amounts to multiple point collection Simplification of market fee and thus adding to the cost
therefore it is necessary to introduce single point levy of market fee in the entire process of
marketing in the country.

Government of India in the Planning Commission had constituted a working Group to

examine these issues. The present concept paper highlights the issues which need consideration
for review so that necessary action is initiated. A draft Model Act incorporating the above
proposals for amendment will be taken up if so desired.

Q.2:- An efficient agricultural marketing system can bring about substantial reduction
in marketing cost. Discuss

Ans. Agricultural marketing plays an important role not only in stimulating production and
consumption, but in accelerating the pace of economic development. The agriculture marketing
system plays a dual role in economic development in countries whose resources are primarily
agricultural. Increasing demands for money with which to purchase other goods leads to
increasing sensitivity to relative prices on the part of the producers, and specialization in the
cultivation of those crops on which the returns are the greatest, subject to socio-cultural,
ecological and economic constraints. It is the marketing system that transmits the crucial price
signals.

1 Agricultural Marketing is one of the manifold problems, which have direct bearing upon the
prosperity of the cultivators, as India is an agricultural country and about 70% of its
population depends on agriculture.
2 Most of the total cultivated area (about 76%) is to under food grains and pulses.
Approximately 33% of the output of food grains, pulses and hearly all of the productions of
cash crops like cotton, sugarcane, oilseeds etc. are marketed as they remain surplus after
meeting the consumption needs of the farmers. Development of technology, quick means of
communication and transportation has introduced specialization in agriculture.
3 Agriculture supplies raw materials to various industries and therefore, marketing of such
commercial crops like cotton, sugarcane, oilseeds etc. assumes greater importance.
4 With the introduction of green revolution agricultural production in general and food grains
in particularly has substantially increased. Agriculture once looked as a subsistance sector is
slowly changing to a surplus and business proposition.
5 The interaction among producers, market functionaries, consumers and government that
determine the cost of marketing and sharing of this cost among the various participants.
6 The producer, middleman and consumer look upon the marketing process from their own
individual point of view. The producer is primarily concerned with selling his products.
7 Any increase in the efficiency of the marketing process, which results in lower costs of
distribution at lower prices to consumers, really brings about an increase in the national
income.
8 A reduction in the cost of marketing is a direct benefit to the society.
9 Marketing process brings a new varieties, qualities and beneficial goods to consumers and
therefore, marketing acts as a line between production and consumption.
1
Scientific, systematic marketing stabilizes the price level.
0
1 An improved marketing system will stimulate the growth of number of agrobased industries
1 mainly in the field of processing.
1 A marketing system can become a direct source of new technical knowledge and induce
2 farmers to adopt upto date scientific methods of cultivation.

Marketing is therefore, playing an important role in the economic development and stability of a
country.
Q.3:- An efficient agricultural marketing system is an effective instrument for breaking
the vicious circle of rural poverty. Discuss

Ans We take an example of Grameen Bank. The Grameen Bank is based on the voluntary
formation of small groups of five people to provide mutual, morally binding group guarantees in
lieu of the collateral required by conventional banks. At first only two members of a group are
allowed to apply for a loan. Depending on their performance in repayment the next two
borrowers can then apply and, subsequently, the fifth member as well.

 
The assumption is that if individual borrowers are given access to credit, they will be able to
identify and engage in viable income-generating activities - simple processing such as paddy
husking, lime-making, manufacturing such as pottery, weaving, and garment sewing, storage and
marketing and transport services. Women were initially given equal access to the schemes, and
proved not only reliable borrowers but astute enterpreneurs. As a result, they have raised their
status, lessened their dependency on their husbands and improved their homes and the nutritional
standards of their children. Today over 90 percent of borrowers are women.
 
Intensive discipline, supervision, and servicing characterize the operations of the Grameen Bank,
which are carried out by "Bicycle bankers" in branch units with considerable delegated authority.
The rigorous selection of borrowers and their projects by these bank workers, the powerful peer
pressure exerted on these individuals by the groups, and the repayment scheme based on 50
weekly installments, contribute to operational viability to the rural banking system designed for
the poor. Savings have also been encouraged. Under the scheme, there is provision for 5 percent
of loans to be credited to a group find and Tk 5 is credited every week to the fund.
 
The success of this approach shows that a number of objections to lending to the poor can be
overcome if careful supervision and management are provided. For example, it had earlier been
thought that the poor would not be able to find renumerative occupations. In fact, Grameen
borrowers have successfully done so. It was thought that the poor would not be able to repay; in
fact, repayment rates reached 97 percent. It was thought that poor rural women in particular were
not bankable; in fact, they accounted for 94 percent of borrowers in early 1992. It was also
thought that the poor cannot save; in fact, group savings have proven as successful as group
lending. It was thought that rural power structures would make sure that such a bank failed; but
the Grameen Bank has been able to expand rapidly. Indeed, from fewer than 15,000 borrowers in
1980, the membership had grown to nearly 100,000 by mid-1984. By the end of 1998, the
number of branches in operation was 1128, with 2.34 million members (2.24 million of them
women) in 38,957 villages. There are 66,581 centres of groups, of which 33,126 are women.
Group savings have reached 7,853 million taka (approximately USD 162 million), out of which
7300 million taka (approximately USD 152 million) are saved by women.
 
It is estimated that the average household income of Grameen Bank members is about 50 percent
higher than the target group in the control village, and 25 percent higher than the target group
non-members in Grameen Bank villages. The landless have benefited most, followed by
marginal landowners. This has resulted in a sharp reduction in the number of Grameen Bank
members living below the poverty line, 20 percent compared to 56 percent for comparable non-
Grameen Bank members. There has also been a shift from agricultural wage labour (considered
to be socially inferior) to self-employment in petty trading. Such a shift in occupational patterns
has an indirect positive effect on the employment and wages of other agricultural waged
labourers. What started as an innovative local initiative, "a small bubble of hope", has thus
grown to the point where it has made an impact on poverty alleviation at the national level ".

Q.4:- On what basis can agricultural markets be classified?

Ans. Agricultural Markets can be classified by:

Pasture

 Property must be fenced if used for livestock.  Hay or pasture sod (i.e. Bahia) operations
need not be fenced to qualify.
 An apparent effort has been made to maintain and care sufficiently and adequately for
this type of land (i.e. fertilizing, liming, tilling, mowing, etc.).

 If property is used for horse boarding, there should be a written agreement between the
parties involved.  This agreement must include the terms for the lease of pasture land. 
Classification is not normally granted for horses in a stable only.  There must be some
agricultural land use involved.  An occupational license is required for horse boarding. 
Raising of any livestock for your own use does not qualify.  Pleasure horses alone do not
qualify.
 The commercial raising of goats or sheep qualifies for the Classification.  On tracts of 5
acres or less, it would take at least 16 goats or sheep to verify a commercial operation.
 If property is leased to others, the lease must be in effect as of January 1st and a copy of
the lease must be on file in the Property Appraiser’s office.  It is the responsibility of the
property owner, not the lessee, to keep this office informed on the agriculture use of the
land.

Citrus

 Trees must be planted prior to January 1st, or at the very least, the land must be prepared
for citrus planting.  Standard plantings are from 100 to 160 trees per acre.  Anything less
than 70 trees per acre could be considered a hobby and not a true commercial venture.
 Agricultural values for citrus are based on type of fruit and effective age of grove.  A
Citrus Questionnaire, available in this office, must be submitted with the application.

Rowcrops

 This category is in reference to those agriculture products referred to as vegetables. 

Production of crops for your own use does not qualify.
 Parcels should be of sufficient size so that the sale of the crop products produces enough
income to sustain the entire operation.  (Rule of Thumb:  5 to 10 acres).
Timberland

 Must be at least 20 acres of planted pines or predominantly natural stand of pines.

 A Forest Management Plan, prepared by a professional forester, must be submitted with
the application.
 Ongoing activities, such as cutting of fire lanes, thinning of trees, under brushing,
reforesting, burning, cruising (inventorying), and any other activity recommended by the
Management Plan should be readily apparent to the agricultural field appraiser.

Nurseries

 Nurseries should have a state agricultural certificate.  Sales can be on a wholesale or

retail level, but plants for sale must be grown on the premises.
 Only land areas actually used for the nursery and service area shall be classified.
 Types of Nurseries:
1. In Ground:  ornamentals and woody ornamentals
2. Above Ground:  in containers
3. Flower Farm:    flowers only

Miscellaneous Agriculture

 Sugar cane, sod, swine, poultry, fish farms, aquaculture, ratite and fruit, other than citrus,
will be handled on a case by case basis.
 For a bee/honey operation you must be a registered Florida Beekeeper and have your
own, or have access to, honey extracting equipment, hive building and repair facility,
etc.  Bee leases will be reviewed on a case by case basis.
 All operations should be of sufficient size so that the income produced will sustain the
entire operation.

General

All applications are field checked to verify the usage and to ensure correct assessments. 
Additional information will be requested from the property owner to determine the continuance
of eligibility.  This information is usually in the form of income and expense documents and will
be requested on a regular basis.  All financial documents will be kept confidential in this office.

Application for agricultural classification must be made every year between January 1st and
March 1st.

If the application is approved, you will receive notification before July 1st.  If the application is
denied, you will receive a certified letter before July 1st.  The letter will explain the appeal
process.

Any residence on the property causes one acre to be removed from the agriculture classification. 
This acre is assessed at the current market value and is referred to as a home site.
Agricultural classification is not an across-the-board exemption.  The agriculturally classified
value is determined through a formula that uses the potential income produced by the agricultural
operation as a principal factor.  This value per acre is different for each agriculture use and will
usually result in a lower assessed value per acre than the market land value.  The land must be
used for a commercial agricultural operation or the agriculture classification will be denied. 

Once an application is approved, you will receive an automatic renewal receipt at the beginning
of each year.  Please read this receipt carefully as it is, in effect, your application for that year. 
Even though the classification has been automatically renewed, the application can still be
denied if the operation does not meet the proper criteria.  When the property is sold, or when the
name of the owner is changed in any way, the agricultural classification is automatically
removed and a new application must be made.

It is the responsibility of the property owner to notify this office of any change in the status or
use of the property with an agricultural classification.

Q.5:- Explain the problem of “defective preparation for marketing” with reference to
Agricultural marketing in India.

Ans. Defective or Inadequacies preparation for marketing system with reference to

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.

1. Improper warehouses

There is an absence of proper ware housing facilities in the villages. Therefore, the farmer is
compelled to store his products in pits, 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.

2. Lack of grading and standardization

Different varieties of agricultural produce are not graded properly. The practice usually prevalent
is the one known as "dara" sales wherein heap of all qualities of produce are sold in one common
lot 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.

3. 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. This is even more true with perishable
commodities.

4. 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 of D.D. Sidhan 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).

5. Malpractices in unregulated markets

Even now the number of unregulated markets in the country is substantially large. Arhatiyas and
brokers, taking advantage of the ignorance, and illiteracy of the farmers, use unfair means to
cheat them. The farmers are required to pay arhat (pledging charge) to the arhatiyas, "tulaii"
(weight charge) for weighing the produce, "palledari" to unload the bullock-carts and for doing
other miscellaneous types of allied works, "garda" for impurities in the produce, and a number of
other undefined and unspecified charges.

6. 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.

7. 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.

Thus it is not possible to view the present agricultural marketing in India in isolation of (and
separated from) the land relations. The regulation of markets broadcasting of prices by All India
Radio, improvements in transport system, etc., have undoubtedly benefited the capitalist farmers,
and they are now in a better position to obtain favourable prices for their "market produce" but
the above mentioned changes have not benefited the small and marginal farmers to any great
extent.

Q.6:- How does the lack of organization among cultivators affect the process of
agricultural marketing?

Ans. The importance of marketing in agriculture is very well illustrated by saying, “that a good farmer
has one eye on the plough and the other on the market”. This is true when agriculture is mainly for
subsistence; and now, even Indian agriculture is becoming commercialized. In these days of commercial
agriculture, it will be more fit to say, “a good farmer has only his hands on the plough but the eyes on
the market. Since agriculture constitutes a major part of the economy, marketing of agricultural
products also assumes considerable importance in our context. Marketed surplus is the amount of
agricultural produce that is brought to the market for sale after what is retained by the producers
for their own consumption. Hence it will be less than total production.  It is difficult to give a
correct estimation of marketed surplus, since it differs according to crop, place, season and
general state of the economy. Marketing finance is also important since the small producer will
experience difficulty in waiting for payment from the whole-sale buyer, if the time lag is too
long. Proper storage and handling facilities are important because otherwise, the produce will
perish and become unmarketable and unusable.

Indian Farmers and Marketing Disabilities:

The present system of agricultural marketing is not well-organized and the farmers have to
depend largely on the middlemen for the disposal of the farm’s yield who have no hesitation in
taking advantage of the farmer’s dependence upon them. The real evil is the tendency of these
intermediaries who exploit the ignorance and helplessness of the farmers to increase their own
profit.  The malpractices in the present system of agricultural marketing are very well known. 
The Rural Credit Survey Committee described the position as follows:

“while standards of marketing have improved, in most of the relatively few regulated markets
which have been established, a number of malpractices still exist even in them since personnel
and enforcement are two great problems, not always sufficiently attended to, much less solved.

 Sometimes, the malpractices take fresh lease of unauthorized life just outside the market, for the
private interests are strong, the advantages of evading strict regulation are many and the producer
is in no position to seek eventual advantage and protection from law at the cost of the immediate
disadvantage involved in the loss of powerful customers, which are also sources of credit and
finance.  Moreover, there is a very great lacuna that no control at all is exercised over village
sales, in which the primary producer is literally, legally and in practice at the mercy of the village
trader”. Frequently large samples are also taken by the buyers with payment.  The cultivators are
not paid for them even when no sale is affected. Generally the transactions take place on a
sample basis.  Consequently, the producer does not get the full worth of his produce.  The
reputation of Indian agricultural producers in the world market is low.

The villagers have practically no contact with the outside world not are they in touch with the
trend of market process and they mostly depend on hearsay reports received form the village
bania who is always busy in earning profits from buyers by making them fools to the ignorant
villagers.

In India, the following are some of the common defects agricultural marketing:

1. Lack of organization,

2. Forced sales,

3. Presence of middlemen,

4. Numerous market charges,

 5. Market malpractices,

6. Lack of standard weights and measures,

7. Inadequate storage,

 8. No standardization of price and quality,

9. Lack of marketing finance, and

10. Want of proper market information.

Q.7:- What are ‘storage functions’ in an agricultural market?

Ans. Agricultural marketing involves in its simplest form the buying and selling of agricultural
produce. In olden days when the village economy was more or less self-sufficient the marketing
of agricultural produce presented no difficulty as the farmer sold his produce to the consumer on
a cash or barter basis.

Marketing functions. In modern marketing the agricultural produce has to undergo a series of
transfers or exchanges from one hand to another before it finally reaches the consumer. This is
achieved through three marketing functions (a)assembling ,(b)preparation for consumption and
(c) distribution. Concentration pertains to the operations concerned with the assembly and
transport from the field to a common assembly field or market. The produce may be taken direct
to the market or it may be stored on the farm or in the village for varying periods before its
transport. It may be sold as obtained from the field or may be cleaned, graded, processed and
packed either by the farmer or village merchant before it is taken to the market. Some of the
processing is done not because consumers desire it, but because it is necessary for the
conservation of quality. At the market the produce may be sold by the farmer direct to the
consumer or more usually through a commission agent or a broker. It may also be purchased by
traders, wholesalers or retailers. The transactions may be carried out by direct negotiation or
through middlemen, by barter or cash, by open or under cover auction, on the spot or in future
markets. The transactions take place at one or more levels in the primary, secondary or terminal
markets or all three. Distribution (dispersion ) involves the operations of wholesaling and
retailing at various points. By a series of indispensable adjustments and equalising functions, it is
the task of the distribution system to match the available supplies with the existing demand.

MARKETING FUNCTIONARIES (AGENCIES)

The transfer of produce or goods takes place through a chain of middlemen or agencies. In the
primary market the main functionaries are the producer, the village or itinerary merchant, pre-
harvest contractors, commission agents, transport agents etc. In the secondary market the
processing and manufacturing agents are the additional functionaries. Financing agents such as
shroffs, banks and co-operatives may also take part. In the terminal or export market the
commercial analyst and shipping agent also gets involved in the transfer of goods.

MARKETING IMPROVEMENTS

India being a primary producing country, agriculture plays a vital role, both as an essential
infrastructure and a development component in generating and sustaining a higher national
income. Out of a natonal income of about Rs 38,921 crores in 1972-73 as much as Rs 17,500
crores or about 44.9% is contributed by agriculture and allied sectors. It is estimated that about
50% of the agricultural produce is available as marketable surplus. The marketing system in
India provides sustenance for abour 3 million persons who are engaged in performing various
marketing function . In the field of exports too, the agricultural sector accounts for about 50% of
the total value.

GOVERNMENT REGULATORY PROGRAMMES.

With this object in view, a number of marketing surveys were conducted by the Directorate of
Marketing and Inspection which revealed the shortcomings in the country's marketing system. A
rectification of these deficiencies was sought to be achieved by rationalizing various activities
and standardizing various practices in the markets through legislation or otherwise. The primary
objective of improving the system of agricultural marketing was not only to remove the
handicaps from which the producer-seller was suffering but also to increase his income by
ensuring him a fair price.

An important development in the field of regulated markets is the keen interest taken by the
International Development Agency (IDA) in the development of the infrastructure in regulated
markets. The IDA is financing the development of infrastructure in 50 markets of Bihar. The
World Bank has approved a loan assistance of 6.5 crores to Karnataka also for the development
of markets.
Q.8:- List out the sources of income for a Regulated Agricultural Market.

Ans. The World Bank estimate that 41.6% of India lives below the international poverty line. 
That means that as many as 410 million Indian citizens are living on less than $1.25US a day.  If
correct, this estimate implies that 1/3 of the entire world’s poor live in India, meaning that the
importance of poverty reduction is exceptionally relevant to the country.  In the past 20 years,
great gains have been made in reducing the number of poor encapsulated in these daunting
statistics, but India is faced with an obligation to continue to reduce the number of people living
in poverty.  India’s impressive growth has disproportionately benefited certain geographic and
social groups.  For India to truly become a country that epitomizes the future of change, the wage
gap and the economic inequality that accompanies it must be eliminated. Historically, state
intervention has favored industry over agriculture .  This can be a positive influence on increasing
GDP, but it does not help to eliminate poverty or reduce inequality. This is because many of the
poor live in rural areas and are dependent on agriculture as a source of income. In fact, some
estimates claim that up to 75% of India’s poor live in rural areas. Thus, one of the hidden
creators of income inequality is underinvestment in the agricultural sector.  As investment flows
into cities, wealth creation is concentrated in urban centers. While it is incredibly important to
foster industry, this kind of specialization cannot take place at the expense of the agricultural
industry.  Not only is a robust agricultural industry important to national food security, it is also
essential to ending the wage gap.

Agriculture income is exempt under the Indian Income Tax Act. This means that income earned
from agricultural operations is not taxed. The reason for exemption of agriculture income from
Central Taxation is that the Constitution gives exclusive power to make laws with respect to
taxes on agricultural income to the State Legislature. However while computing tax on non-
agricultural income agricultural income is also taken into consideration.

Sources of income for a Regulated Agricultural Market:

(i)     Any rent received from land which is used for agricultural purpose.

(ii)   Any income derived from such land by agricultural operations including processing of
agricultural produce, raised or received as rent in kind so as to render it fit for the market, or sale
of such produce.

(iii)   Income attributable to a farm house subject to the condition that building is situated on or
in the immediate vicinity of the land and is used as a dwelling house, store house etc.

Now income earned from carrying nursery operations is also considered as agricultural income
and hence exempt from income tax.

In order to consider an income as agricultural income certain points have to be kept in mind:
(i)  There must me a land.

(ii)  The land is being used for agricultural operations.

(iii)   Agricultural operation means that efforts have been induced for the crop to sprout out of
the land .

(iv)  If any rent is being received from the land then in order to assess that rental income as
agricultural income there must be agricultural activities on the land.

(v)   In order to assess income of farm house as agricultural income the farm house building must
be situated on the land itself only and is used as a store house/dwelling house.

Certain income which is treated as Agriculture Income;

(a)    Income from sale of replanted trees.

(b)   Rent received for agricultural land.

(c)    Income from growing flowers and creepers.

(d)   Share of profit of a partner from a firm engaged in agricultural operations.

(e)    Interest on capital received by a partner from a firm engaged in agricultural operations.

(f)    Income derived from sale of seeds.

Certain income which is not treated as Agricultural Income;

(a)    Income from poultery farming.

(b)   Income from bee hiving.

(c)    Income from sale of  spontaneously grown trees.

(d)   Income from dairy farming.

(e)    Purchase of standing crop.

(f)    Dividend paid by a company out of its agriculture income.

(g)   Income of salt produced by flooding the land with sea water.

(h)   Royalty income from mines.

(i)     Income from butter and cheese making.

(j)     Receipts from TV serial shooting in farm house is not agriculture income.

ertain points to be remembered;

(a)    Agricultural income is considered for rate purpose while computing tax of
Individual/HUF/AOP/BOI/Artificial Judicial Person.

(b)   Losses from agricultural operations could be carried forward and set off with agricultural
income of next eight assessment years.

(c)    Agriculture income is computed same as business income.

Thanks