UPSC Economics Indian Economy NCERT Extracts - Rural Development

NCERT Extracts - Rural Development

Category : UPSC




  • Agriculture is the major source of livelihood in the rural sector. Mahatma Gandhi once said that the real progress of India did not mean simply the growth and expansion of industrial urban centres but mainly the development of the villages.
  • This idea of village development being at the centre of the overall development of the nation is relevant even today.
  • It is because more than two-third of India's population depends on agriculture that is yet to become productive enough to provide for them; one-third of rural India still lives in abject poverty. That is the reason why we have to see a developed rural India if our nation has to realise real progress.


What is Rural Development?


  • Rural development is a comprehensive term. It essentially focuses on action for the development of areas that are lagging behind in the overall development of the village economy.
  • Some of the areas which are challenging and need fresh initiatives for development in rural India include:
  • Development of human resources including :
  • literacy, more specifically, female literacy, education and skill development.
  • health, addressing both sanitation and public health.
  • Land reforms.
  • Development of the productive resources of each locality.
  • 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 population emphasising access to productive employment opportunities.
  • All this means that people engaged in farm and non-farm activities in rural areas have to be provided with various means that help them increase the productivity.
  • They also need to be given opportunities to diversify into various non-farm productive activities such as food
  • Enabling them better and more affordable access to healthcare, sanitation facilities at workplaces and homes and education for all would also need to be given top priority for rapid rural development.
  • It was observed in an earlier chapter that although 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 about 3 per cent per annum during the 1991-2012, which was lower than the earlier years.
  • Scholars identify decline in public investment since 1991 as the major reason for this.They also argue that inadequate infrastructure, lack of alternate employment opportunities in the industry or service sector, increasing casualisation of employment etc., further  impede rural development.
  • The impact of this phenomenon can be seen from the growing distress witnessed among farmers across different parts of India.
  • During 2007-12, agriculture output has grown at 3.2 per cent.


Credit and Marketing in Rural Areas



  • Growth of rural economy depends primarily on infusion of capital, from time to time,to realise higher productivity in agriculture and non-agriculture sectors.
  • As the time gestation between crop sowing and realisation of income after production is quite long, farmers borrow from various sources to meet their initial investment on seeds, fertilisers, implements and other family expenses of marriage, death, religious ceremonies etc.
  • At the time of independence, moneylenders and traders exploited small and marginal farmers and landless labourers by lending to them on high interest rates and by manipulating the accounts to keep them in a debt-trap.
  • A major change occurred after 1969 when India adopted social banking and multiagency approach to adequately meet the needs of rural credit.
  • Later, the National Bank for Agriculture and Rural Development (NABARD) was set up in 1982 as an apex body to coordinate the activities of all institutions involved in the rural financing system.
  • The Green Revolution was a harbinger of major changes in the credit system as it led to the diversification of the portfolio of rural credit towards production oriented lending.
  • The institutional structure of rural banking today consists of a set of multi-agency institutions, namely, commercial banks, regional rural banks (RRBs), cooperatives and land development banks. They are expected to dispense adequate credit at cheaper rates.
  • Recently, Self-Help Groups (henceforth SHGs) have emerged to fill the gap in the formal credit system because the formal credit delivery mechanism has not only proven inadequate but has also not been fully integrated into the overall rural social and community development.
  • Since some kind of collateral is required, vast proportion of poor rural households were automatically out of the credit network.
  • The SHGs promote thrift in small proportions by a minimum contribution from each member From the pooled money, credit is given to the needy members to be repayable in small instalments at reasonable interest rates.
  • By March end 2003, more than seven 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. It is alleged that the borrowings are mainly confined to consumption purposes.

Rural banking: A critical appraisal

  • Rapid expansion of the banking system had a positive effect on rural farm and non-farm output, income and employment, especially after the green revolution – it helped farmers to avail services and credit facilities and a variety of loans for meeting their prodution needs.
  • Famines became events of the past; we have now achieved food security which is reflected in the abundant buffer stocks of grains. However, all is not well with our banking system.
  • With the possible exception of the commercial banks, other formal institutions have failed to develop a culture of deposit mobilisation - lending to worthwhile borrowers and effective loan recovery.
  • Agriculture loan default rates have been chronically high. Why farmers failed to pay back loans? It is alleged that farmers are deliberately refusing to pay back loans. What could be the reasons?
  • Thus, the expansion and promotion of the rural banking sector has taken a backseat after reforms. To improve the situation, it is suggested that banks need to change their approach from just being lenders to building up relationship banking with the borrowers.
  • Inculcating the habit of thrift and efficient utilisation of financial resources needs to be enhanced among the farmers too.


Agricultural Market System


  • Have we ever asked ourself how food grains, vegetables and fruits that we consume daily come from different parts of the country? The mechanism through which these goods reach different places depends on the market channels.
  • Agricultural marketing is a process that involves the assembling, storage, processing, transportation, packaging, grading and distribution of different agricultural commodities across the country.
  • Prior to independence, farmers, while selling their produce to traders, suffered from faulty weighing and manipulation of accounts.
  • Farmers who did not have the required information on prices prevailing in markets were often forced to sell at low prices. They also did not have proper storage facilities to keep back their produce for selling later at a better price.
  • Do we know that even today, more than 10 per cent of goods produced in farms are wasted due to lack of storage? Therefore, state intervention became necessary to regulate the activities of the private traders.
  • The first step was regulation of markets to create orderly and transparent marketing conditions.
  • By and large, this policy benefited farmers as well as consumers. However, there is still need to develop about 27,000 rural periodic markets as regulated market places to realise the full potential of rural markets.
  • Second component is provision of physical infrastructure facilities like roads, railways, warehouses, godowns, cold storages and processing units.
  • The current infrastructure facilities are quite inadequate to meet the growing demand and need to he improved.
  • Cooperative marketing, in realising fair prices for farmers' products, is the third aspect of government initiative. The success of milk cooperatives in transforming the social and economic landscape of Gujarat and some other parts of the country is testimony to the role of cooperatives.
  • However cooperatives have received a setback during the recent past due to inadequate coverage of farmer members, lack of appropriate link between marketing and processing cooperatives and inefficient financial management.
  • The fourth element is the policy instruments like : assurance of minimum support prices (MSP) for agricultural products,  maintenance of buffer stocks of wheat and rice by Food Corporation of India, and distribution of food grains and sugar through PDS.
  • These instruments are aimed at protecting the income of the farmers and providing food grains at a subsidised rate to the poor.
  • However, despite government intervention, private trade (by moneylenders, rural political elites, big merchants and rich farmers) predominates agricultural markets.
  • The need for government intervention is imminent particularly when a large share of agricultural products, is handled by the private sector.
  • Agricultural marketing has come a long way with the intervention of the government in various forms. Some scholars argue that commercialisation of agriculture offers tremendous scope for farmers to earn higher incomes provided the government intervention is restricted.

Emerging alternate marketing channels

  • It has been realised that if farmers directly sell their produce to consumers, it increases their incomes. Some examples of these channels are Apni Mandi (Punjab, Haryana and Rajasthan); Hadaspar Mandi (Pune); Rythu Bazars (vegetable and fruit markets in Andhra Pradesh and Telangana) and Uzhavar Sandies (farmers markets in Tamil Nadu).
  • Further, several national and multinational fast food chains are increasingly entering into contracts/alliances   with farmers to encourage them to cultivate farm products (vegetables, fruits, etc.) of the desired quality by providing them with not only seeds and other inputs but also assured procurement of the produce at predecided prices.
  • It is argued that such arrangements will help in reducing the price risks of farmers and would also expand the markets for farm products.  

Diversification into Productive Activities


  • Diversification includes two aspects - one relates to change in cropping pattern and the other relates to a shift of workforce from agriculture to other allied activities (livestock, poultry, fisheries etc.) and non-agriculture sector.                     
  • The need for diversification arises from the fact that there is greater risk in depending exclusively on fanning for livelihood.
  • Diversification towards new areas is necessary not only to reduce the risk from agriculture sector but also to provide productive sustainable livelihood options to rural people.       
  • Much of the agricultural employment activities are concentrated in the Kharif season. But during the Rabi season, in areas where there are inadequate irrigation facilities, it becomes difficult to find gainful employment.
  • Therefore expansion into other sectors is essential to provide supplementary gainful employment and in realising higher levels of income for rural people to overcome poverty and other tribulations.
  • Hence, there is a need to focus on allied activities, non-farm employment and other emerging alternatives of livelihood, though there are many other options available for providing sustainable livelihoods in rural areas.
  • As agriculture is already overcrowded, a major proportion of the increasing labour force needs to find alternate employment opportunities in other non-farm sectors.
  • Non-farm economy has several segments in it; some possess dynamic linkages that permit healthy growth while others are in subsistence, low productivity propositions.
  • The dynamic sub-sectors include agro-processing industries, food processing industries, leather industry, tourism, etc.
  • Those sectors which have the potential but seriously lack infrastructure and other support include traditional home-based industries like pottery, crafts, handlooms etc.             
  • Majority of rural women find employment in agriculture while men generally look for non- farm employment. In recent times, women have also begun looking for non-farm jobs.

Animal husbandry

  • In India, the farming community uses the mixed crop-livestock farming system - cattle, goats, fowl are the widely held 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 labourers. A significant number of women also find employment in the livestock sector.
  • Poultry accounts for the largest share with 58 per cent followed by others. Other animals which include camels, asses, horses, ponies and mules are in the lowest rung.
  • India had about 300 million cattle, including i08 million buffaloes, in 2012.
  • Performance of the Indian dairy sector over the last three decades has been quite impressive. Milk production in the country has increased by more than five times between 1960-2012.
  • This can be attributed mainly to the successful implementation of '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 the farmers are assured of a fair price and income from the supply of milk to urban markets.
  • As pointed out earlier Gujarat state is held as a success story in the efficient implementation of milk cooperatives which has been emulated by many states.
  • Meat, eggs, wool and other byproducts are also emerging as important productive sectors for diversification.


  • The fishing community regards the water body as 'mother' or 'provider'.
  • The water bodies consisting of sea, oceans, rivers, lakes, natural aquatic ponds, streams etc. are, therefore, an integral and life-giving source for the fishing community.
  • In India, after progressive increase in budgetary allocations and introduction of new technologies in fisheries and aquaculture, the development of fisheries has come a long way.
  • Presently, fish production from inland sources contributes about 64 per cent to the total fish production and the balance 36 per cent comes from the marine sector (sea and oceans).
  • Today total fish production accounts for 0.8 per cent of the total GDP. In India, West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu are major fish producing states.
  • A large share of fishworker families are poor. Rampant under employment, low per capita earnings, absence of mobility of labour to other sectors and a high rate illiteracy and indebtedness are some of the major problems fishing community face today.
  • Even though women are not involved in active fishing, about 60 per cent of the workforce in export marketing and 40 per cent in internal marketing are women.
  • There is a need to increase credit facilities through cooperatives and SHGs for fisherwomen to meet the working capital requirements for marketing.


  • Blessed with a 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 a vital role in providing food and nutrition, besides addressing employment concerns. Horticulture sector contributes nearly one-third of the value of agriculture output and six per cent of Gross Domestic Product of India.
  • India has emerged as a world leader in producing a variety of fruits like mangoes,bananas, coconuts, cashew nuts and a number of spices and is the second largest producer of fruits and vegetables.
  • Economic condition of many farmers engaged in horticulture has improved and it has become a means of improving livelihood for many unprivileged classes.
  • Flower harvesting, nursery maintenance, hybrid seed production and tissue culture, propagation of fruits and flowers and food processing are highly remunerative employment options for women in rural areas.
  • Though, in terms of 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 farmers and landless labourers would enhance sustainable livelihood options through livestock production. Production of fisheries has already increased substantially.
  • However problems related to over-fishing and pollution need to be regulated and controlled. Welfare programmes for the fishing community have to be reoriented in a manner which can provide long-term gains and sustenance of livelihoods.
  • Horticulture has emerged as a successful sustainable livelihood option and needs to be encouraged significantly.
  • Enhancing its role requires investment in infrastructure like electricity, cold storage systems, marketing linkages, small-scale processing units and technology improvement and dissemination.

Other alternate livelihood options

  • The IT has revolutionised many sectors in the Indian economy. There is broad consensus that IT can play a critical role in achieving sustainable development and food security in the twenty-first century.
  • Governments can predict areas of food insecurity and vulnerability using appropriate information and software tools so that action can be taken to prevent or reduce the likelihood of an emergency.
  • It also has a positive impact on the agriculture sector as it can disseminate information regarding emerging technologies and its applications, prices, weather and soil conditions for growing different crops etc.
  • Though IT is, by itself, no catalyst of change but it can act as a tool for releasing the creative potential and knowledge embedded in the society.
  • It also has potential of employment generation in rural areas. Experiments with IT and its application to rural development are carried out in different parts of India.


Sustainable Development and Organic Farming


  • In recent years, awareness of the harmful effect of chemical-based fertilisers and pesticides on our health is on a rise.
  • Conventional agriculture relies heavily on chemical fertilisers and toxic pesticides etc., which enter the food supply, penetrate the water sources, harm the livestock, deplete the soil and devastate natural eco-systems.
  • Efforts in evolving technologies which are eco-friendly are essential for sustainable development and one such technology which is eco-friendly is organic farming.
  • In short, organic agriculture is a whole system of farming that 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 agriculture offers a means to substitute costlier agricultural inputs (such as HYV seeds, chemical fertilisers, pesticides etc.) with locally produced organic inputs that are cheaper and thereby generate good returns on investment.
  • Organic agriculture also generates income through exports as the demand for organically grown crops is on a rise.
  • Studies across countries have shown that organically grown food has more nutritional value than chemical farming thus providing us with healthy foods.
  • Since organic farming requires more labour input than conventional farming, India will find organic farming an attractive proposition. Finally, the produce is pesticide-free and produced in an environmentally sustainable way.
  • Popularising organic farming requires awareness and willingness on the part of farmers to adapt to new technology.
  • Inadequate infrastructure and the problem of marketing the products are major concerns which need to be addressed apart from an appropriate agriculture policy to promote organic farming.
  • It has been observed that the yields from organic farming are less than modem agricultural farming in the initial years.
  • Therefore, small and marginal farmers may find it difficult to adapt to largescale production.
  • Organic produce may also have more blemishes and a shorter shelf life than sprayed produce.
  • Moreover choice in production of off-season crops is quite limited in organic farming.
  • Nevertheless, organic farming helps in sustainable development of agriculture and India has a clear advantage in producing organic products for both domestic and international markets.

Organic food

  • Organic food is growing in popularity across the world. Many countries have around 10 per cent of their food system under organic farming.
  • There are many retail chains and supermarkets which are accorded with green status to sell organic food. Moreover, organic foods command higher price of around 10-100 per cent than conventional ones.

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