Rural Economics

Chapter 1

Introduction to Rural Economy

Meaning of Rural Economy: Application of the principles of economics to the 'rural sector'
of the economy is known as rural economies. Rural sector mainly consist of agriculture and
its allied activities such as rearing livestock, cottage industries and also small industries,
using the agricultural raw materials of the region or village.

Objectives of Rural Economy:

 To improve productivity and wages of rural people

 To guarantee increased and quick employment possibilities

 To demolish unemployment and bring a notable decline in underemployment

 To guarantee an increase in the standard of living of the underprivileged population

 To provide the basic needs: elementary education, healthcare, clean drinking water,
rural roads, etc.

Characteristics of Rural Economy

Agriculture is the Main Occupation: A farmer has to perform various agricultural activities
for which he needs the cooperation of other members. Usually, these members are from his
family. Thus, the members of the entire family share agricultural activities. That is the reason
why Lowry Nelson has mentioned that farming is a family enterprise.

Close Contact with Nature: The daily activities revolve around the natural environment.
This is the reason why a rurality is more influenced by nature than an urbanite. The villagers
consider land as their real mother as they depend on it for their food, clothing and shelter.

Homogeneity of Population: The village communities are homogenous in nature. Most of

their inhabitants are connected with agriculture and its allied occupations, though there are
people belonging to different castes, religions and classes.
Social Stratification: In rural society, social stratification is a traditional characteristic, based
on caste. The rural society is divided into various strata on the basis of caste.

Social Interaction: The frequency of social interaction in rural areas is comparatively lower
than in urban areas. However, the interaction level possesses more stability and continuity.
The relationships and interactions in the prima-ry groups are intimate. The family fulfils the
needs of the members and exercises control over them.

Joint Family: Another characteristic feature of the rural society is the joint family system.
The family controls the behaviour of the individuals. Generally, the father is the head of the
family and is also responsible for maintaining the discipline among members. He manages
the affairs of the family.

Indicators of Rural development:

Rural development usually refers to the method of enhancing the quality of life and financial
well-being of individuals, specifically living in populated and remote areas.

Traditionally, rural development was centred on the misuse of land-intensive natural

resources such as forestry and agriculture. However today, the increasing urbanisation and
the change in global production networks have transformed the nature of rural areas.

Rural development still remains the core of the overall development of the country. More
than two-third of the country’s people are dependent on agriculture for their livelihood, and
one-third of rural India is still below the poverty line. Therefore, it is important for the
government to be productive and provide enough facilities to upgrade their standard of living.

Rural development is a term that concentrates on the actions taken for the development of
rural areas to improve the economy. However, few areas that demand more focused attention
and new initiatives are:

 Education

 Public health and Sanitation

 Women empowerment

 Infrastructure development (electricity, irrigation, etc.)

 Facilities for agriculture extension and research

 Availability of credit
  Employment opportunities

Inclusive and sustainable development

1-No Poverty: Poverty is multidimensional and complex, and especially rural poverty is more
deep-rooted and pervasive. To attain eradication of rural poverty is essential and can be
achieved by better infrastructure development, agricultural development, and better credit
support facility.

2-Zero Hunger: Hunger and food insecurity are quite prevalent in rural areas and are very
much associated with an extreme form of poverty. Millions of children are living under
malnutrition and suffering from various diseases in general and in the rural segment in
particular. Agricultural development is imperative to address this challenge.

3-Good Health and Well-Being: For better health and well-being, health care facilities in
rural areas are very much essential.

4-Quality Education: The well-being of the nation rests on quality education. The challenges
in quality education in the rural areas are more because of a lack of infrastructure.

5-Gender Equality: Inclusiveness is possible only when all the segments get equal rights and
equal opportunities in every aspect of life. The major challenges in this respect are gender
inequality and socio-economic discrimination which is rampant in the rural sector. For
meaningful gender equality and empowerment of girls and women, rural development is
inevitable and the need of the hour.

6-Clean Water and Sanitation: For better health and rural well-being, safe and clean drinking
water is very essential. Clean water, sanitation and hygiene are essential for protecting human
health and human dignity.

7-Decent Work and Economic Growth: Unemployment and lack of opportunities adversely
affect the economy and also affect the health and socio-economic status of unemployed people.
Unemployment in various forms is rampant in the rural sector. The focus should be given to
in situ employment creation in the rural economy.
8- Industry, Innovation and Infrastructure: Adequate and accessible infrastructure not only
enriches the quality of life but also brings betterment of rural livelihood. Better infrastructure
always has a positive correlation with economic development.

Approaches to Rural development

Gandhian Model:

Gandhi firmly believes that village republics can be built only through decentralisation of social and
political power.

• In such a system decision-making power will be vested in the Village Panchayat rather than in the
State and the national capital.

• The Panchayat exercises legislative, executive and judicial functions.

• It would look after education, health and sanitation of the village.

• It would be the Panchayats responsibility to protect and uplift ‘untouchables’ and other poor
people.

• Resources for Gandhian Approach to managing village affairs would be raised from the villages.

• All the conflicts and disputes would be resolved within the village

• The Panchayat would play its role in propagating the importance of moral and spiritual values
among the ruralises for bringing about rural reconstruction.

• A non-violent peace brigade of volunteers would be organised to defend the village.

Industrialization:

• Gandhi maintained that industrialization would help only a few and will lead to concentration of
economic power.

• Industrialization leads to passive or active exploitation of the villages.

• It encourages competition.
• Large scale production requires marketing. Marketing means profit-seeking through an
exploitative mechanism.

• Moreover, industrialization replaces manpower and hence it adds to unemployment.

Community development approach:

1. External Agent Approach : The appointment of an external agent for the development of
community program is the best approach. He convinces the people through his personal skills
and experience and motivate them to work for the development of community. He identifies
various problems and seek suitable solutions for it. He organize the people discuss the situation,
arrange meetings, forms committee and village councils to highlight the hinders in the
developmental procedures. At last this person presents a policy for the community and the
whole society adopt it for development. The external agent approach is also called managerial
approach.

2. Multiple Approaches:In this approach the community development experts try to provide

various facilities including health, education, sanitation, recreation etc to control the causative
factors in the way of community development. The basic philosophy of multiple approaches is
to convert centuries into decades. The adaptation process must be kept in mind and the values,
traditions, beliefs, and norms should be care. Slowly and gradually development must be given
to the community.
3 Inner Resource Approach: In this approach the local people are encouraged and motivated
to use their resources for the improvement of the areas. These people are guided by the
representatives of the community through various programs working internally. They arrange
meetings discussions, give suggestions and agreements in the community. So, the people
should motivate to improve the living standard of the whole community by using their internal
resources. This inner approach of community development is also called participatory approach
because the people actually take part in the progress and promotion process. This participation
of the members is to utilize their skill and knowledge for the betterment of community.

Minimum needs approach: Minimum Needs Programme (India) was introduced during the
5th Five year 1974 plan to provide the basic needs of people so as to improve their living
standards.
  Providing facilities for universal elementary education for children up to the age of 14
at places nearest to their homes.
 Ensuring in all areas a minimum uniform availability of rural public health facilities
including preventive medicine, family planning, nutrition, early detection of morbidity
and referral services.
 Supplying drinking water to problem villages suffering from chronic scarcity of safe
sources of water.
 Providing of all-weather roads to all villages having a population of 1,500 persons or
more.
 Providing developed home sites for landless labour in rural areas.
 Carrying out environmental improvement in slums.
 Ensuring spread of electrification in rural areas to cover about 30-40 per-cent of the
rural population

Integrated Rural development and inclusive growth approach: As previously stated, the
goal of IRDP is to raise the standard of living in disadvantaged rural regions above the poverty
line. IRDP’s additional goals are as follows:

 To improve the rural population’s living conditions by providing long-term

employment.

 Increasing agricultural and small-scale rural industry production.

These goals are met by supplying this population with productive assets from the primary,
secondary, and tertiary sectors. These folks receive financial support in the form of government
subsidiaries or an IRDP loan and credits from various financial organizations.

The objective of this program is to make poor rural people generate an additional source of
income to help them cross the poverty line.

Around 55 million poor people have been covered under the scheme at the cost of Rs. 13,700
to the government. IRDP has several partner programmes associated with it. A few of them
are:

 Development of Women and Children in Rural Areas (DWCRA)

 Ganga Kalyan Yojana (GKY)

  Million Wells Scheme (MWS)

 Supply of Improved Toolkits to Rural Artisans (SITRA)

 Training of Rural Youth for Self-Employment (TRYSEM)

However, these partner programs were implemented as separate programmes, and they failed
to achieve the main objective of the IRDP. For example, only 3% of IRDP participants received
training under TRYSEM.

The beneficiaries of IRDP are:

 Rural poor

 Artisans

 Marginal farmers

 Schedule castes

 Schedule tribes

 Backward classes with an average income of less than Rs. 11,000.

These are some of the more significant features and details regarding the Integrated Rural
Development Programme.

Poverty and unemployment in Rural India:

Meaning of poverty: The term poverty refers to the state or condition in which people or
communities lack the financial resources and essentials for a minimum standard of living.
As such, their basic human needs cannot be met.

Measurement of poverty: Income poverty measurements generally use the physiological

deprivation model1 to assess lack of access to economic resources (income) to satisfy basic
material needs. A person (or household) is considered poor if the person’s (or household’s)
income cannot acquire the basket of goods and services used to define a threshold for poverty.
The monetary value of the basket is the poverty line and the population of people and
households whose incomes are below this line, is then derived through a head count. While this
approach is the most currently used in household and poverty surveys, it is important to
understand that its focus is exclusively on income and expenditure as surrogates for measuring
access to goods and services. Concerns about its limitations as a tool for assessing people’s
level of deprivation has led to definitions that consider other nonmonetary aspects such as
human rights values enshrined in the UN Human Rights Charter, The Development
Programme’s Human Development Index has integrated more dimensions to the
income/expenditure measures, notably life expectancy, educational attainment and a measure
of income. Human development is defined as the process of enlarging people's freedoms and
opportunities and improving their well-being.

Causes for poverty:

1.Increase rate of rising population: In the last 45 years, the population has increased at the
whopping rate of 2.2% per annum. An average of approx. 17 million people are added every
year to the population which raises the demand for consumption goods considerably.
2. Less productivity in agriculture: In agriculture, the productivity level is very low due to
subdivided and fragmented holdings, lack of capital, use of traditional methods of cultivation,
illiteracy etc. The very reason for poverty in the country is this factor only.
3. Less utilization of resources: Underemployment and veiled unemployment of human
resources and less utilization of resources have resulted in low production in the agricultural
sector. This brought a downfall in their standard of living.
4. A short rate of economic development: In India, the rate of economic development is
very low what is required for a good level. Therefore, there persists a gap between the level
of availability and requirements of goods and services. The net result is poverty.
5. Increasing price rise: Poor is becoming poorer because of continuous and steep price rise.
It has benefited a few people in the society and the persons in lower income group find it
difficult to get their minimum needs.
6. Unemployment: One of the main causes of poverty is the continuous expanding army of
unemployed in our country. The job seeker is increasing in number at a higher rate than the
expansion in employment opportunities.
7. Shortage of capital and able entrepreneurship: The much-required capital and
sustainable entrepreneurship play a very important role in accelerating the growth. But these
are in short supply making it difficult to increase production significantly.
8. Social factors: Our country’s social set up is very much backward with the rest of the
world and not at all beneficial for faster development. The caste system, inheritance law,
rigid traditions and customs are putting hindrances in the way of faster development and have
aggravated the problem of poverty.
9. Political factors: We all know that the East India Company started lopsided development
in India and had reduced our economy to a colonial state. They exploited the natural
resources to suit their interests and weaken the industrial base of Indian economy. The
development plans have been guided by political interests from the very beginning of our
independence.
10. Unequal distribution of income: If you simply increase the production or do a checking
on population cannot help poverty in our country. We need to understand that inequality in
the distribution of income and concentration of wealth should be checked. The government
can reduce inequality of income and check the concentration of wealth by pursuing suitable
monetary and price policies.
11. The problem of distribution: The distribution channel should be robust in order to
remove poverty. Mass consumption of goods and food grains etc. should be distributed first
among the poor population. Present public distribution system must be re-organised and
extended to rural and semi-urban areas of the country.
12. Regional poverty: India is divided by the inappropriate proportion of poor in some
states, like Nagaland, Orissa, Bihar, Nagaland, etc. is greater than the other states. The
administration should offer special amenities and discounts to attract private capital
investment to backward regions.
13. Provision for minimum requirements of the poor: The government should take care of
the minimum requirements, like drinking water, primary medical care, and primary education
etc. of the poor. The public segment should make generous expenditure on the poor to
provide at least minutest requirements.
Form and non-farm employment:

The non-farm areas of employment are essential with a view to raise income and exploring
alternative avenues of sustainable livelihood besides agriculture. The following are the
importance of non-farm employment opportunities in promoting rural diversification:
1. A substantial portion of Indian farming is dependent on the vagaries of monsoon, making it
a risky affair to rely upon solely. Hence, non-farm employment opportunities are to be explored
to enable the farmers to earn from alternative non-farm occupations. This will lessen the excess
burden on agriculture by reducing disguised unemployment.
2. The kharif season opens up ample opportunities for agricultural employment. However, due
to lack of irrigation facilities, the farmers fail to get gainful employment opportunities during
the Rabi season. Therefore, absence of opportunities in agriculture sector should be
compensated in non-farm sectors.
3. Agriculture being over crowded cannot further generate employment opportunities to the
farmers. Therefore, the prospects of the non-farm sectors should be opened up in the rural areas
to provide job opportunities, thereby, diverting workforce from the already crowded
agricultural sector.
4. The non-farming sector has several segments that have dynamic linkages. Such linkages
enhance the healthy growth of the rural areas.
5. The non-farm sector provides employment opportunities for the whole year as compared to
the farming occupation. So, it helps to eradicate poverty from the rural areas.
6. Most of the output of non-farm sectors acts as an input for the large scale industries. For
example, agro-processing industries, food processing industries, leather industry, tourism,etc.
This has two-fold benefits. First, the large scale industries can specialise in their final output
by relying on the processed inputs from the non-farm sectors. Secondly, such dependence of
the large scale industries provides impetus to the non-farm sectors reducing the urban-rural
regional disparities.

Measurements and types of unemployment: Unemployment is referred to as the condition

when individuals belonging to the age group of the working population are searching for a
job and are not able to avail. The National Sample Survey Organization in India (NSSO)
pursues the measurement of the rate of unemployment in India. There are numerous types of
unemployment in India, such as structural, frictional, cyclical, and many more. It directly
affects the country’s economy and GDP. This also poses a threat to the social structure of the
country.

Types of Unemployment:

Structural Unemployment: This type of unemployment is characterized by the

differences in the skill set possessed by an individual from the type of skills required to pursue
a job.

Frictional Unemployment: This refers to the interval or the time period between migrating
from one job to the next. This is not caused due to a reduced number of jobs in India but because
the employees quit their job in search of higher roles and better opportunities.
Cyclical Unemployment: Individuals lose their jobs due to the loss in businesses or due to
recession. At this time, the number of unemployed individuals surges. This is also known
as demand deficiency unemployment.

Educated Unemployment: Individuals cannot avail of jobs according to their

qualifications or the degree attained; rather they are opting for jobs in different fields.

Disguised Unemployment: The disguised unemployment could be traced to the number of

employed individuals exceeding the required individuals. In turn, the net productivity does not
change with more people being employed in that sector. This is a major sign in the unorganized
sectors.

Voluntary Unemployment: This type of unemployment refers to individuals who do not want
to earn or pursue a job. The job shortage is not the criteria accounting for this type.

Seasonal Unemployment: This type accounts for the individuals getting unemployed during
a particular season of the year. The farmers are an example of this.

Technological Unemployment: This is the loss of jobs due to advancements in technology.

The AI technologies at the forefront these days might cause a loss in certain types of job
requirements.

Open Unemployment: No job is available, and both skilled and non-skilled workers are
affected.

Governmental Initiatives for Poverty Alleviation & Employment Generation in

India

Considering the importance of poverty alleviation, to foster economic growth in a

country, the government of India has, since independence, taken various measures
in the form of initiatives and schemes to alleviate poverty and to generate
employment. Some of these initiatives are given below.

Initiatives for Poverty Alleviation

1. Integrated Rural Development Programme (IRDP)

2. Jawahar Rozgar Yojana/Jawahar Gram Samridhi Yojana
 3. Rural Housing – Indira Awaas Yojana
4. Food for Work Programme
5. National Old Age Pension Scheme (NOAPS)
6. Annapurna Scheme
7. Sampoorna Gramin Rozgar Yojana (SGRY)
8. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
2005
9. National Rural Livelihood Mission: Aajeevika (2011)
10. National Urban Livelihood Mission
11. Pradhan Mantri Kaushal Vikas Yojana
12. Pradhan Mantri Jan Dhan Yojana

Government Initiatives for Employment Generation in India : The initiatives

undertaken by the government of India since independence for employment
generation are:

1. Nehru Rozgar Yojana

2. National Food for Work Programme
3. Training of Rural Youth for Self-employment
4. National Rural Employment Programme
5. Rural Landless Employment Guarantee Programme
6. Jawahar Rozgar Yojana
7. Rural Employment Generation Programme
8. Prime Minister’s Rozgar Yojana For Educated Unemployed Youth
9. Swarna Jayanti Shahari Rozgar Yojana
10. Swarnjayanti Gram Swarozgar Yojana
11. Sampoorna Grameen Rozgar Yojana
12. National Rural Employment Guarantee Scheme
13. Employment Assurance Scheme
14. Deen Dayal Upadhyaya Grameen Kaushalya Yojana
15. Deendayal Antyodaya Yojana - National Urban Livelihoods Mission (DAY-
NULM)
16. Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
 Unit 2 Rural Infrastructure MSMEs, Banking, Health and Education

MSMEs Meaning: Micro, Small, Medium Enterprises (MSME’s) are entities that are
involved in production, manufacturing and processing of goods and commodities.

The concept of MSME was first introduced by the government of India through the Micro,
Small & Medium Enterprises Development (MSMED) Act, 2006.

Micro, Small and Medium Enterprises Classification 2020

Size of the Enterprise Investment and Annual Turnover

Micro Investment less than Rs. 1 crore
Turnover less than Rs. 5 crore
Small
Investment less than Rs. 10 crore

Turnover up to Rs. 50 crore

Medium Investment less than Rs. 20 crore
Turnover up to Rs. 100 crore
Importance of MSMEs: The MSME sector is considered the backbone of the Indian
economy that has contributed substantially to the economic development of the nation. It
generates employment opportunities and works in the development of backward and rural
areas. India has approximately 6.3 crore MSMEs.

In addition, due to the following features, they are considered a viable source of income for
those looking to venture into the manufacturing industry

Export Promotion and potential for Indian products

 Funding – Finance & Subsidies

 Government’s Promotion and Support
 Growth in demand in the domestic market
 Less Capital required
 Manpower Training
 Project Profiles
 Raw Material and Machinery Procurement
MSMEs contribute to approximately 8% of India’s GDP, employ over 60 million people,
have an enormous share of 40% in the exports market and 45% in the manufacturing sector.
Hence, they are of paramount importance for overall economic development of India.
Progress of MSME:

 As per the National Sample Survey (NSS) 73rd round, there (2015-16) are a total of
633.88 lakh unincorporated non-agriculture MSMEs in the country engaged in
different economic activities. As far as employment is concerned, the MSME sector
has been creating 11.10 crore jobs (360.41 lakh in Manufacturing, 0.07 lakh in Non-
captive Electricity Generation and Transmission, 387.18 lakh in Trade and 362.22
lakh in Other Services) in the rural and the urban areas across the country.
 Small Sector in 2015-16 (Latest Data as published in MSME Ministry Annual Report
2019-20) provided employment 31.95 lakh people. That is around 2.88 per cent of the
total employment in the MSME sector.
 SSIs are conducive to the economic development of underdeveloped countries like
India. Such industries are relatively labour intensive so they make economical use of
scarce capital.
 Small scale industries are instrumental in reducing the inequalities in wealth.
 In these industries, capital is widely distributed in small quantities and the surplus of
these industries is distributed among a large number of people.
 Small scale industries bring about regional dispersal of industries and alleviate
regional imbalances.
 Small-scale industries make use of local resources including the capital and
entrepreneurial skills which would have remained unused for want of such industries.
 The small industry sector has performed exceedingly well and enabled the country to
achieve a wide measure of industrial growth and diversification.
 In these industries, relations between employers and employees are direct and cordial.
There is hardly any scope of exploitation of labour and industrial disputes.

Problems of MSME: The major problems faced by the cottage and small-scale industries are
stated below:

1. Non-availability of timely and adequate credit.

2. Inefficient management
3. Lack of infrastructure
4. Technological obsolescence
5. Limited availability of raw materials
6. Marketing problems
7. Competition with large-scale industries and imports.
8. Excessive burden of local taxes
9. Widespread sickness

Functions of Khadi and village industries

1. It plans, promotes, organizes, and implements programmes for the development of

Khadi and Village Industries (KVI).
 2. It coordinates with multiple agencies that are engaged in rural development for
several initiatives w.r.t khadi and village industries in rural areas.
3. It maintains a reserve of raw materials that can be further promoted in the supply-
chain.
4. It aids in creating common service facilities that help in processing of raw materials.
5. It aids the marketing of KVI products through artisans and other avenues.
6. It creates linkages with multiple marketing agencies for the promotion and sale of
KVI products.
7. It encourages and promotes research and development in the KVI sector.
8. It brings solutions to the problems associated with the KVI products by promoting
research study and enhancing competitive capacity.
9. It also helps in providing financial assistance to the individuals and institutions related
to the khadi and village industries.
10. It enforces guidelines to comply with the product standards to eliminate the
production of ingenuine products.
11. It is empowered to bring projects, programmes, schemes in relation to khadi and
village industries’ development.

Rural Banking and Finance:

Introduction to Credit Co-Operative societies: Cooperative societies are formed with the
aim of helping their members. This type of business organisation is formed mainly by weaker
sections of the society in order to prevent any type of exploitation from the economically
stronger sections of the society.

Cooperative societies need to be registered under the Cooperative Societies Act, 1912 in order
to function as a legal entity. Members of the society raise the capital within themselves.

Types of Cooperative Societies

Following are some of the types of cooperative societies:

1. Consumer Cooperative Society: Consumer cooperative societies are formed with the
objective of protecting the consumer interests. Individuals who wish to purchase products at
reasonable rates most likely join consumer cooperative societies. In such type of societies, there
are no middlemen involved, the product is purchased directly from the producer and sold to
consumers.

2. Producer Cooperative Society: Producer cooperative societies are formed with the
objective of protecting the interests of small producers. These cooperatives help producers in
maintaining their profit and also to assist producers in procuring items that will be helpful in
production of goods and services.

3. Credit Cooperative Society: These cooperative societies are set up with the objective of
helping people by providing credit facilities. They provide loans at a minimal rate of interest
and flexible repayment tenure to its members and protect them against high rates of interest
that are charged by private money lenders.

4. Housing Cooperative Society: Housing cooperative societies are formed with the objective
of providing housing facilities to the members of the society. This proves to be beneficial for
the lower income groups as it allows them to avail housing benefits at a very affordable price.

5. Marketing Cooperative Society: These societies are formed with the objective of providing
small producers a platform to sell their products at affordable prices and also eliminate
middlemen from the chain, thus ensuring adequate profits.

Advantages of Cooperative Society

Following are some of the advantages of cooperative societies:

1. The products that are sold in the cooperative societies are cheaper than the market.

2. Procurement of products is done directly from the producers, which removes the middlemen,
thereby generating more profit for the producers and consumers.

3. Members of the cooperative society can get quick loans.

4. There is no black marketing involved.

Regional Rural Banks: Regional Rural Banks (RRBs) in India are the scheduled commercial
banks that conduct banking activities for the rural areas at the state level. As the name suggests,
the Regional Rural Banks cater to the needs of the rural and underprivileged people at the
regional level across different states in the country.

Objectives:

1. Opening branches of banks in the rural areas

2. Providing loans for the development of the agricultural sector to small farmers,
agricultural laborers, small entrepreneurs, etc.
3. Generating employment opportunities
4. Encouraging savings among the rural people, accepting deposits, and using the funds
for productive purposes
5. Protecting common people from money lenders’ exploitation
6. Reducing the cost of providing loans in rural areas

Role of NABARD: National Bank for Agriculture and Rural Development was established in
July 1982 by combining the Agriculture Credit Department, Agriculture Refinance and
Development Corporation, and Rural Planning and Credit Cell of the Reserve Bank of India.
Functions of NABARD:
Financial Functions:

NABARD performs the following functions under this section:

 Rural Infrastructure Development Fund:

o GOI created the RIDF in 1995-96 with an initial corpus of Rs. 2000
crore.
o There are 37 eligible activities under RIDF which can be classified
under three categories:
 Agriculture and related sector
 Social sector
 Rural connectivity
 Micro Irrigation Fund:
o NABARD started MIF form 2019-10 with a corpus of Rs. 5000 crore.
o The objective of the MIF is to provide additional resources for the
expansion of micro-irrigation practices.
 Provide loans for the development of Food Parks and Food Processing Units
in Designated Food Parks.
 Provide loan to Warehouses, Cold Storage and Cold Chain Infrastructure for
the development of storage infrastructure in India.
 Provide Credit Facilities to Marketing Federations and cooperatives to create
value/supply chain management of the various agricultural commodities.
 Provided Direct Refinance facility to Cooperative Banks.

2. Supervision Functions:

Banking Regulation Act, 1949 empowers NABARD to conduct an inspection of;

 State Cooperative Banks (StCBs)

 District Central Cooperative Banks (DCCBs)
 Regional Rural Banks (RRBs)
 State Cooperative Agriculture and Rural Development Banks (SCARDBs)

The objective of Supervision:

Following are the objectives behind the NABARD’s supervision practices.

 NABARD conducts supervision to protect the interest of present and future

depositors.
 To ensure that these banks conduct business in compliance with the
provisions of the relevant Acts, Rules & Regulations.
 NABARD ensures the compliance and observance of rules, guidelines issued
by NABARD/RBI/Government.
  NABARD also examine the financial soundness of the banks under its
supervision.
 To recommend methods for strengthening the institutions so as to enable them
to play a more efficient role in providing rural credit in India.

3. Development Functions:

NABARD plays a major role in the development of the rural region of our country.
It performs the following function:

Institutional Development:

NABARD is responsible for regulating and supervising the functions of Cooperative

banks and RRBs which disburse more than 50% of the rural credit in India.

Some of the Institutional Development Initiatives of NABARD are:

 Developing policies in consultation with GOI & RBI related to strengthening

Rural Cooperatives & RRBs.
 NABARD designed and maintains a web-based portal ENSURE to review the
performance of Cooperative Banks.
 Track and record the financial status of Cooperative Bank & RRBs.
 Drafts policies related to business, auditors related and staff related matters
of RRBs, also appoint Chairman of RRB.
 The appointment of NABARD Officer as Nominee Director in the Board of
RRB is done by NABARD.

Other Development functions of NABARD:

 Provided credit assistant to the farm sector as well as allied economic

activities of the rural region.
 performs various activities to promote the financial inclusion of the rural
society of India.
 Through its’ Micro Credit Innovations Department, NABARD has
sustained its function as the facilitator and mentor of microfinance initiatives
in the rural sector.
 Research and Development (R&D) Fund was established under
the NABARD Act 1981 to gain new insights into the difficulties of
agricultural and rural development through in-depth studies and applied
research.
 NABARD has constituted the Environment and Social Policy of
NABARD to eradicate or minimize unnecessary environmental and social
harm and to promote sustainable development.
 Micro Finance Institutions: Microfinance institutions (MFIs) are financial companies that
provide small loans to people who do not have any access to banking facilities. The definition
of "small loans" varies between countries. In India, all loans that are below Rs. 1 lakh can be
considered as microloans.

Objectives of Micro Finance in India

A proposal has been made to start a pilot programme to identify SHG members and develop
their capacities to become entrepreneurs, enable credit linkage, and facilitate market linkage.

This is done in order to:

 Graduate to micro entrepreneurs using higher capital, employing more laborers, using better
technologies, and operating continuously, without seasonal fluctuations.

 Development of new skill sets, in addition to assisting first-generation entrepreneurs and

upgrading the operations of current companies.

 Conducting a trainers' training programme for NGOs to support and scale up start-ups among
SHG and JLG members.

 Providing special emphasis to the under-served states in various regions of India.

 Introduction of digital banking for SHGs in collaboration with banks to maintain regular
updates on financial and non-financial data on the portal.

Chapter 6
Rural Infrastructure

Health and education are defining sectors for equitable human development and sustainable
and inclusive economic growth for India. Given the strong economic growth of the country in
the past decade, increasing demand for public investment across all sectors has created
investment gaps in these key sectors. In addition, challenges are also increasing in terms of
service delivery standards, performance benchmarks, and incorporation of technology into the
provision of health and education services to all, especially the poorest and those located far
from the urban growth centers of the country.

IMPORTANCE OF RURAL EDUCATION IN DEVELOPMENT

It is universally acknowledged that education is THE fundamental way to achieve development

and growth. Education is the guiding light, and investing in this area is the only way for the
nation’s development to move forward. It is impossible to achieve sustainable rural
 development in India without investment in human capital. Education leads to improved quality
of life, improved productivity, and economic and social progress, thus improved income
distribution among the masses. Promoting literacy will ultimately lead to a lower
unemployment rate and higher GDP growth. Therefore, it becomes essential to look at design
and development of infrastructure in a way that improves accessibility and effectiveness of
delivery of education.

WHERE WE LACK AND WHY

Numerous issues lead to inequities in education, such as:

 Lack of resources sometimes leads to poor infrastructure in schools situated in rural areas.
Buildings lack infrastructures such as benches, playgrounds, laboratories, or toilets.
Sometimes, with the poor density of educational institutions, transportation is a challenge, and
lack of connectivity often results in poor enrollment and/or early dropouts.
 Often education is not seen as a priority in rural areas. Children are viewed as an extra earning
hand and thus kept away from schooling. Social and religious mores often convey a belief that
girls should concentrate on household chores and not on education.
 The ratio of primary schools to population is low, and children often have to travel long
distances, often on foot, to reach them. This is a deterrent for children and parents alike that
leads to increased dropouts at early stages. In addition, girls are kept away from school due to
safety issues.
 Reaching remote parts of India with quality education can be achieved through digital means.
With the lack of infrastructure and the technology divide, education initiatives are not able to
reach the hinterland.

What are the Recent Government Initiatives Related to Healthcare?

 National Health Mission

 Ayushman Bharat
 Pradhan Mantri Jan Arogya Yojana (AB-PMJAY)
 PM National Dialysis Programme
 Janani Shishu Suraksha Karyakram (JSSK)
 Rashtriya Bal Swasthya Karyakram (RBSK)
Housing , sanitation and Drinking water supply: The National Sample Survey Office
(NSSO) has been collecting data on ‘Housing Conditions and other Amenities’ almost since its
inception. Data on the structural aspects of dwelling units and basic housing amenities such as
drinking water, bathrooms, sewerage, latrine, lighting, etc., available to the households.
Drinking Water, Sanitation, Hygiene and Housing Condition), data were collected on important
items like (i) principal and supplementary source of drinking water of the household, (ii)
availability of sufficient drinking water from principal source, (iii) access of the household to
the principal source of drinking water, (iv) distance to the principal source of drinking water,
(v) quality of drinking water, (vi) access and facility of bathroom of the household, (vii) access
of the household to latrine, (viii) type of latrine used by the household, (ix) reason for not using
latrine by the household despite having access, (x) drainage arrangement of the household, (xi)
system of disposal of household waste water, (xii) method of disposal of household garbage,
(xiii) problem of flies/mosquitoes faced by the household, (xiv) type of the dwelling unit, (xv)
tenurial status of dwelling unit, (xvi) type of floor/wall/roof of the dwelling unit, (xvii)
condition of the structure of dwelling unit, (xviii) floor area of the dwelling unit, (xix) age of
the house owned by the household, (xx) sources of finance for construction/first-hand purchase
of houses or flats for residential purpose etc.

Facilities of drinking water, sanitation along with housing facilities available to

the households and the micro environment surrounding the houses are important

determinants of overall quality of living condition of the people of the country. The survey on
‘Drinking Water, Sanitation, Hygiene and Housing Condition’ aims to collect information on
all these aspects. Some of the important items on which information will be collected through
this survey are: ‘type of the dwelling unit’ (viz. independent house, flat etc.), ‘tenurial status of
the dwelling unit’ (viz. owned, hired, no dwelling etc.), ‘structure of the dwelling unit’(viz.
pucca, semi-pucca, katcha), ‘condition of the structure’ (viz. good, satisfactory, bad), ‘floor
area of the dwelling unit’, ‘age of the house owned by the household’, facilities available to the
households in respect of drinking water, bathroom, latrine etc. and micro environment
surrounding the house like ‘drainage system of the house’, ‘system of disposal of household
waste water’, ‘system of disposal of household garbage’, ‘problems of flies and mosquitoes’
etc. The main users of the data of NSS 76th round survey on ‘Drinking water,
Sanitation,Hygiene and Housing condition’ will be the Ministry of Drinking Water and
Sanitation . Ministry of Housing and Urban Affairs, Ministry of Health and Family Welfare,
Office of the Registrar General of India. The results of the survey on ‘Drinking water,
Sanitation, Hygiene and Housing condition’ of NSS 76th round will also meet the data
requirement of National Institution for Transforming India (NITI) Aayog, Housing and Urban
Development Corporation, Water Aid India, UNICEF, WHO etc. Apart from these users, the
results of the survey will be useful for other planners/policy makers and researchers.

Rural transport and communication: ransport and communication are a way for us humans to
overcome the barrier of physical distance. It is an effective way to connect with people with no
regard to the distance that separates them. Transport generally involves the movement of people or
goods forms one place to another via a means of transport. On the other hand, communication is
the passing of information or data from one source to another. Transport usually involves means
of transport such as roadways, railways, air travel etc. While the examples of means of
communication are email, telephones, letters etc. Both transport and communication are
complementary to each other. But they can also act like substitutes of one another. For example,
if you can email the required information to a client, it eliminates the need to travel to go see him.

Both transport and communication play major roles in our development and advancement in the
last few decades. Thanks to some marvellous technological advancements that have happened in
the last five decades, the quality, speed, accuracy etc of both transport and communication have
been outstanding.

Any developing economy like India must acutely focus on these two fields to make certain they
face no difficulties in their economic and social growth and development.

Transport in India

India is a country of a vast population. The nearly 1,2 billion people in India means that the
development and maintenance of transport and infrastructure are a humongous task for
the government. In India, public transport remains the primary mode of transport for the common
man.

Railways
India’s nationalized railways are the lifeline of its transport. It has the third longest railways in the
world and transports about 18 million passengers daily. It is the busiest railways in the world! The
railways cover the length and breadth of the country. Every remote location in India cannot be
very far from a railway station. The economical pricing and frequency of trains make it the
preferred mode of transport for most Indians.

Just in 2017, the government has introduced a plan to start bullet trains in India. So far high-speed
rail has been absent from the country. In fact, the Indian railways are always looking to develop
and modernize its ways. We even have a separate budget for railways in our country!

Roadways
Next, we come to the Roadways. India has the second largest roadways in the world in terms of
the length of roads. It is second only to the United States.

India has a very intricate patterned National Highway system. These national highways connect
all major cities and towns of the country, making them the highlight of the roadways of India. At
present, there are about 228 national highways in India connecting and interlinking various states
and cities.
These roadways are the backbone of commodity and goods transport in India. Trucks are still the
most used transport vehicle especially for FMCG goods and perishable items. So the conditions
and maintenance of these highways have a big impact on our economy as well.

Airways
India has a busy network of airports in their country, both domestic and international. But current
data there are about more than 20 international airports in India. The Indira Gandhi International
Airport in Delhi and the Chattrapati Shivaji Airport in Mumbai handle about half of the
international air traffic.

The country also has about 80 domestic airports. The air travel in India has seen a huge increase
in the last 10 years due to the economical pricing of tickets and availability of infrastructure. The
aviation industry in India is highly regularized, but the government is looking to remedy the
situation. Overall the situation looks promising for Indian air transport in the coming years.

Waterways
India is surrounded by the ocean on three sides, so water transport is quite prominent in India.
Almost 95% of international trading in India happens via ships. There are twelve major ports in
India with the Nhava Seva in Mumbai being the largest. Other than these there are about 200
minor ports throughout the coastline.

India also has a sizable network of inland waterways which include canals, rivers backwaters etc.
However, the use of these waterways is not utilized to its full capacity for commercial purposes.
Inland waterways have some scope for development and must be looked into.

Communication in India

Telecommunication
The three major branches of communication in India are telephones, television broadcast and
internet. India has about 1.2 billion phone subscribers as of 2017, making it the second
largest telecommunication system in the world! Due to recent innovation and a large number of
users, the tariffs are also one of the lowest in the world

India also has the second largest number of internet users in the world. It has about 450 million
internet users, which is nearly 13.6% share of the global internet users. Recent developments since
2016 have made internet subscriptions and mobile networks very cheap. This has greatly helped
with market penetration.
Since the privatisation drive of 1990, India’s television industry has seen a complete overhaul.
What started with only one channel, Doordarshan now is a global network of thousands and
thousands of channels and platforms. Even today T.V. broadcast is believed to be the most far-
reaching and penetrative source of communication, especially in the rural sectors.

Rural Electrification: Government of India had launched Deen Dayal Upadhyaya Gram Jyoti
Yojana (DDUGJY) in December 2014 for the rural areas with the objectives of electrification
of all un-electrified villages as per Census 2011; Strengthening and augmentation of sub-
transmission & distribution infrastructure in rural areas, including construction of HT and LT
lines, metering at distribution transformers, feeders and consumers; and feeder segregation.
Similarly, Pradhan Mantri Sahaj Bijli Har Ghar Yojana – Saubhagya was launched in October,
2017 for electrification of rural and urban poor households in the country.
SAUBHAGYA was launched with the objective to achieve universal household
electrification by providing electricity connections to all un-electrified households in rural
areas and all poor households in urban areas of the country. Under the aegis of
SAUBHAGYA, as on 31.03.2019, all households were reported electrified by the States,
except 18,734 households in Left Wing Extremists (LWE) affected areas of Chhattisgarh.
Subsequently, seven States namely Assam, Chhattisgarh, Jharkhand, Karnataka, Manipur,
Rajasthan and Uttar Pradesh reported that 19.09 lakh un-electrified households in their State
identified before 31.03.2019, which were unwilling earlier but later expressed willingness
to get electricity connections needed to be electrified. The electrification of these households
was sanctioned under SAUBHAGYA. All these seven States reported 100% households’
electrification as on 31.03.2021. A total of 2.817 crore households were electrified since the
launch of SAUBHAGYA, up to 31.03.2021. Thereafter, some States again reported that
11.84 lakh households remain to be electrified. Electrification of these households was
again sanctioned till date, a total 2.86 crore households have been electrified.