INDIAN SCHOOL BOUSHER

DEPARTMENT OF ECONOMICS
CHAPTER :RURAL DEVELOPMENT

SL. NO. QUESTION AND ANSWER

Q1. Define Rural Development.

 Rural Development means an ‘action-plan’ for the Socio-

economic growth of rural areas.
 It is the process of improving the quality of life, social and
economic conditions of the people living in rural areas.
Q2. What are the certain challenges in the context of Rural Development
in India?

There are two challenges faced within the framework of the Rural
Development in India are:
 Lingering challenges
 Rural Credit
 Rural marketing
 Emerging challenges
 Diversification of Productive Activities
OR
Employment outside agriculture
 Organic Farming

Q3. What are the significance of Rural development ?

 Rural Development is significant as more than 2/3rd of our

population lives in rural areas and 1/3rd of rural India is Still
below under poverty. Growth would be of no meaning, if the
rural area’s growth is left out.
 Reforms of 1991, focused largely on industrial development
and foreign trade but not on agricultural sector, being totally
ignored. As the result, there is a huge gap between total GDP
and growth of agricultural sector.
  Our agricultural sector remains to be under absolute poverty
with massive unemployment without any other means of
sustainable living.
 Our total GDP growth rate is 7-8% , whereas our agricultural
growth sector is just 2%. This shows that rural-urban gap is
increasing day by day,
Q4. What is Rural Credit? Why do the farmers need it? Talk about the
types of rural credit.

 It means credit for farming. Credit is the lifeline of farming

activity in rural areas because:
 Most farming families are small and marginal holders,
providing just enough for survival. They rarely generate
surplus for further investment.
 The gestation period between sowing and harvesting of
seeds is too log.

TYPES
 Basis of time period
 Short-term Credit
 Required for :
Purchase of inputs like seeds, fertilizers, pesticides
and insecticides, payment of electricity bills.
 Time period:
6 to 12 months
 Medium-term Credit
 Required for:
Purchase of machinery, construction of fences and
digging of wells.
 Time Period:
1 year to 5 years
 Long-term Credit
 Required for:
Purchase for additional land and for carrying out
permanent improvements on the existing land.
 Time period:
5 to 20 years
  Production basis
 Productive Credit
 When farmers take loan for production activity like
purchase of inputs.
 Non-productive credit
 When farmers take loan for consumption basis.
Q5. What are the sources of Rural Credit?

The source of Rural Credits are:

A. Non-Institutional Sources
 Main sources:
 Landlords
 Moneylenders
 Village traders
 93% of the overall borrowings of the farmers were met by
non-institutional sources in the beginning of First five year
plan. It led to debt trap for the farmers.
B. Institutional Sources
 Main sources:
 Government
 Commercial bamks
 Cooperatives
 The regional rural banks
 7% of the total borrowing of the farmers were met by
institutional sources in the beginning of First five year plan.
 But presently their share has increased up to 66%
Q6. What are the important institutional agencies offering rural credit in
India?
There are 4 important institutional agencies offering rural credit,
which are:
A. Cooperative credit Societies:
 It provides credit to the farmers at reasonable rate of
interest. Cooperative account 16-17% of rural credit flow.
 These societies ensure:
 Elimination of moneylenders as credit agencies.
 Timely and fast flow of credit to the farmers.
 Spread credit facilities across all regions.
  Providing credit to areas covered by special
programmes of development.
B. State Bank of India & other Commercial banks:
 The State Bank of India was set up in 1955, with focus on
rural credit.
 The nationalization of some banks took place in 1969.
 The nationalized commercial banks were directed to
provide credit directly to the farmers as well as through
cooperative societies.
C. Regional Rural Banks (RRBs) &Land development banks:
 RRBs and land development banks were set up to provide
credit in the remote rural areas and backward districts.
 These banks operates at district level.
 These banks focus’ on credit needs of weaker section of the
rural areas.
D. National Bank For Agricultural and Rural Development (NABARD):
 NABARD is an apex institution handling policy, planning
and operations in the field of rural credit and related
economic activities.
 Set up on : 12th July, 1982.
 Headquarter:Mumbai
MAIN FUNCTIONS
1. To serve as an apex funding agency for the institutions credit in
rural areas.
2. To improve the credit delivery system and reconstruction of
credit institutions and training of personnel.
3. To monitor and evaluate the projects financed by it.
4. To coordinate the activities of various rural credit institutions.
5. To maintain a close connection with government of India,
State government, RBI and other national level institutions.
Q7. How was the green revolution a harbinger of changes in rural credit
system?

 Green revolution led to change in outlook of farmers from

subsistence farming to commercial farming.
 Commercial farming led to increase in demand of rural credit.
 It has changed portfolio of rural credit, focusing more on
 production loan.

Q8. Explain the role of RBI in the field of agricultural credit?

RBI has been playing an important role in providing credit to farmers

and strengthening credit institution, cooperative credit societies and
land development banks.
It focus on:
 Development of cooperative credit institutions.
 Providing short-term long-term funds for cooperative credit
system.
 Helping bank-branch expansion in rural areas.
 Training and professionalism of cooperatives.
 Providing guidance to all the institutionson matters relating to
rural areas.
Q9. Define Micro-credit.

 Micro credit means giving small loans to the individuals,

helping them to become self-employed by establishing small
enterprises.
 These programmes are becoming popular among small
borrowers because it involves very minimum legal formalities
and no-collateral.
 EG: Self-Help-Groups (SHG)
 SIDBI, NABARD, NHFDC, etc are some institution that provides
micro credit in India
Q10. What are Self-Help-Groups (SHGs)?

 Self-Help Groups are informal groups of people who come

together to address their common problems.
 SHGs promote saving habits among rural households.
 Members of SHGs pool their savings and offer as redit to its
members, depending on their needs.
 Credit is offered without any collateral security and at a
moderate rate of interest.
 Presently, there are 54 Lakh women SHGs in our country with 6
crore women members.
Q11. Define Agricultural marketing.

 Agricultural marketing is a process which involves assembling,

storage, processing, transportation, packaging, grading and
distribution of different agricultural commodities across the
country.
 Gathering the produce after harvesting.
 Processing the produce.
 Grading the produce as per it’s quality.
 Packaging as per the preferences of the buyers.
 Storing the produce for future sale.
 Selling the produce when the price is lucrative.

Q12. Explain the governmental measures taken to improve agricultural

marketing?

 Regulated Markets:
 Regulated markets have been established to create
orderly and transparent marketing condition. This is
organized in order to protect farmers from malpractices
of sellers and brokers.
 Cooperative Marketing:
 Marketing societies are formed by farmers to sell the
output collectively and to take advantages of collective
bargaining for obtaining a better price.
 Infrastructural facilities:
 Govt. has also provided infrastructural facilities like
roads, railways, warehousing, cold storage and
processing units.
 Standardization and Grading:
 Grading & Quality control helps farmers to get good
price for quality products produced by them.
 Minimum Support Price:
 To safeguard the interest of the farmers, government
fixes the minimum support price for agricultural
products. The government offers to buy any amount of
grains from the farmers at a price higher than the
 market price in order to help them recover their loss.
The Government in turn supplies these products in
public distribution system to the BPL & APL card holders.
Q13. What are the limitations of agricultural marketing in India?

 Lack of storage facilities:

for food grain and crops has damaged the products either by
rats or insects or due to rain.
 Distress Sale:
Most Indian farmers are poor and they have no capacity to
wait for better price. They sell the commodities at whatever
the price available immediately. As a result they go for distress
sale of their output to the village money lenders or traders for
poor price.
 Lack of transportation:
as a result farmer cannot reach nearly mandis to sell their
produce at a fair price.
 Long chain of middleman:
intermediaries between the cultivator and the consumer will
also reduce the profit of the producer.

 There are also other defects like lack of institutional finance,

lack of professional guidance etc. This makes Indian marketing
system disorganized.
Q14 Define Agricultural diversification. What the two Aspects of
Agricultural diversification?

It is the Re-allocation of some of farm’s productive resources into

new activities or crops reducing market risk.

AGRICULTURAL DIVERSIFICATION HAS TWO ASPECTS

Diversification of Crop Diversification of Production

Production Activity
 Production of a diverse  Shift from crop farming to
variety of crops rather other areas of production
than one specialised crop activity/employment.
  It implies a shift from  It not only raises the
single-cropping system to income of the farmers but
multi-cropping system. also stabilises it.
 It would minimise market  It provides supplementary
risk arising due to price gainful employment to
fluctuations and monsoon the famers.
failures.
Q15. Explain about diversification of Productive Activities.

 Agriculture is already overcrowded & hence, major portion of

the increasing labour force needs to find alternate
employment opportunities in other nonfarm sectors.
 This will provide alternate sustainable livelihood and would
raise the level of income.
 Some of the non- farm activities are animal husbandry, dairy
farming, fishers, horticulture, agro-processing industries, food
processing industries leather industry, tourism etc.
 These sectors have the potential but they lack infrastructure
and other financial support.
 Operation flood is a system, whereby all the farmers can pool
their milk produce according to different grading and the same
is processed and marketed to urban centers through
cooperatives.
 The period of 1991-2003 is known as Golden Revolution
because during this period, the planned investment in
horticulture became highly productive and the sector emerged
as a sustainable livelihood option.
Q16. What is the role of information technology in rural development?

 Information Technology has revolutionized many sectors in

Indian economy. There is a broad agreement that IT will play
critical role in achieving sustainable development and food
security in the 20th century.
 Through proper information and software tools, govt has been
able to predict area of food insecurity and vulnerability to
prevent or reduce the livelihood of an emergency.
 It also has a posture impact on the agricultural sector as it
 circulate information regarding technologies and its
application, prices, weather and soil condition for growing
different crops.
 This has increased the scientific knowledge about farming and
minimized associated risks.
 The aim for increasing the role of information technology is to
make every village a Knowledge Centre where IT provides a
sustainable option of employment and livelihood.
Q17. Define Organic farming?
 Organic farming is the process of producing food naturally.
 This method avoids the use of synthetic chemical fertilizers
and genetically modified organisms.
 It is eco-friendly and is deeply linked with sustainable
development.
 It maintains, restores & enhances the ecological balance.
 Animal manures & composts are the basic organic inputs.
 It focuses on maintaining ‘Soil-health’ rather than ‘Plant-
health’.
 In most of the developed countries, nearly 10% of their food
system comes under organic farming.
 To encourage sale of organic food, retail chains &
supermarkets are awarded with GREEN STATUS.
 Organic foods command higher price than the conventionally
grown foods.
 It offers an inexpensive farming technology to small &
marginal farmers.
Q18. What are the limitations of organic farming?
 Organic farming needs to be popularized by creating
awareness and willingness on the part of the farmers for
adoption of new methods.
 There is no proper infrastructure and marketing facilities for
these products alone.
 An appropriate agricultural policy should be brought in for
organic farming.
 The fields for organic farming are less than modern
agricultural farming in the initial years.
 Therefore small and marginal farmers may find it difficult to
 adapt to large scale production.
 Organic food items are costlier than the conventionally
produced food items.