Rural Development

Rural development means an action- plan for the social and economic upliftment of the rural
areas.
The key issues of action plan for rural development are:

 Development of infrastructure
 Human capital formation
 Development of productive resources
 Poverty alleviation
 Land reforms

Rural Credit
Rural credit means credit for the farming families. Credit is the life line of farming activity credit
needs of the typical Indian farmer may broadly be classified as under

 Short Term Credit It needs relates basically to the purchase of inputs like seeds fertilisers
etc short term borrowings generally stretches over a period of 6 to 12 months.
 Medium Term Credit Medium term loans are required for purchasing machinery
constructing fences and digging wells. Such loans are generally stretch over a period of 12
months to 5 years.
 Long Term Credit Long term credit is meant for the purchase of additional land. The period
of such loan ranges between 5 to 20 years.

Sources of Rural Credit

 Non-institutional sources
 Institutional sources
 Co-operative credit societies
 State Bank of India
 Regional Rural Bank
 National Bank for Agriculture and Rural Development (NABARD)

Agriculture Marketing
It includes all those activities or processes which help a former getting maximum price for his
produce among others, these processes include grading packaging and storage.

Measures Initiated by the Government to Improve Market System

 Regulated markets
 Co-operative agricultural marketing societies
 Provision of warehousing facilities
 Subsidized transport
 Dissemination of information
 MSP policy

Diversification is an emerging challenge in the context of rural development. It has two aspects.
  Diversification of Crop Production It implies production of diverse variety of crops rather
than one specialized crop. It means a shift from single-cropping system to multi-cropping
system.
 Diversification of Production Activity/Employment It implies a shift from crop farming to
other areas of production activity employment.

Non-Farm Areas of Production Activity/Employment for the Rural Population

 Animal Husbandry It is the most important area of employment in India different from crop
farming. It is also called livestock farming, poultry, cattle etc.
 Fisheries The fishing community in India depends almost equally on inland sources and
marine sources of fishing. Inland sources include rivers, lakes, ponds and streams etc.
 Horticulture Horticultural crops include fruits, vegetables and flowers besides several other.
Over time, there has been a substantial increase in area under horticulture.
 Cottage and Household Industry This industry has been dominated by such activities as
spinning, weaving, dyeing and bleaching.

Organic Farming and Sustainable Development

Organic farming is a system of farming that relies upon the use of organic inputs for cultivation.
Organic inputs basically include animal manures and composts.
Benefits of organic farming are as follows

 Discards the use of non-renewable resources

 Environment friendly
 Sustains soil fertility
 Healthier and tastier food
 In expensive technology for the small and marginal farmers

Golden Revolution
The rapid growth in the production of diverse horticultural crops such as fruits, vegetables, tuper
crops and plantation crops is known as Golden Revolution.

Agriculture is the major source of livelihood in the rural sector. Mahatma Gandhi once said that
“real progress of India did not mean only the industrial growth but also the development of
villages because two-third of India‟s population depends on agriculture”. One-third of rural
Indians still live in poverty. This is the reason, why there is need to develop rural India.

Rural Development and Rural credit

Rural development is a comprehensive term which essentially focuses on action for the
development of areas that are lagging behind in the overall development of the village economy.
It is a process whereby the standard of living of rural people, especially poor people, rises
continuously.
The basic objectives of rural development are

 Increasing the productivity of the agricultural sector, so that the income of the formers
increase.
  Generating alternative means of livelihood in the rural areas, so that dependency on
agriculture sector is reduced.
 Promoting education and health facilities in the rural areas, so that human development is
also achieved.

Key Areas in Rural Development

Some of the areas which are challenging and need fresh initiatives for development in rural India
are as follows

 Development of the productive resources of each locality.

 Development of human resources including literacy (more specifically female literacy)
education and skill development.
 Development of human resources like health, addressing both sanitation and public health.
 Honest implementation of land reforms.
 Infrastructure development like electricity, irrigation, credit, marketing, transport facilities
including construction of village roads and feeder roads to nearby highways, facilities for
agriculture research and extension and information dissemination.
 Special measures for alleviation of poverty and bringing about significant improvement in
the living conditions of the weaker sections of the populations emphasizing access to
productive employment opportunities.

The share of agriculture sector‟s contribution to GDP was on a decline, the population dependent
on this sector did not show any significant change. Further, after the initiation of reforms, the
growth rate of agriculture sector decelerated to 2.3% per annum during the 1990s, which was
lower than the earlier years.

Rural Credit
Credit is the life line of the farming activity. Rural credit means providing credit for the forming
community. Farmers need credit because

 Most formers in India are small and marginal land holders who practice subsistence
farming. They have no surplus for further production.
 The gestation period between sowing and harvesting is quite high. So, farmers have to
borrow to fulfill their various needs during this period.

Borrowings of a farmer can before the following purpose

 Productive Borrowings These borrowings include loans to buy seeds, fertilizers and
agricultural equipments and implements.
 Un-productive Borrowings These borrowings include loans for social purposes such as
marriage and festive occasions.

Types of Rural Credit

Credit needs of farmers may be classified as
  Long-term Credit These loans are required to acquire permanent assets like tractors, land,
costly equipments, tube-wells, etc. These loans are for a period of 5 to 20 years.
 Medium-term Credit These loans are required for purchasing machinery, constructing
fences and digging wells. Such loans are generally stretch over a period of 12 months to 5
years.
 Short-term Credit These loans are required for buying seeds, tools, manure and fertilizers,
etc. This credit is given to the needy borrowers by cooperatives, moneylenders and banks.
These loans are for a period of 6 to 12 months.

Sources of Rural Credit

Credit in the rural sector is available from two sources
1. Non-institutional Sources of Rural Credit The major non-institutional sources of rural credit
are moneylenders, friends, relatives, landlords, shopkeepers and commission agents.
Moneylenders provided about 93.6% of total financial requirement rural areas in 1951-52 and
presently it is 30%. The short-term credit needs of the formers are met from commission agents,
friends and relatives which supply roughly 50% of total rural borrowings, Non-institutional
sources of credit are not encouraged by government because of the following reasons

 They charge high rate of interest.

 They acquire land on failure to pay interest and loan.
 They manipulate accounts.

The Poor Women‟s Bank Kudumbashree is women-oriented community based poverty i

reduction programme being implemented in Kerala. In 1995, a thrift and credit society was
started as a small savings for poor women with an objective to encourage savings. The thrift and
credit society mobilized Rs. 1 crore as thrift savings. These societies have been acclaimed as
largest informal banks in Asia in terms of participation and savings mobilised.

2. Institutional Sources of Rural Credit In regard to rural credit, major change occurred after
1969, when India adopted social banking and multi-agency approach to adequately meet the
needs of rural credit. Different institutions were formed to provide the rural credit.
The major institutional sources of rural credit are as follows:
(i) National Bank for Agriculture and Rural Development (NABARD) It was set up in 1982 as
an apex body to coordinate the activities of all institutions involved in the rural financing system.
It has an authorized share capital of Rs. 500 crore. The RBI has contributed half of the share
capital while the other half has been contributed by Government of India.
The main functions of NABARD are

 To grant long-term loans to the State Government for subscribing to the share capital of
cooperative societies.
 To take the responsibility of inspecting cooperative banks, Regional Rural Banks (RRBs)
and primary cooperative societies.
 To promote research in agriculture and rural development.
 To serve as a refinancing agency for the institutions providing finance to rural and
agricultural development.
 To help tenant farmers and small farmers to consolidate their land holdings.
The national agricultural credit fundjias been transferred from RBI to NABARD to form a part
of its national rural credit fund.

(ii) Self Help Groups (SHGs) Formal credit system has proven inadequate. It has also not been
fully integrated into the overall rural, social and community development.
Due to the demand of some kind of collateral, vast proportion of poor rural households were
automatically out of the credit networks. Self Help Groups emerged to fill this gap, created by
formal credit system.

Self Help Groups (SHGs) promote thrift in small proportions by a minimum contribution from
each member. By March end 2003, more than Rs. 7 lakh SHGs had reportedly been credit linked.
Such credit provisions are generally referred to as micro-credit programmes. SHGs have helped
in the empowerment of women. However, borrowings from SHGs are mainly confined to
consumption purposes.

(iii) Regional Rural Banks (RRBs) As a supplement to commercial banks, the regional rural
banks have also been opened. These have been set up under the Regional Rural Banks Act-of
1976. Their banking services are meant for small and marginal formers and artisans, etc. They
cater exclusively to the needs of weaker section. Nearly 90% of the loan of RRBs were provided
to the weaker section.

Kisan Credit Card Scheme

Kisan Credit Card scheme (KCCs) was introduced by the government in 1998-99. It facilitates
access to credit from commercial banks and regional rural banks. Under the scheme, the eligible
farmers are provided with a kisan card and pass book from the relevent bank. The farmers can
make withdrawals and repayments of cash within the credit limit as – specified in the Kisan
Credit Card (KCC).

(iv) Commercial Banks They were inducted into the field of agricultural credit under the
Banking Reforms Act, 1972. The share of commercial banks in the supply of agricultural credit
has considerably improved. It was 46.9% during the year 2006-07.
Commercial banks disburse agricultural credit for the purchase of inputs, cattle, tractors, dairy
farming, installation of tube-wells, etc.

(v) Cooperative Credit Societies The cooperative credit societies are actively engaged in
addressing credit needs of the farmers, besides offering a host of related services. Notably these
societies provide guidance in diverse agricultural operations with a view to raise crop
productivity. Currendy, cooperatives account for 16-17% of rural credit flow. The main fimcdon
of cooperative credit society is to provide timely and increased flow of credit to the farmers.

Latest Status of Agricultural Credit

The following points reveal the latest status of agricultural credit

 The credit flow in this sector in 2011-12 is placed at Rs. 475000 crore.
  The agricultural debt waiver and debt relief scheme was announced in the union budget
2008-09.
 Farmers have been receiving crop loans upto a principal amount of Rs.3 lakh at an effective
rate of 4% per annum.
 To provide adequate and timely credit support to the formers, the Kisan Credit Card (KCC)
scheme was
introduced in February, 1999. About 10.78 crore KCCs had been issued upto October 2011.
 Government is implementing a revival package for short-term rural cooperative credit
structure involving financial outlay of Rs. 13596 crore.

Rural Banking : A Critical Appraisal

After the nationalisation of commercial banks in 1969, the rapid expansion of the banking
system in rural areas has been witnessed. Rural banking has raised the level of rural farm and
non-farm output, income and employment especially after the green revolution.
Advantages of Rural Banking

 Raising farm and non-farm output by providing services and credit facilities to farmers.
 Generating credit for self employment schemes in rural areas.
 Achieving food security which is clear from the abundant buffer stocks of grains.

Limitations of Rural Banking

 Small and marginal formers receive only a very small portion of the institutional credit.
 Rural banking is suffering from the problems of large amount of over dues and default rate.
 The sources of institutional finance are inadequate to meet the requirements of agricultural
credit.
 There exist regional inequalities in the distribution of institutional credit.

It is suggestible that more and more regional rural banks should be set up to need the credit need
of the rural and backward areas of India.

Agricultural Marketing, Diversification of Agricultural Activities and Organic Fanning

Agricultural Marketing Agricultural marketing is the process that involves functions of
assembling, storage, processing, packaging, transportation, grading and distribution of
agricultural commodities throughout the country.
In other words, agricultural marketing covers the services involved in moving an agricultural
product from the farm to the consumer.
Need of Agriculture Marketing
Need of agriculture marketing originates due to the problems faced by farmers.
Different types of problems faced by the farmers are

 Farmers while selling their produce to traders suffered from faulty weighing and
manipulation of accounts.
 Due to lack of knowledge about the prices prevailing in the markets, farmers are often
forced to sell their produce at low prices.
  Farmers did not have proper storage facilities to keep back their produce for selling later at
better price.
Approximately 10% of goods produced in farms is wasted due to lack of storage.

Distress Sale Lack of agricultural marketing infrastructure often forces the farmers to sell their
produce at low prices for fear of spoilage or to pay off an imminent debt. This is termed as
distress sale. Farmers tend to suffer highly on account of these sales, because they not only get a
low price for their produce, but are also cheated by use of false weights and are charged a high
commission.
Measures by Government to Improve Agriculture Marketing
Four measures which were initiated to improve the agriculture marketing aspect are discussed
below
1. Regulation of Markets The first measure to improve agriculture marketing aspect is regulation
of markets to create orderly and transparent marketing conditions. Regulated markets have been
established where sale and purchase of the produce is monitored by the Market Committee
consisting of representatives of government, farmers and the traders.

Market committee ensure that the formers get appropriate price of their produce. By and large,
this policy benefited farmers as well as consumers. However there is still need to develop about
27000 rural periodic markets as regulated market places to realize the full potential of rural
markets.

2. Improvement in Physical Infrastructure It is the second measure to improve the agriculture

marketing aspect. The current infrastructure facilities like; roads, railways, warehouses,
godowns, cold storages and processing units etc are inadequate to meet the growing demand.
Through this measure government ensures the improvement in physical infrastructure.

3. Cooperative Marketing It is the third measure taken by government in realizing the fair prices
for farmers products. As members of these societies, formers find themselves better bargainers in
the market and get better prices of their produce through collective sale. The success of milk
cooperatives in Gujarat and some other parts of the country are the brilliant examples of
cooperative marketing.
Different problems faced by cooperative during the recent past are

 Inadequate coverage of former members.

 Lack of appropriate link between marketing and processing cooperatives.
 Inefficient financial management.

Supporting Policies
It is the fourth measure taken by government to improve agriculture marketing system. Different
supportive policies applied in this regard are

 Minimum Support Price (MSP) It is an important step to improve agriculture market

system. MSP is an assurance to the farmers that a minimum price will be fixed by the
government to formers‟ produce, no purchasing can be done below this price, however
 farmers can sell their produce in open market above MSP. This policy assured a minimum
income to the farmers.
 Maintenance of Buffer Stocks of Wheat and Rice Purchases from the farmers are kept by
Food Corporation of India as buffer stocks.
 Distribution of Foodgrains and Sugars Through Stocks purchased by government at MSP
are used primarily for Public Distribution System (PDS). Distribution of foodgrains and
other necessary items like kerosene oil at subsidised price to the poor takes place through
fair price shops.
 Emerging Alternative Marketing Channels In India, alternative marketing channels are
emerging. Through these channels, farmers directly sell their products to the consumers.
This system increases farmers‟ share in the prices paid by the consumers.

Important examples of such channels are

 Apni mandi (Punjab, Haryana and Rajasthan).

 Hadaspar mandi (Pune); Rythu Bazars (Vegetables and fruit market in Andhra Pradesh).
 Uzhavar sandies (Farmers‟ Markets in Tamil Nadu).
 Several national and international fast food chains and hotels are also entering into contracts
with the farmers to supply them farm products (fresh vegetables and fruits) of the desired
quality.

Diversification into Productive Activities

Diversification means a major proportion of the increasing labour force in the agricultural sector
needs to find alternate employment opportunities in other non-farm sectors. Diversification is an
emerging challenge in the context of rural development. It has two aspects

 Diversification of crop production

 Diversification of productive activity

Diversification of Crops
This implies a shift from single cropping system to multi-cropping system. In India, where
subsistence farming is still dominant, it may also mean a shift from subsistence farming to
commercial farming.
Significance of Diversification of Crops Diversification of crops is improtant because it will

 Minimise the risk occuring. due to failure of monsoon.

 Minimise the market risk arising due to price fluctuations.

Need of Diversification into Productive Activities

Agriculture sector is a seasonal based activity, most of agriculture employment activities are
concentrated in Kharif season. But during Rabi season, in the areas where irrigation facilities are
inadequate, it becomes difficult to find gainful employment.

So, there is a need to focus on allied activities, non farm employment and other emerging
alternatives of livelihood. Also agriculture sector is already overcrowded, a major proportion of
the increasing labour force needs to find alternate employment opportunities in other non-farm
sectors.

Some non-farm activities are discussed below

1. Animal Husbandry
In India, the forming community uses the mixed crop-live stock forming system. Cattle, goats,
fowl are the widely domesticated species. Livestock production provides increased stability in
income, food security, transport, fuel and nutrition for the family without disrupting other food
producing activities.
Today, livestock sector alone provides alternate livelihood options to over 70 million small and
marginal farmers including landless labourer.

Poultry accounts for the largest share with 55% followed by others. India has about 304 million
cattle, including 105 million buffaloes.

A significant number of women also find employment in the livestock sector.

Milk production in the country has increased by more than five times between 1960-2009. This
can be attributed mainly to the successful implementation of „operation flood‟.

Meat, eggs, wool and other by-products are also emerging as important productive sectors for
diversification.
In numbers, our livestock population is quite impressive but its productivity is quite low as
compared to other countries. It requires improved technology and promotion of good breeds of
animals to enhance productivity. Improved veterinary care and credit facilities to small and
marginal formers and landless laborers would enhance sustainable livelihood options through
livestock production.

Operation Flood
It is a system whereby all the farmers can pool their milk produced according to different grading
(based on quality) and the same Is processed and marketed to urban centres through
cooperatives.
In this system farmers are assured of fair price and Income from the supply of the milk to urban
markets. Gujarat state is held as a success story in the efficient implementation of milk
cooperatives which has been emulated by many states.

Fisheries
The socio-economic status of fishermen is comparatively lower because of

 rampant underemployment
 low per capital earnings
 absence of mobility of labour to other sectors
 high rate of illiteracy
 indebtedness
Horticulture
Due to varying climate and soil conditions, India has adopted growing of diverse horticultural
crops such as fruits, vegetables, tuber crops, flowers, medicinal and aromatic plants, spices and
plantation crops. These crops play an important role in providing food, nutrition and
employment.

The period between 1991-2003 is called „golden revolution‟ because during this period, the
planned investment in horticulture became highly productive and the sector emerged as a
sustainable livelihood option.

India has emerged as a world leader in producing a variety of fruits, like mangoes, bananas,
coconuts, cashew, nuts and a number of species and is the second largest producer of fruits and
vegetables.

Economic conditions of many formers engaged in horticulture has improved and has become a
means of improving livelihood for many unprivileged classes.

Flower harvesting, nursery maintained, hybrid seed production and tissue culture, propagation of
fruits and flowers and food processing are highly profitable employment opportunities for rural
women. It has been estimated that this sector provides employment to around 19% of the total
labour force.

Other Alternate Livelihood Options

The Information Technology (IT) has revolutionized many sectors in the Indian economy.
It plays a very significant role in achieving sustainable development and food security in the
following ways

 It can act as a tool for releasing the creative potential and knowledge embedded in our
people.
 Issues like weather forecast, crop treatment, fertilizers, pesticides storage conditions, etc.
can be well administered, if expert opinion is made available to the farmers.
 The quality and quantity of crops can be increased manifold, if the farmers are made aware
of the latest equipments, technologies and resources.
 It has ushered in a knowledge economy.
 It has potential of employment generation in rural areas.

Every Village A Knowledge Centre

MS Swami Nathan Research Foundation, an institution located in Chennai, Tamil Nadu, with
support from Sir Rattan Tata Trust, Mumbai, has established the Jamshedji Tata National Virtual
Academy for Rural Prosperity. The academy envisaged to identify a million grass root
knowledge workers who will b% enlisted as fellows of the academy.

The programme provides an info-kiosk (PC with internet and video conferencing facility,
scanner, photocopier, etc) at a low cost and trains kiosk owner; the owner then provides different
services and tries to earn a reasonable income. The Government of India has decided to join the
alliance by providing financial support of Rs. 100 crore.

Sustainable Development and Organic Farming

Conventional agriculture uses chemical fertilizers and toxic pesticides, etc. which enter the food
supply, penetrate the water resources, harm the livestock, deplete the soil and devastate natural
eco-system. Due to these problems, an eco-friendly technology is required.
Organic farming is such technology which restores, maintains and enhances the ecological
balance. There is an increasing demand for organically grown food to enhance food safety
throughout the world.
Benefits of Organic Farming

 Organic forming substitutes costlier agriculture inputs like HYV seeds, chemical fertilizers,
pesticides, etc. with locally produced organic inputs that are cheaper and thereby generate
good returns on investment.
 Organic forming also generates income through exports.
 Organically grown food has more nutritional value than chemical forming, thus providing
us with healthy foods. Produce pesticide free and produced in an environment sustainable
way.
 Due to more labour requirement in organic farming, it is an attractive proposition for India.

Limitations of Organic Farming

 Yields from organic forming are less than modern agricultural forming in the initial years.
Therefore, small and marginal formers may find it difficult to adapt to large scale
production.
 Organic produce have shorter shelf life than sprayed produce.
 Choice in production of off-season crops in quite limited in organic forming.