Unit III- Rural Development

Concept of Rural Development and its Key Issues

Objectives

After going through this lesson, you shall be able to understand the following concepts.

• Meaning of rural development

• Key Issues involved in rural development

Introduction

Nearly two-thirds of the people in India live in rural areas. That is, the bulk of our
population lives in the rural areas.

However, despite being home to the bulk of the population, development is largely
absent from rural India. It is weighed down by serious problems such as extreme
poverty, lack of basic infrastructure, low farm productivity and low standard of living.
Rural India has failed to keep up with the fast-growing urban India. There exists a great
disparity between the two in terms of development.

For example, while cities are literally touching the skies with tall skyscrapers, there are
many villages in India which cannot even boast of proper pucca houses; while the best
of health facilities are available in cities, there are many villages in India which do not
have access to a single doctor; while the children living in cities can avail of the
excellent educational system in place in cities, there are many villages in India which
cannot provide its children with even primary schools. Truly, the urban–rural divide is
great!

Can India ever hope to become a developed nation by ignoring the many ills that plague
its rural areas? No. Real progress cannot happen as long as a large part of the country
remains underdeveloped. This is why rural development is important. Developing rural
areas at par with the urban areas is key to the overall development of India.

Rural Development

Rural development refers to the actions and initiatives taken for the social and economic
development of the rural or backward areas. It aims at a continuous rise in the standard
of living of the rural poor.

Key Issues in Rural Development

Rural development involves the following key issues.

1. Human capital formation: Quality human capital is missing from rural areas. The
reason for this is the absence of basic health and education facilities that are necessary
for human capital formation. People in rural areas often have to resort to far-flung
places for these facilities. This has the effect of reducing the quality of human capital.
Thus, an important part of rural development is production of quality human capital out
of the human resources available in rural areas. For this, it is important to invest in such
areas as education, technical skills development through on-the-job training and
healthcare.

2. Development of productive resources: Agriculture is the main occupation of

people in rural areas. There is, thus, an excess burden on the agricultural sector. This
sector also suffers from low productivity, lack of infrastructure and disguised
unemployment. Hence, there is the need to develop productive resources to help
generate alternative employment opportunities for the rural people. This would increase
the productivity and income of the rural people and also reduce the strain on the
agricultural sector. Therefore, creation of alternative sources of income via growth of
productive resources is an important part of rural development.

3. Development of rural infrastructure: Infrastructure such as banking, credit

societies, electricity, means of transport, means of irrigation and facilities for agricultural
research are crucial to the development of rural areas. These facilities provide the
necessary support to all production activities. Absence of these facilities makes
economic growth and social development a difficult task. Thus, infrastructure
development is of critical importance in rural development.

4. Land reforms: As mentioned before, agriculture is the primary occupation in rural

areas. The agricultural sector has several shortcomings such as small land size,
presence of intermediaries, dependence on moneylenders, employment of traditional
techniques of farming and lack of a marketing system. These shortcomings can be
removed through various land reforms and technical reforms.

Land reforms include abolishing intermediaries, consolidating land holdings, imposing

land ceiling and regulating rent. These help in increasing the productivity and aggregate
volume of farm output. Technical reforms include encouraging the use of HYV seeds,
fertilisers and pesticides, providing irrigation facilities and promoting modern techniques
of production.

Land reforms and technical reforms together lead to efficient and optimum use of land,
thereby resulting in large scale production. This would in turn increase the income and
standard of living of the rural people.

5. Reducing poverty: Poverty is one of the main causes of rural underdevelopment.

While not a problem in itself, poverty does give rise to many interrelated problems such
as unemployment, inferior human capital, underdevelopment, backwardness and
inequalities. Poverty alleviation should be integral to government plans and policies.
Increasing number of schemes should be launched by the government for the upliftment
of the rural poor. Developing income-earning assets is an important step in tackling
poverty. Such steps would help generate income, raise the living standards and make
the people in rural areas self-sufficient.

6. Generation of new employment opportunities: Agriculture, as stated before, is the

primary source of income of the rural people. Low productivity and output characterises
the agricultural sector. For this reason, the income of farmers remains low. Moreover,
as agriculture is a seasonal occupation, there exists a time lag of approximately 5 to 7
months between the cultivation of two crops.

During this time, due to the lack of alternative employment opportunities, farmers
remain without any job. Thus, emphasis must be laid on the development of alternative
means of income such as cottage industries, fisheries and handicrafts. The greater the
employment opportunities, the higher would be the income generated. This increase in
income would help reduce the poverty persisting in the rural economy, thereby making
the people of rural areas self-sufficient.

Rural credit and its Sources

Objective

In this lesson, you will go through the following topics.

• Concept of Rural Credit

• Classification of Rural Credit

• Sources of Rural Credit in India

• Critical Appraisal of Rural Banking in India

Introduction

Rural poverty is an issue of grave concern. The income of the people in rural areas is
barely enough for their sustenance. Consequently, they are unable make any
worthwhile savings. Low income and the resultant low rate of savings make it difficult for
farmers to invest on their farmlands to increase productivity. The few banks that are
present in rural areas prefer to advance credit to farmers with large land holdings. Small
and marginal farmers have none but moneylenders to turn to. The inability to increase
productivity implies that the total farm output remains low and, thus, the conditions of
low income and poverty continue to prevail.
The infusion of credit is essential to counter these conditions. Rural credit is vital for the
development of the agricultural sector and the consequent rural economic development.
Let us look at some of the points that highlight the importance of credit in rural
development.

1. Promotes commercialisation of farming: The produce of small and marginal

farmers is hardly enough for their own subsistence. They are unable to generate
sufficient surplus to reinvest on their lands. Influx of funds helps these farmers to
upgrade their productivity and, thereby, commercialise their farming. Easy and cheap
availability of rural credit enables the farmers to invest in modern techniques of farming,
which in turn helps them generate surplus for the market. Consequently, their income
increases.

2. Helps finance farming inputs: A long gestation period exists between the sowing of
seeds and the harvesting of crops. In other words, the time lag between the investment
made by farmers on farming inputs and the receipt of income from the sale of their
output is very long. As a result, farmers often fail to finance the initial requirements such
as seeds, fertilisers and tools. Here, credit plays a crucial role by enabling farmers to
meet the initial requirements of farming inputs.

3. Keeps farmers out of the vicious circle of poverty: Credit saves farmers from the
vicious circle of poverty. Farmers require funds to meet their general and specific
needs. These needs can be fulfilled via credit.

4. Protects farmers against natural calamities and dynamic market environment:

Indian agriculture has always been at the mercy of the vagaries of climate. Farmers are
the worst hit in the event of poor rains and crop failure. This pushes them into debt
traps, thereby preventing them from undertaking any farming in the subsequent period.
In such a scenario, crop insurance and farm credit play a significant role. They cushion
the impact of an unfavourable market environment or a natural calamity such as flood,
and enable farmers to survive.

Classification of Rural Credit

The following flow diagram illustrates the different types of rural credit.
1. On the basis of purpose and use: Rural credit can be classified into the following
two categories on the basis of purpose or use.

a. Productive credit: This refers to the credit requirements of farmers for purchasing
farming inputs necessary for production, such as seeds, fertilisers and machinery.

b. Unproductive credit: This refers to the credit requirements of farmers to meet

personal expenses such as conducting a marriage and paying for medical treatment.

2. On the basis of duration of credit: Rural credit can be classified into the following
three categories on the basis of the duration for which credit is advanced.

a. Short-term credit: This form of credit is advanced for a short period (typically,
ranging between 6 months and 15 months). Farmers use short-term credit to buy
farming inputs such as seeds and fertilisers.

b. Medium-term credit: This form of credit is advanced for a period ranging between
15 months and 5 years. Farmers use medium-term credit for productive purposes such
as purchasing machinery, carrying out land improvements and purchasing farm
animals. This form of credit also serves the purpose of enabling farmers to meet certain
personal expenses such as conducting a marriage.

c. Long-term credit: This form of credit is advanced for a period ranging between 5
years and 20 years. Farmers use long-term credit for productive purposes that require
large funds, such as purchasing additional land and purchasing modern machinery like
tractors and threshing machines.

Sources of Rural Credit in India

Sources of rural credit in India can be divided into two broad categories.

a. Non-institutional sources

b. Institutional sources

Non-institutional source of credit

You must have seen Indian films wherein rich landowners, moneylenders and big
traders are shown advancing loans to poor farmers. These landowners, moneylenders
and traders form the non-institutional sources of credit. At the time of independence,
these were the major and popular sources of credit in rural India. They accounted for
more than 90% of the total rural credit. Landowners and moneylenders would often
exploit poor farmers. They would charge exorbitant rates of interest and even
manipulate the accounts. As a result, farmers would get caught in never-ending debt-
traps.

Some of the important non-institutional sources of credit are discussed below.

Moneylenders

Moneylenders are the most popular sources of credit in rural areas. Rural folk can
readily obtain funds from moneylenders for both productive and unproductive purposes.
Moneylenders can be either professional or non-professional. Professional
moneylenders are those for whom lending money is the sole business. Non-
professional moneylenders, on the other hand, are those who engage in money lending
activities in addition to their primary occupation (usually farming).

Traders, landlords and relatives

Traders, landlords and relatives are some other non-institutional sources of credit.
Traders advance credit to farmers by way of purchasing their produce. They force
farmers to sell their output at very low prices and, in the process, charge high amounts
of commission for themselves.

Institutional source of credit

Non-institutional sources of credit are usually exploitative by nature. To counter this,

sources of credit needed to be institutionalised. The first step taken in this direction was
the nationalisation of commercial banks in 1969. Since then, rural credit has
increasingly been seen as a priority issue and steps have been taken to adopt social
banking and a multi-agency approach to cater to the rural credit requirement.

In India, the structure of rural banking is called the multi-agency system. It includes the
following institutions.
a. Cooperative banks and cooperative credit societies

b. Commercial banks

c. Regional rural banks

d. Land development banks

Cooperative banks and cooperative credit societies

In 1904, the Indian government passed the ‘Cooperative Credit Societies Act’. This act
marked the beginning of cooperative credit in India. It enables people to voluntarily
come together to meet their mutual financial needs as and when required. Cooperative
credit societies were formed with the following broad objectives.

i. To eliminate the role of moneylenders as a source of credit

ii. To provide easy and adequate credit to farmers

iii. To expand the flow of credit in rural areas

In India, cooperative credit societies work at three levels.

i. Primary agricultural credit societies (PACS): These societies work at the village
level and deal directly with the rural borrowers.

ii. Central cooperative banks: These banks work at the district level. They advance
short-term as well as medium-term loans to PACS.

iii. State cooperative banks: These banks work at the state level. They, too, advance
loans to PACS.

Presently, cooperative credit societies account for 30% of the total rural credit.

Cooperative credit societies have certain drawbacks that prevent them from becoming
a popular source of credit in rural areas. Some of these limitations are discussed below.

i. Insufficient financial resources: Cooperative credit societies do not have sufficient

financial resources to cater to the demands of the rural regions.

ii. Huge overdue amount: Many cooperative credit societies have huge amount of
overdue, which has made them virtually defunct.

iii. Delay in advancing credit: Most cooperative credit societies are unable to advance
timely credit.
iv. Inclination towards large farmers: Cooperative credit societies have mostly
benefitted big farmers. These societies have failed to solve the fund problems of small
and marginal farmers.

v. Uneven growth: Cooperative credit societies have come up unevenly in different

parts of the country. Only certain regions seem to have benefitted from this initiative.

Commercial banks

The entry of commercial banks in the rural sector was necessitated by the failure of
cooperative credit societies to meet the rural credit requirement. In 1969, fourteen
commercial banks were nationalised for the purpose of advancing credit to rural people.
These commercial banks have been directed to advance 40% of their total loan credit to
the priority sector, which includes the agricultural sector. The share of commercial
banks in rural credit has increased tremendously over time. In 2007-08, they accounted
for 68% of the total rural credit.

Regional rural banks (RRBs)

RRBs were set up to complement commercial banks and cooperative credit societies in
satisfying the credit needs of small and marginal farmers. Initially, 5 RRBs were set up
in 1975. This number rose to 196 by 2005. However, later, their number declined to 86
as a result of the amalgamation process started by the government. RRBs advance
credit only for productive purposes. They account for almost 8–10% of the total
agricultural credit. The weaker sections and backward districts have been the major
beneficiaries of RRBs.

National Bank for Agricultural and Rural Development (NABARD)

Established in 1982, NABARD controls and regulates the activities of rural banking
institutions. Some of its functions are discussed below.

i. To act as the apex rural credit institute: NABARD serves as the apex agency for
financial institutions that advance credit for various rural developmental activities.

ii. To take necessary steps for improving the credit delivery system: NABARD
takes appropriate steps or measures to improve the credit delivery system. These
measures include monitoring, formulation, restructuring of institutions and training of
manpower.

iii. To coordinate the rural financing activities: NABARD coordinates the rural
financing activities of all credit institutions engaged in developmental work at the grass-
roots level.
iv. To refinance and monitor other financial institutions: NABARD refinances
institutions that are involved in financing the rural sector. In addition, it also monitors
and evaluates the projects that it refinances.

Microcredit

Microcredit refers to the credit and other financial services provided to the poor through
self- help groups (SHGs) and non-governmental organisations (NGOs). SHGs play a
crucial role in meeting the credit requirements of the rural poor by inculcating in them
the habit of saving. The individual savings of many farmers are pooled together to meet
the financial requirements of the needy members of SHGs.

The members of these groups are linked with the rural banks. A poor individual, thus,
become financially strengthened by being part of an SHG. Further, the financing made
through SHGs reduces transaction costs for both lenders and borrowers. Presently,
more than 7 lakh SHGs are operating in different rural areas. SHGs are becoming
popular among the small and marginal borrowers owing to their informal credit delivery
mechanism and minimal legal formalities.

Kisan Credit Card

Launched in 1997-98, the Kisan Credit Card scheme aims to increase the farmers’
accessibility to credit. Under this scheme, credit limits are fixed for farmers based on
their operational land holdings, their estimated credit requirements, cropping patterns,
etc. A farmer can then use the Kisan Credit Card to withdraw money up to the assigned
credit limit. Loans can even be rescheduled in the event of a natural calamity or crop
failure. Up to 2008, seven hundred and fifty-seven lakh Kisan credit cards had been
issued.

The poor women’s bank

In order to promote saving and banking habits among poor women, a scheme
called Kudumbashree was launched in Kerala in 1995. It is a community-based
programme that has poverty reduction as its core objective. Under this scheme, thrift
and credit societies have been formed to mobilise savings and credit. This initiation has
been quite successful and is acclaimed as the largest informal banking system in Asia.

Critical Appraisal of Rural Banking in India

Over the years rural banking has expanded rapidly. NABARD has made significant
progress in the field of rural credit. The share of institutional sources in the total rural
credit has increased from just 7% at the time of independence to 70% at present. Rural
banking has been successful in inculcating saving and banking habits among rural folk.
Readily available credit has helped farmers to increase their level of output.

As a result, India has been able to build buffer stocks of food grains. Facilities like crop
insurance shield farmers against the vagaries of climate and crop failure.
Moreover, institutionalisation of credit has achieved its objective of freeing farmers from
the debt-traps of moneylenders and other exploitative non-institutional sources of credit.

Nevertheless, institutional credit has its own share of deficiencies. The credit advanced
by institutional sources is invariably associated with security or collateral. Consequently,
a substantial number of farmers cannot avail of this credit. It is mostly large farmers who
have benefitted from institutional credit facilities. Commercial banks have failed to
encourage the habit of thrift among farmers.

In addition to this, the leniency shown by the government in collecting repayments has
encouraged defaulting among farmers. Almost 50% of rural borrowers have defaulted
on their loans. Such high default rate has made most rural banks financially unfeasible.
Thus, steps must be taken to improve rural banking. Rather than just being lenders,
rural banks should look to build a strong banking relationship with the borrowers.

Agricultural Marketing System, Measures Initiated by the Government

Objectives

In this lesson, you will go through the following topics.

• Meaning and need of agricultural marketing

• Steps/measures taken by the government to improve agricultural marketing

• Alternative channels for agricultural marketing

• Problems of agricultural marketing in India

Introduction

Over the past few years, the Indian agricultural setup has changed significantly.
Farmers no longer produce simply for their own consumption. Rather, they produce a
surplus to cater to the demands of the market as well. In other words, Indian agriculture
is fast getting commercialised. Consequently, farmers have become aware of the
importance of post-production work such as storage, packaging and transportation. This
is where agricultural marketing becomes significant. Agricultural marketing system
consists of activities ranging from harvesting till the final sale of the produce. The
following are the activities involved in the agriculture marketing.

i. Gathering the produce after harvesting

ii. Processing the produce

iii. Grading the produce according to different quality norms

iv. Packaging the produce

v. Storing the produce for future use

vi. Selling the produce at attractive prices

In other words, agricultural marketing does not simply refer to farmers’ act of bringing
their produce to the market for the purpose of sale. Rather, it also includes all those
activities that help farmers fetch the maximum price for their produce.

Need for Agricultural Marketing

The existence of a proper agricultural marketing system has the following advantages.

i. Agricultural marketing system helps farmers fetch the maximum price for their produce
in the market. Often, farmers are ill-informed and unaware of the prevailing market
prices. As a result, they incur loss on their sale. Agricultural marketing system aims at
safeguarding farmers’ interests in this regard.

ii. The availability of proper storage and transportation facilities encourages farmers to
increase their level of output.

iii. The supply of raw materials from the agricultural sector to the industries becomes
smoother and more efficient.

iv. Agricultural marketing system reduces the role of middlemen in the sale and
purchase of agricultural produce. Thus, it helps in reducing the exploitation faced by
farmers.

Measures Adopted By the Government

Realising the importance of agricultural marketing, the Indian government has adopted
various measures to improve the same. Here are some of those measures.

1. Organisation of regulated markets: In regulated markets, the sale and the

purchase of farm produce are monitored by a market committee that comprises farmers,
government agents, brokers and traders. These markets operate with the basic
rationale of protecting farmers from fraudulent practices of intermediaries.

Often, on account of their illiteracy and lack of awareness, farmers are cheated by
middlemen through the use of wrong weights and measures, underhand dealings, etc.
The market committee aims at protecting farmers from such practices. Some of
the important functions of the market committee are summarised below.
i. Prohibiting underhand dealings, unlawful deductions and fraudulent practices of
intermediaries

ii. Infusing greater transparency through the use of proper scales and weights

iii. Ensuring that farmers receive a fair price in exchange of their produce

iv. Making farmers aware of the prevailing market conditions and information

v. Fixing the weighing and brokerage charges

Till 2006, there were 7566 regulated markets in India. Farmers throughout the country
have benefitted from these markets. The government has also set up regulated market
yards on the outskirts of major towns and cities. Farmers can sell their produce in these
markets at a fair price and also use the available storage facilities for their crops.

2. Infrastructure development: Lack of proper infrastructure forces farmers to sell their

produce right after harvesting, even at unfavourable prices. This impedes agricultural
productivity and growth prospects. To counter this, the Indian government has set up
cold storages and warehouses all across the country. The central and state
warehousing corporations offer storage and warehousing facilities to farmers. This has
given farmers the option of selling their produce at the right time and the right price. The
availability of these facilities has also motivated farmers to generate greater marketable
surplus.

Further, the advancement of the Indian railways and roadways (which offer subsidised
transport facilities) has helped farmers to extend their market to urban areas where they
are able to earn even higher profits.

3.Propagation of market information: Prior to the introduction of the agricultural

marketing system, Indian farmers would fall prey to intermediaries and traders. To
safeguard the interests of farmers, they had to be made aware of the prevailing market
conditions such as current prices, sales and stock updates of farm products. So, these
market updates and market forecasts began to be disseminated via the radio, television,
newspapers, etc. Special agriculture-based programmes such as Krishi Darshan began
to be broadcast on Doordarshan and the All India Radio. In 2004, the government
initiated the Kisan Call Centres to speed up the dissemination of information and to
provide round-the-clock solutions to various grievances of farmers. All these facilities
have helped farmers sell their produce at a favourable time, so as to get the maximum
returns.

4. MSP policy: Minimum Support Price (MSP) is the minimum legislated price that
farmers can charge in return for selling their produce. This policy enables farmers to sell
their produce in the open market at a higher price. MSP insulates farmers in case of
price fall as they are assured of selling their produce at the minimum price. Government
agencies (such as the Food Corporation of India) purchase the produce from farmers at
MSP and keep it as buffer stock. The purchases are then distributed to the public
through the public distribution system and fair price shops at subsidised prices. The
buffer stock is also used during emergencies such as low produce and scarcity.

5. Setting up of warehousing facilities: The availability of warehousing facilities

encourages farmers to invest in crops, store their excess produce and sell it later at an
attractive price. The central and state warehousing corporations have provided farmers
with storage space for storing their excess produce.

6. Improvement of transportation facilities: With better transportation facilities at their

disposal, farmers can sell their produce in urban areas at higher prices. In this way, they
are able to enhance their earnings.

Alternative Channels For Agricultural Marketing

To further improve the system of agricultural marketing, the government has developed
various alternative channels. It was found that small and marginal farmers, who sold
their produce through middlemen, were often exploited because of price differences.
The middlemen would buy the farmers’ produce at a very low price and sell the same at
a higher price in the market.

Alternative marketing channels have, thus, been developed to protect the economic
interest of such farmers. Using these channels, small and marginal farmers can sell
their produce directly to consumers at a higher price and, thereby, make profits. Some
examples of alternative agricultural marketing are Apni Mandi in Punjab, Haryana and
Rajasthan, Hadapsar Mandi in Pune, Rythu Bazar in Andhra Pradesh and Uzhavar
Mandi in Tamil Nadu.

Nowadays, various national and international companies enter into contracts of direct
sale with farmers. These companies make advance payments to farmers for supplying
their produce at
pre-determined rates. These alternative agricultural channels raise a farmer’s income
and, simultaneously, reduce the price risk for small and marginal farmers.

Problems of Agricultural Marketing in India

Despite various attempts by the government, the system of agricultural marketing in

India has only been partly successful. Private traders and middlemen still remain the
dominant players in the marketing system. They account for 90% of the marketing
activities, while government agencies handle a mere 10%. The following are some of
the obstacles in the way of a successful agricultural marketing system.

1. Defective weighing techniques and misappropriation of accounts: Being illiterate

and ignorant, farmers fall prey to defective weighing techniques and misappropriation of
accounts.
2. Ignorance: Lack of knowledge of market prices and market conditions forces farmers
to sell their produce at a lower price.

3. Lack of proper storage facilities: Lack of access to proper storage facilities forces
farmers to sell their produce at a lower price right after harvesting. Also, improper
storage makes the agricultural produce vulnerable to damage due to pests and bad
weather. Huge amounts of food grains and other products are wasted every year due to
improper storage.

4. Difficulty in obtaining agricultural credit: Lack of institutional sources of finance

forces farmers to fall back on local moneylenders for obtaining credit. Such credit is
subject to various conditions. For example, credit might be advanced to farmers on the
condition that they would sell their produce only to the moneylender at whatever price
he sets. This results in exploitation of small and marginal farmers.

5. Lack of transportation facilities: Farmers are unable to sell their produce in far-off
places because of lack of proper roads and transportation facilities. They are forced to
sell in local markets at a lower price.

6. Large number of intermediaries: Farmers are separated from the actual consumers
of their produce by a large number of intermediaries. These intermediaries purchase the
produce from farmers at a low price and sell the same at a much higher price. This
implies that farmers receive a very small share of the actual return on their produce.
Studies indicate that Indian farmers on an average receive less than 60% of the actual
price paid by the final consumers for their produce.

Agricultural Diversification– Animal Husbandry, Fisheries, Horticulture

Objectives

In this lesson, you will go through the following topics.

• Meaning of Agricultural Diversification

• Significance of Diversification in Production Activity

• Meaning and Importance of Animal Husbandry

• Meaning and Importance of Fisheries

• Meaning and Importance of Horticulture

Introduction

Agriculture, which employs the majority of the population in India, is a seasonal

occupation. Many farmers remain out of work for certain months in a year due to the
seasonal nature of agriculture. As a result, these farmers are unable to ensure a
continuous flow of income for themselves. Moreover, agricultural production in India is
largely dependent on rains. Poor or late monsoons can hamper the production process
and, thereby, affect farmers’ income. So, we can say that depending solely on
agriculture leads to instability in the income of the rural population. Thus, there is the
need to diversify agriculture.

Diversification of agriculture has two aspects.

i. Diversification of crops

ii. Diversification of production activity

1. Diversification of crops: Farmers should be encouraged to grow a variety of crops

rather than focus on producing only one crop. Diversification of crops, thus, implies a
shift from single-cropping system to multiple-cropping system. Crop diversification can
also be understood as a shift from subsistence farming to commercial farming practices.
Multiple cropping helps farmers to avoid the risk arising due to fluctuations in market
prices. Farmers can grow crops depending upon the prevailing market conditions and,
thereby, maximise their gains.

2. Diversification of production activity: The rural folk should be encouraged to set

up and seek employment in non-farming practices. Diversification of production activity,
thus, implies a shift from farming activities to non-farming activities such as agro-
processing, food processing, horticulture, fisheries and livestock farming. Such
diversification not only raises the standard of living of the rural population, but it also
reduces the strain upon the agricultural sector by creating alternative avenues of
employment.

Significance of Diversification in Productive Activity

The given figure provides an overview of the significance of diversifying production

activity.
The following is a detailed discussion of the significance of diversifying production
activity.

1. Non-farming employment opportunities: Indian agriculture is largely dependent on

the monsoons. Poor and late monsoons adversely affect the production process. Thus,
farmers cannot depend entirely on farming for their sustenance. Diversification of
production activity enables farmers to find employment in alternative non-farming
avenues and, thereby, sustain themselves.

2. Helpful during seasonal change: Agricultural employment opportunities are mostly

concentrated in the kharif season. Lack of proper irrigation facilities prevents framers
from finding gainful employment during the rabi season. Diversification of production
activity helps counter this seasonal unemployment in the agricultural sector by
generating non-farming employment opportunities.

3. Creates new prospects: Agriculture suffers from disguised unemployment. This

implies that the number of people employed in the agricultural sector is a lot more than
what is actually required. Diversification of production activity solves this problem of
overcrowding in the agricultural sector by creating non-farming job opportunities. New
prospects of employment would help divert the excess workforce from farming and,
thereby, lessen the burden on the agricultural sector.

4. Eradicates poverty: Non-farming production activities provide employment

opportunities to the rural people throughout the year. This implies that the people are
assured of an income all year round. This goes a long way in raising their standard of
living and eradicating poverty from the rural areas.

Major Non-Farming Production Activities

There are three major non-farming activities in India. These are:

i. Animal husbandry

ii. Fisheries

iii. Horticulture

The relative importance of the three activities is discussed below.

Importance of animal husbandry

Animal husbandry is the most important non-farming activity in India. It employs about
70 million small and marginal farmers. It is also known as “livestock farming”. Mixed
livestock farming is followed in India. This comprises raising poultry, cattle, goats and
sheep.

Forty per cent of livestock farmers in India are involved in raising poultry. It should be
noted that the share of livestock farming in employment is comparatively higher in semi-
arid and arid areas than in well-irrigated areas. Lack of irrigation facilities in semi-arid
and arid regions makes crop farming less feasible. So, farmers in these areas find
animal husbandry to be suitable for their sustenance. Thus, livestock farming provides
sustainable livelihoods to the people in semi-arid and arid regions where farming cannot
be performed well. Another thing to note is that capital investment in livestock farming is
comparatively less than that in crop farming.

So, farmers are able to reap greater benefits by incurring lower cost. Livestock farming
is an important source of employment for rural women. Many women in rural areas are
engaged in this activity. Livestock farming has resulted in increased production of milk,
eggs, meat, wool and other animal products. This has enhanced the consumption
bundle both qualitatively and nutritionally.

Operation Flood: Launched in 1966, Operation Flood is a system of milk cooperatives.

Under this system, the milk produce of different farmers is pooled and grouped
according to quality and grading. This milk is then processed and sold to urban centres.
Such a system benefits farmers as it assures them of a fair return for their product in the
market.

Gujarat has successfully implemented this system and is presently the hub of milk
cooperatives in the country. The brand “Amul” is the best-known example of the
success of milk cooperatives. Since the implementation of Operation Flood, milk
production in India has increased by nearly 4 times.

Despite the fact that livestock farming is the most important source of non-farming
employment, it suffers from various problems. The produce lacks in quality and is
inferior to what is produced in developed countries. Additionally, livestock farming
suffers from low productivity due to lack of knowledge and information.

Lack of proper veterinary facilities often leads to animal diseases and deaths. To curb
this problem, the government launched a life insurance scheme for farm animals in
2005. The government also launched the National Project for Cattle and Buffalo
Breeding. This objective of this programme is genetic improvement of farm animals.

Importance of fisheries

Fisheries are an important source of livelihood in coastal states such as Kerala,

Maharashtra, Gujarat and Tamil Nadu. The fishing community in India depends on
waterbodies—both inland and marine. Inland sources include rivers, lakes, ponds and
streams. Seas and oceans are classified as marine waterbodies. Fishing as a means of
livelihood is not a new concept.

Nevertheless, with the population rising continuously, fisheries as a source of

employment has become quite popular. In recent years, it has become an important
source of income generation for the economically backward population. At present, it
employs nearly 14 million people in our country.

Despite the presence of a significant segment of the population in the fisheries sector, it
contributes only 1.4% to GDP. Major reasons for this are low per capita earnings, lack
of mobility of labour to other sectors, illiteracy and indebtedness. Another problem faced
by this sector is overfishing and pollution of waterbodies. State governments have been
making efforts to attract funds to this sector and, thereby, boost production.

The fishing community is still one of the backward communities of our country. Due to
low income, the people in this community are trapped in a vicious circle of poverty and
indebtedness. Thus, there is the need to make easy credit and finance facilities
accessible to them through cooperatives and self-help groups.

Importance of horticulture
Horticulture is fast emerging as an important source of livelihood in rural areas.
Horticultural crops include fruits, vegetables, and medicinal and aromatic plants and
flowers. Presently, India is the second largest producer of fruits and vegetables, which
include mangoes, bananas, coconuts, cashew nuts and a variety of spices.

Consequently, the income levels of families engaged in horticultural production have

risen considerably. The increase in horticultural production has lowered the vulnerability
of small and marginal farmers. Activities such as flower harvesting, nursery
maintenance, hybrid-seed production, food processing and propagation of fruits and
flowers have provided a gateway of employment opportunities to women. Horticulture
generates employment for 19% of the total rural labour force in India.

The term “Golden Revolution” is used to refer to the period between 1991 and 2003.
During this period, there was a tremendous increase in the production of various fruits,
vegetables, spices and other horticultural products. The growth of the horticultural
sector has created a major problem for the country. The bulk of the area under
horticulture has expanded at the cost of the area under pulses.

As a result, the production of pulses has reduced considerably. Horticulture suffers from
lack of infrastructural facilities such as cold storage, transportation and modern
technology. Thus, efforts are required in this area to fully utilise the potential of
horticulture.

To conclude, the various non-farming activities are increasingly playing an important

role in providing alternative employment opportunities to the rural people and, thereby,
raising their standard of living. Nevertheless, efforts must still be made to rectify the
various shortcomings and further develop these activities.

Role of IT Sector in Economic Development and Growth

Objectives

After going through this lesson, you shall be able to understand the role of IT sector in
rural development.

Introduction

What is meant by the term “information technology”? Information technology (IT) refers
to the development and management of computer-based information. We live in the age
of information technology. The spread of IT has made human capital all the more
important in the process of growth. The role of IT in the economic growth process
cannot be neglected. Not only does it lead to the modernisation of a country but it also
facilitates the smooth and fast functioning of an economy as a whole.

This sector is not limited to itself. Rather, it provides the basic framework for all other
economic sectors (agricultural, industrial, tertiary) to operate efficiently. Besides this, the
IT sector helps in attracting foreign investment via FDI, MNCs and FIIs, and, thereby,
brings in efficiency, competitiveness and transparency in operations. This enables
innovations and inventions, which in turn result in the development of cost-efficient and
more productive technology.

IT enables us to see the future conditions and accordingly frame policies and corrective
measures. The fast movement of goods and services in this age of information
technology has shrunk the world into a global village.

Over the past few years, India has seen a revolution in terms of IT. It has transformed
the Indian economy into a knowledge economy. The fast economic development of
India is in large part due to the IT revolution. Hence, we can say that the key to India’s
economic growth rests on the advancement of the IT sector.

Role of IT in the Agricultural Sector

IT has a significant role to play in the agricultural sector and in the overall rural
development. Let us understand this with the help of the following points.

1. Sustainable development: IT enables the storage of data relating to past and future
conditions. This data can be used for formulating appropriate policies and adopting
various corrective measures to achieve sustainable development and food security.

2. Forecasting: IT enables the meteorological department to forecast accurate weather

conditions. The predictions of the department can be used to take appropriate corrective
actions. For example, if scarce rains are predicted, then farmers can take suitable
preventive measures to avoid crop failure.

3. Productivity enhancement: The IT sector has a positive impact on the productivity of

the agriculture sector by providing crucial information regarding emerging and modern
technologies, weather and soil conditions for the growth of different crops, etc. Such
information eases the decision-making process vis-a-vis production and productivity.

4. Valuable information: The government has launched Kisan Call Centres that can be
used by farmers to access valuable information. Moreover, websites that provide
information regarding modern techniques of production and measures to improve farm
productivity and quality of farm inputs have also been introduced.

5. Employment generation: The IT sector also helps in generating employment

opportunities in the backward rural areas through the development of “info kiosks”.
These kiosks have computers, scanners, printers along with e-mailing and video
conferencing facilities. The knowledge of such services makes the rural people self-
sufficient. Consequently, they can earn a good livelihood by rendering these services.

Organic Farming– Its Benefits and Limitations

Objectives

After going through this lesson, you shall be able to understand the following concepts:

• Meaning of organic farming

• Benefits of organic farming

• Limitations of organic farming

Introduction

While visiting big malls and have you ever noticed that certain vegetables and fruits
offered by them are labelled as organic? Similarly, cereals such as wheat and rice are
also offered in organic varieties. Often, in newspapers and magazines, we see articles
on organic food and organic farming. What is this organic farming?

Organic farming is a system of farming that employs organic inputs for the
cultivation of crops. Unlike conventional farming, organic farming does not make use
of chemical fertilisers and toxic pesticides for crop growth. Instead, it employs organic
inputs such as animal manure and compost. This type of farming is practised to produce
non-poisonous and chemical-free food for consumers. At the same time, organic
farming ensures that the fertility of soil is maintained.
The following are the major features of organic farming.

i. Instead of chemical fertilisers and toxic pesticides, it employs green manure and
biological pest-control methods for the cultivation of crops and plantations.

ii. It uses farm inputs like animal dung and crop residues as nutrients for crops.

iii. It focuses on maintaining soil fertility and ecological balance.

Principles of Organic Farming

Organic farming is based on the following four broad principles.

1. Principle of Health

2. Principle of Ecology

3. Principle of Fairness

4. Principle of Care

1. Principle of health: The farming techniques used in organic farming and the crops
produced should be such that the health of one and all is sustained. It is said that the
health of human beings is directly linked to the health of the ecosystem. Organic
farming protects the ecosystem. A healthy ecosystem enhances the health of human
beings. Organic farming is known to produce healthy and nutritious food while
simultaneously maintaining the ecosystem.

2. Principle of ecology: Organic farming is based on ecology, its processes and

cycles. Organic farming techniques should sustain the ecological balance. This implies
that organic farming should give due importance to the protection of the environment.

3. Principle of fairness: Organic farming should promote equity among human beings.
It should provide healthy, nutritious and good quality food for all. Moreover, the use of
natural resources should be both socially and ecologically fair. Due importance must be
given to the needs of not only the present generation but also the future generations.

4. Principle of care: Organic farming must accord the utmost importance to the care of
the environment as well as of human beings. For instance, new techniques for
enhancing productivity and efficiency must be developed, but it should not be at the cost
of the health of the ecosystem and the overall well-being of individuals.

Organic Farming and Sustainable Development

Sustainable development is the process of development that aims at meeting the needs
of the present generation without compromising the ability of the future generations to
meet their own needs. Traditional farming techniques such as the use of chemical
fertilisers and toxic pesticides harm the ecosystem. The harmful chemicals present in
fertilisers and pesticides dissolve in water and penetrate the soil, thereby reducing its
fertility. These chemicals also harm livestock.

Moreover, the crops grown with the aid of chemical fertilisers and pesticides pose
serious health hazards. In contrast, organic farming relies on the use of organic inputs
for crop cultivation. This type of farming practice produces toxic-free food for consumers
while simultaneously maintaining the fertility of soil. In this way, it helps maintain the
ecological balance. In other words, organic farming enables eco-friendly sustainable
economic development.

Benefits of Organic Farming

The given figure provides an overview of the benefits of organic farming.

The following is a detailed discussion of the benefits of organic farming.

1. Discards the use of chemicals: Unlike conventional farming, organic farming does
not make use of chemicals. The chemicals present in fertilisers and pesticides penetrate
into the groundwater and raise its nitrate content. This causes health hazards and also
pollutes the environment. So, organic farming, by discarding the use of chemicals, is an
environment friendly method of farming.

2. Sustains soil fertility: The use of chemical fertilisers and pesticides adversely
affects soil fertility. Organic farming discards the use of chemicals and employs organic
inputs instead. Therefore, the crops produced by this technique are toxic-free. At the
same time, the fertility of soil is maintained.

3. Healthier food: Organically grown crops have higher nutritional value than
conventionally grown crops. Hence, food crops grown organically are healthier. This is
why the demand for organically produced food has risen rapidly despite their higher
price.

4. Inexpensive technology for small and marginal farmers: Small and marginal
farmers constitute the bulk of the farming sector. Organic farming offers these farmers
an inexpensive farming technique as it does not involve the use of expensive chemical
fertilizers and pesticides.

5. Less incidence of pests and diseases: As compared to conventional farms,

organic farms are found to have lesser incidence of outbreak of crop diseases and
pests.

Organic Farming and India

India has tremendous potential in organic farming. Research suggests that nearly 70%
of the land under cultivation in India is arable. Such type of land requires negligible
amount of chemical fertilisers for the cultivation of crops. Such land offers ample
opportunities for organic farming. Organic farming involves labour-intensive techniques
of production. India is a labour-abundant country.

Hence, India has a comparative advantage in organic farming. Organically produced

products have a higher demand not only within the country but also in foreign countries.
By producing and exporting organic products, India can generate higher income for
itself. If India realises the potential of organic farming, then it can become the largest
supplier of organic food in the world.

Limitations of Organic Farming

Despite its benefits, organic farming does have certain shortcomings. In the initial years
of organic farming, Indian farmers faced the following disadvantages.

1. Lesser yield: Organic farming offers lesser yield than conventional farming.
Therefore, the productivity of the former is lower than that of the latter.
2. Lacks initiative: The popularity of organic farming depends on the awareness and
willingness of farmers to adopt this system. Due to lower productivity, farmers lack the
initiative to adopt organic farming techniques.

3. Inadequate infrastructure: Organic farming suffers from lack of infrastructure with

respect to its market reach. Thus, the problems of inadequate infrastructure and
marketing need to be addressed to promote organic farming.

4. Financially infeasible for small farmers: As mentioned before, organic farming

offers lesser yield than conventional farming. Hence, the former is not financially viable
for small and marginal farmers.