Class 12-science NCERT Solutions Economics Chapter 6 - Rural Development

Rural development concentrates on actions for the development of rural areas which require overall development of the economy.

Key areas which are in need of initiative for rural development:

1. Human resources: Well-planned education and health systems develop quality human resources in an economy. Government expenditure on education and health facilities enables the rural people to develop skills, access to better public health and thus earn higher income. It provides better social standing and pride.
2. Productive resources: Development of productive resources in each region of rural India is vital. Farmers require proper irrigation facilities and necessary financial support to consume fertilisers and pesticides to increase agricultural productivity. Most farmers experience low agricultural productivity. Hence, they require opportunities to diversify from farming to non-farming activities with the resources available in rural areas. This diversification is essential for rural people to generate additional gainful employment and to earn a higher level of income.
3. Performance of land reforms: The government needs to bring a series of land reform measures to tackle the problem of agriculture production in rural areas, specifically technical reforms required to upgrade the level of technology in rural India.
4. Rural infrastructure facilities: The government has to provide infrastructural facilities such as roads, railways, banking, warehousing, storage and processing units. Lack of transport facilities will not enable farmers to reach nearby markets to sell their produce at a fair price. Production activities of all the regions will be connected through infrastructural facilities in rural India.
5. Poverty alleviation programmes: Poverty alleviation programmes will improve the standard living of the poor in rural India. These measures enable the poor to raise income and employment for the poor. The government should increase the allocation of funds to meet the requirement for poverty alleviation programmes. 

Rural credit is the provision of loans created for agricultural and non-agricultural activities in an economy. Points highlighting the importance of credit in rural development:

1. In rural areas, credit is required to meet certain expenses because the gestation period between crop sowing and realisation of income after production is long. It helps farmers to purchase seeds, fertilisers, pesticides and farming machinery.
2. Rural farmers were deprived of irrigation facilities and technology advancement. As a result, the production of the agricultural sector is solely dependent on the monsoon and created an adverse situation for farmers. Thus, credit assists farmers to overcome these problems.  
3. Credit is required for various important economic activities such as big or small investments and setting up of businesses. Manufacturers require credit to sustain operational costs, for buying raw material and to purchase plant machinery and equipment. These credit facilities in the rural areas have contributed a large increase in employment in non-agricultural sectors.
4. Rural credit enables farmers to sell their produce at better prices in the market through the development of proper storage facilities in rural areas. This removes the fear of farmers of getting their produce damaged by fire, rodents or pests.
5. India has several structural dimensions of poverty because there is lack of capital to generate income, and hence, rural India is caught in the vicious circle of low economic condition. So, timely and adequate credit is important for an increase in the fixed and working capital for farmers.

Micro-credit is a worldwide credit scheme extended to the rural poor and women for their better standard of living preferably with the satisfaction of basic needs. The micro-credit programmes initiated credit and other financial services through Self-Help Groups (SHGs) and non-government organisations. An SHG is a group of about 15-20 members who pool their savings together. Members of SHGs can take loans from the group's savings themselves on a decided rate of interest. The rate of interest is much lower than the interest which is charged by informal sources. After two years of regular savings, the SHG can also take a loan from the bank. A loan is given in the name of the group and creates tremendous opportunities for self-employment of members. The micro-credit programme abandons the need of collateral to avail loans and many women have become economically independent. This has led to women empowerment at the rural level. National Bank for Agriculture and Rural Development (NABARD) takes the responsibility of inspecting cooperative banks, regional rural banks and primary cooperative societies. It serves as a refinancing agency for rural and agricultural development. It is actively engaged in addressing the credit need of farmers with a view to raise agricultural productivity. Thus, NABARD empowers the rural poor by improving access to micro-credit in an effective way to reach the rural population through SHGs.

Steps taken by the government in developing rural markets:

1. Regulated markets: The first step in developing rural markets is the regulation of markets to create transparent marketing transactions. The sale and purchase of the produce is supervised by the marketing committee which consists of the government, farmers and traders. This is organised to protect farmers from malpractices of sellers in the market.
2. Cooperative marketing: The government encourages forming marketing societies to maintain fair prices for farmer's products. Farmers sell the products collectively through better bargaining and to get reasonable prices for their product. Cooperative societies play an important role in the food security system. The cooperative Amul (milk and milk products) in Gujarat is a well-known success. However, cooperative marketing has certain problems in the recent past because

a. Insufficient coverage of farmer members

b. Lack of relationship between marketing and processing cooperatives

c. Poor financial management of cooperative marketing

3. Infrastructural facilities: The government provided infrastructural facilities such as roads, railways, warehousing, old storage and processing units. Warehousing facilities enable farmers to sell their products at better prices in the market because proper storage space is provided to farmers. The railways transport facilities at subsidised prices to enable farmers to sell their produce in the urban market where they can get better offers for their produce. Information related to market prices is given by electronic and print media which is useful for farmers to analyse the price behaviour in the market.
4. Standardisation and grading: Grading and quality control assist farmers to get benefit out of quality products produced by them.
5. Minimum support price: The government fixes the minimum support price for agricultural products such as wheat, rice, maize, cotton and pulses to assist farmers. The government purchases food grains from farmers at a price higher than the market price which help them to recover from their loss. These products are supplied through the public distribution system against BPL and APL cards. 

Agricultural diversification is essential for rural people to generate additional gainful employment and earn higher level of income.

Importance of agricultural diversification for sustainable livelihoods based on two aspects of diversification:

1. Diversification of crop production: A shift from the single cropping system to the multiple cropping system is known as the diversification of crop production. This implies the addition of new crops or the adoption of new cropping systems on a particular farm to increase the returns from the value-added crops with marketing opportunities. This enhances the crop portfolio so that farmers are not relying on a single crop production to earn their income. Farmers relying on one particular crop for cultivation will be more risky because the agro-climatic setting and technical innovations will severely affect agricultural production. 

A wide range of seeds also leads to diversification of agricultural production.  This increases natural biodiversity and the ability of the agro-ecosystem to reduce the risk of crop failure and provides alternative ways to increase the income of producers.

2. Diversification of productive activities: Many people are engaged in agriculture as small farmers or wage earners as they consider agricultural income the most important source of income. In many farms, there are excess people than the required number of workers for cultivation. This results in a disguised unemployment situation. The rural people can tackle this situation by diversifying production activities in other non-farming activities such as dairy farming, fishing and agro-processing industries. Thus, diversification of production activities generates sufficient secure livelihood for the rural population. 

Often, agricultural activity threatens the survival of the rural people because they face problems such as poor ecological conditions, low prices and limited land for cultivation. So, farmers need to diversify their production activities to seek income from multiple sources for their sustained livelihood.  

The rural banking system is a multi-agency approach to agriculture credit in India. Initially, the rural banking system began with a cooperative credit structure and further extended to rural branches of commercial banks and regional rural bank's institution structure over the years since independence. This banking system expanded rapidly after the nationalisation of commercial banks in 1969. National Bank for Agriculture and Rural Development (NABARD) took the responsibility of inspecting cooperative banks, regional rural banks and primary cooperative societies. This expansion of the rural banking system had a positive effect on the outcome of rural farming and non-farming productivity, income and employment opportunities. However, certain limitations of the rural banking system in the rural development in India are  

1. Collateral: Poor households are deprived of institutional credit because they lack proper documents and collateral such as house, livestock or any other property as a guarantee to obtain a bank loan.
2. Credit rules: Credit rules of banking institutions will hinder the credit access of small and marginal farmers because they are not clear to illiterate and partially educated farmers.
3. Reluctant partners: Commercial banks are reluctant partners for agricultural credit, and their operation may increase the number of small and marginal farmers to choose non-institutional sources of credit. 
4. Regional inequalities: Government funds absorbed by institutions are not actually reaching marginal, small and mid-size farmers. The coverage of farmers by the existing rural banking system remains inadequate because it is limited to only rich farmers.
5. Inadequate finance: Sources of institutional finance are inadequate to meet the requirements of agricultural credit for medium and large farmers.
6. Political influence: Credit facilities are not allocated according to the relative efficiency of the cultivator. Based on political motives, agricultural credit is given to farmers and it results in a substantial loss to the banking system. 
7. Lack of mobilisation of deposits: The banking system faced the problem of a large amount of over dues and defaults in repayment of loans, and hence, they failed to mobilise deposits for productive purposes.  

Agricultural marketing includes the processes involved from harvesting to the final sale of the produce. These processes are assembling the produce after harvesting, storing, processing, grading according to the standard of the produce, packaging, storing the excess produce and distributing the produce across the region/nation.

Obstacles hindering the mechanism of agricultural marketing:

1. Distress sale: Agricultural marketing is completely controlled by money lenders and traders in the market because farmers took credit from non-institutional institutions. These money lenders insist farmers sell the crops to them only to recover debts, and hence, products are sold at low prices.
2. Lack of transport facilities: In rural areas, transport facilities are not adequate, and hence, farmers cannot bring their produce to the urban market for better prices.
3. Lack of standard weights and measures: Farmers are not aware about malpractices prevailing in the market, and therefore, they are exposed to defective weighing.  
4. Lack of storage facilities: Farmers do not have access to proper storage facilities as the cost of storage is very high. 

While selling the product, farmers face many problems in the market such as faulty weighing and manipulation of accounts. This creates the need for regulating the agricultural marketing system and thus emerges many alternative marketing channels. In these marketing channels, there is direct contact between farmers and consumers. Therefore, farmers were able to demand better prices for their products.

Examples of alternative marketing channels:

1. Apni Mandi and Big Bazar in Punjab, Haryana and Rajasthan
2. Rythu Bazars in Andhra Pradesh
3. Hadapsar Mandi in Pune
4. Uzhavar Sandies in Tamil Nadu

National and multinational companies such as Reliance Retail, food processing companies and other fast food chains enter into contracts with farmers for their supply of farm products.

These companies agreed to make advance payment at pre-determined rates for the product. This system of marketing reduced the small and marginal farmer's price-risk and helped to expand the market for farm products.

The government adopted some measures to improve the marketing system such as regulated markets, cooperative agricultural marketing societies, provision of warehousing facilities, subsidised transport, dissemination of marketing information, minimum support price policy, buffer stocks and a public distribution system. These measures have made certain improvements but not sufficient to the small and marginal farmers in India.

Obstacles affecting the mechanism of agricultural marketing:

1. Distress sale: Agricultural marketing is completely controlled by money lenders and traders in the market because farmers took credit from non-institutional institutions. These money lenders insist farmers sell the crops to them only to recover debts, and hence, products are sold at low prices.
2. Lack of transport facilities: In rural areas, transport facilities are not adequate, and hence, farmers cannot bring their produce to the urban market for better prices.
3. Lack of standard weights and measures: Farmers are not aware about malpractices prevailing in the market, and therefore, they are exposed to defective weighing.  
4. Lack of storage facilities: Farmers do not have access to proper storage facilities as the cost of storage is high. They are forced to sell their farm products at low prices to traders because of the fear of damage from fire and rodents without proper storage. 
5. Lack of credit facilities: Supply of credit is irregular and depends on non-institutional sources of credit such as money lenders, friends and relatives. These lenders often take advantage of the ignorance of farmers and exploit them by cheating by charging high interest rates and failing to record payments in full.  
6. Presence of middlemen: Farmers gain only a small portion of the actual gains of the total produce because the middlemen reap benefits by purchasing the produce from farmers at low prices and sell at higher prices in the urban market.  

Non-farm activities play a significant role in creating employment opportunities, income and demand for goods and services. Points highlighting the importance of non-farm employment in promoting rural diversification:

1. Growth of employment opportunities in farming activities is not adequate to increasing population in India. Hence, non-farm activities should provide diverse employment to the rural people and drive the rural economy towards the desired direction of growth. 
2. Non-farm employment opportunities in rural India prevent rural people from migrating to urban areas in search of better employment.
3. Wide range of non-farm employment opportunities reduces the level of unequal income distribution in rural areas. The lower section of rural areas engages actively in diverse non-farm activities, yet they earn income lesser than the upper section of the rural areas.
4. In rural areas, farmers were deprived of irrigation facilities and technology advancement. As a result, the production of the agricultural sector was solely dependent on the monsoon. This created an adverse situation for farmers, and hence, there is a need for alternative employment opportunities in non-farm activities.
5. Non-farm activities have many divisions. Divisions such as agro-processing and food processing industries possess dynamic linkages which permit healthy growth. On the other hand, some activities may provide survival and low productivity prepositions.
6. These non-farm activities provide employment throughout the year so that it improves the food security and the standard of living of the rural population.

Importance of animal husbandry, fisheries and horticulture as a source of diversification 

Animal husbandry: It plays an important role in the area of employment generation in India. It created employment opportunities among the landless, small, marginal farmers and women in the rural sector. Livestock farming, i.e. poultry, cattle and goats, are important components against famine, drought and other natural disasters. 

 Fisheries: It provides a significant source of income to people in rural coastal areas such as Tamil Nadu, Kerala, Maharashtra and Gujarat. This sector contributes to the growth of national income, export and employment opportunities in India. Today, total fish production accounts for  0.8 per cent of the total GDP. 

Horticulture: It plays an important role in providing an alternative source of employment in rural areas. It provides rapid growth in the production of crops such as fruits, vegetables, flowers, tuber crops, medicinal and aromatic plants, spices and plantation crops. Diverse horticultural crop production enabled India to become a world leader in producing fruits such as mango, banana, coconut and cashew as well as several spices. This rapid growth in the production of horticultural crops during 1991-2012 is called golden revolution.   

Information technology plays an important role in achieving sustainable development and food security:

1. Information technology acts as a tool for releasing the creative potential and knowledge rooted in people.
2. It helps in storing and disseminating information which enables experts to formulate various policies and remedial measures regarding weather forecast, crop treatment, fertilisers, pesticides and storage conditions.
3. It provides knowledge on new techniques, equipment and methods to increase productivity. Rural farmers can receive information from Kisan Call Centres to enhance the quality and productivity of the farming activity.  
4. It is necessary for employment creation in rural areas. For example, M. S. Swaminathan Research Foundation in Tamil Nadu recognised a million grassroot knowledge workers. Under this programme, they provided an info-kiosk at low cost and provided proper training to the kiosk owner. Finally, it provided services to earn income.

Organic farming is a technology which restores, maintains and enhances the ecological balance. Organically grown food is highly demanded to improve food safety across the world. Awareness and willingness of farmers to get used to new technology are required to initiate organic farming. It has more nutritional value and provides healthy food to the economy. The use of animal manures and composts helps farmers to sustain soil fertility. Thus, it removed the use of chemical fertilisers so that farming promotes sustainable development in an eco-friendly environment.

Advantages of organic farming:

1. Organic farming does not require costly inputs such as HYV seeds and chemical fertilisers; rather, it uses only cheaper organic inputs and creates high returns on investment.
2. It generates more employment opportunities as it is based on a labour-intensive technique.
3. It boosts exports of organic products from India.
4. It has more nutritional value than chemical farming and provides healthy food in the economy.
5. It provides pesticide-free food and is produced in an environmentally sustainable way.

Disadvantages of organic farming:

1. The method of organic farming is not well-known to farmers regarding pesticide-free food which is so healthy and more demandable in the market. It lacks awareness and willingness of farmers to adopt new methods in agricultural production.
2. It has no proper infrastructural and marketing facilities to attract farmers. So, the government needs to formulate policies to enhance the facilities for organic farming in India.
3. Income generated from organic farming is lesser than modern agricultural farming, so small and marginal farmers faced difficulty to adopt this method on a large scale.

Problems faced by farmers during the initial years of organic farming: 

1. Organic farming requires inputs of organic manure, biofertilisers and organic pesticides. These inputs are cheaper to purchase, but still poor farmers are unable to get it for their purpose.
2. Income generated from organic farming is lesser than modern agricultural farming, so small and marginal farmers do not adopt this method.
3. Price of organic foods is high, so it is difficult to find a market for their product.
4. These products are more perishable in nature.

However, this method of farming absorbs more labour, and thus, farmers gain comparative advantage in organic farming.