Chapter – 5

Rural Development
Syllabus Key issues-credit and marketing role of cooperatives; agricultural diversification: alternative
farming-organic farming

Rural development is a comprehensive term which essentially focuses on for the development of areas that
are lagging behind in the overall development of the village economy.

Significance of rural development in India:

(a)Agriculture is the mainstay of Indian economy because of its high share in employment and livelihood
creation.
(b) Agriculture plays an important role in the development of the industrial sector. It provides raw materials
to the manufacturing industries.
(c) Agriculture provides food grains for expanding population.
(d) Major share in GDP.
(e) Importance in international trade.

Key Issues in Rural Development: Some of the area international trade of development are:
(a) Development of human resources like literacy, more specifically, female literacy education and skill
development.
(b) Development of human resources like health, addressing sanitation and public health.
(c) Honest implementation of land reforms because:
- Improvement in agricultural productivity.
- Abolition of intermediaries.
- Protection of rights of tillers of the soil.
- Eliminating the exploitation of cultivators.
(d) Development of the productive resources each locality. So that:
- Available resources can be utilised to the optimum.
- Opportunities of investment and employment in farm areas such as food processing can be enhanced.
- Better and affordable access to healthcare, sanitation facilities at workplaces and homes should be provided
along with 'education for all for rapid rural development.
(e) 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.
(f) Special measures for alleviation of poverty and bringing about significant improvement in the living
conditions of the weaker sections of the population. There is a need to emphasise access to productive
employment opportunities.

After New Economic Policy (LPG) the growth rate of agriculture sector decelerated to about 3% per annum
during the 1991-2012 which was lower than the earlier years. Reasons:
(a) Inadequate infrastructure,
(b) lack of alternative employment opportunities in the industry or service sector,
(c) increasing casualisation of employment.
The impact of this phenomenon can be seen from the growing distress witnessed among farmers across
different parts of India. During 2014-15, the GVA growth rate of agriculture and its allied sectors was less
than one per cent.

Meaning and Need for Rural Credit

Rural credit means credit for the farming families. Need:
(a) Farmers need money to buy additional land, implements and tools, fertilizers and seeds, paying off old
debt, personal expenses like marriage, death, etc.
PGT ECONOMICS – BHAVESH SONI (8349965291)
(b) Since the gestation period between crop sowing and realisation of income after sale of agricultural produce
is very long.

Farmers require credit for various purposes, which are listed below:
(a) Long-term Credit: It is required for permanently acquiring assets like tractors, land, costly equipment’s,
tube wells, etc. These loans are for a period of 5 to 20 years.
(b) Medium-term Credit: It is required for about one to five years period. It is required for digging wells,
buying machinery etc.
(c) Short term credit : It is required for buying seeds, tools, and manure fertilizers. These loans are for a
period maximum upto 12 months.

Box 5.1: The Poor Women's Bank

'Kudumbashree' is a women - oriented community based poverty reduction pro ramme being implemented
in Kerala. In 1995, a thrift and credit society was started as a small savings bank for poor women with the
objective to encourage savings. The thrift society mobilised Rs. 1 crore as thrift savings. These societies
have been acclaimed as the largest informal banks in Asia in terms of participation and savings mobilised.

Sources of Rural Credit:

The various sources can be classified into two groups:
1. Non-institutional Sources or Informal Sector: It includes moneylenders, traders and commission agents,
landlords, relatives, friends. Moneylender's play a very important role as far as credit requirement of
agricultural sector is concerned.
Unhealthy effects of moneylender on agriculture sector.
- They intend to exploit labour to their last drop of blood.
- They charge high rate of interest.
- They acquire land on failure to pay interest and loan.
- They manipulate accounts.

A major change occurred after 1969 when India adopted social banking and multi agency approach to
adequately meet the needs of rural credit.

2. Institutional Sources or Formal Sector: Multi-Agency Approach in rural credit.

(a) Co-operative Credit Societies
(b) Commercial Banks
(c) Regional Rural Banks
(d) Land Development Banks

Recently, Self-Help Groups (SHG's) 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 fully integrated into overall
rural social and community development.
The SHG's 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.

1. Cooperative Credit Societies:

Functions of Co-operative Sector
- To provide timely and increased flow of credit to the farmers.
- To reduce and gradually eliminate the mor oneylenders from the rural scene.
- To provide credit facilities to all the rea itena egions of the country.e., reduce regional
imbalances.
PGT ECONOMICS – BHAVESH SONI (8349965291)
- To provide adequate credit support to areas covered by special programmes.

Weaknesses of Co-operative Sector

(a) Financially and administratively weak
(b) Managed by Large Farmers
(c) Regional Imbalances
(d) Dependence on External Sources?
(e) Large Overdues.
(f) Inadequate organisation and managerial inefficiency
(g) Lack of Gainful Utilisation of Funds

2. Commercial Banks
These provide loans f for all agricultural operations and allied purposes. These may broadly be classified into
(a) Direct Advances: It may be for short, medium or long-term. Short-term may take the form of crop loans
or production loans.
(b) Indirect Advances. These include:
Credit granted to dealers of fertilizers to meet their working capital requirements. Advances made to co-
operative milk societies, sheep breeders co-operative societies, etc.

Weaknesses of Commercial Banks:

1. Huge Cost in Operation
2. Lack of Interest
3. Lack of Reliable Data
4. No Branch in Backward Villages
5. Cautious while Lending
6. No Proper Feedback
7. Immobilisation of Rural Saving

3. Regional Rural Banks: These have been set up under the Regional Rural Banks Act of 1976. The areas of
their operation have been very carefully selected as the area where banking facilities and co-operatives are
absent.

Weaknesses of RRBs;
1. Regional Disparities in Growth
2. Continuous Losses
3. Problem of Growing Overdues
4. Various Shortcomings in Dealings
5. Methods of Operation

(4) National Bank for Agriculture and Rural Development (NABARD): In 1979, RBI appointed a
committee to go into the whole structure of rural credit make recommendations for reorganising and
strengthening it. The Committee gave its report and recommended the setting up of NABARD. It was set up
in July, 1982. It is an apex body to coordinate the activities of all the institution involved in the rural financing
system.
Functions of NABARD-
1. To provide short, medium and long-term credits to State Co-operative Banks, RRBs, Land Development
Banks and other financial institutions, approved by the RBI and also to inspect them.
2. To grant long-term loans to the State Government for subscribing to the spect theital of co-operative
societies.

PGT ECONOMICS – BHAVESH SONI (8349965291)

3. To give loans to the approved institutions to invest in securities or to contribute to share capital of
institutions engaged in agricultural and rural development.
4. To coordinate the activities of the Central and the State Government and other all India and state level
institutions entrusted in the development of small-scale industries, village Industries and rural crafts.
5. To promote research in agriculture and rural development.
6. To serve as a refinancing agency.
7.NABARD can help tenant farmers and small farmers to consolidate their landholdings.

SHGs and Micro Credit Programmes

SHGS (Self-Help Groups) and micro credit programmes promote thrift in small proportions by a minimum
contribution from each member. From the pooled money, credit needs are fulfilled. The members have to
repay the credit in small instalments at low rate of interest. The borrowings are mainly for consumption
purposes.

By May 2019, nearly 6 crore women in India have become ember in 54 lakh women SHGs. About ₹10- 15,000
per SHG and another Rs. 2.5 lakhs per SHGs as a Community Investment Support Fund (CISF) are provided
as part of renovating fund to take up self employment for income generation.

Rural Banking-A Critical Evaluation

Since 1969, when the nationalisation of commercial banks took place, rural banking has expanded a great
deal.
Significant expansion of rural banking system played a positive role in:
1. Raising farm and non-farm output by providing services and credit facilities to farmers.
2. Providing long-term loans with better repayment options. It, helped in eliminating moneylenders from the
scene.
3. Generating credit for self-employment in rural areas.
4. Achieving food security which is clear from the abundant buffer stocks grains.

For expansion and promotion of cural banking all the adults are encouraged to open bank accounts as a part
of a scheme known as Jan- Dhan Yojana. Those bank holders can get Rs. 1-2 lakh accidental insurance
coverage and overdraft facilities for Rs. 10,000 and get their wages, old age pension and other social security
payments of the government transferred to bank accounts. There is no need to keep minimum bank balance.

Limitations of Rural Banking

1. Except commercial banks, other formal institutions have failed to develop a culture of deposit mobilisation.
2. The sources of institutional finance are inadequate to meet the requirements of agricultural credit. Farmers
still depend on moneylenders for their credit needs.
3. There exist regional inequalities in the distribution of institutional credit.
4. Rural banking is suffering from the problems of large amount of overdues and default rate, Recovery of
agricultural loans has become a serious problem in the functioning of rural banking institutions.
5. A large portion of institutional credit is taken away by the rich farmers.

Solution to the Problems of Agricultural Credit in India:

1. Credit facilities should be extended to farmers by commercial banks easy terms and conditions.
2. Cooperative credit societies in rural areas should be strengthened and their working should be transparent
and efficient.
3. An effective mechanism for the recovery of agricultural loans should be evolved at the earliest.
4. More Regional Rural Banks should be set up to meet the credit needs of rural and backward areas.

PGT ECONOMICS – BHAVESH SONI (8349965291)

 AGRICULTURE MARKETING
Agriculture marketing defined as a process of marketing farm produce though wholesalers and stockists to
ultimate consumers. Agricultural marketing is defined as a marketing is a process that involves the assembling,
storage, processing, transportation, packaging, grading and distribution of agricultural commodities across the
country.

Prior to independence, farmers were exploited by the private traders in many ways, such as:
1. While selling their produce to traders, farmers suffered faulty weighing and manipulation of accounts.
2. Farmers who did not have the required information about the prevalling prices were often forced to set at
low prices.
3. Lack of storage facilities did not allow farmers to keep back their produce to fetch a better price. Even today
more than 10% of goods produced in farms are wasted due to lack of storage.
State intervention thus, became necessary to the small and marginal farmers from such exploitation.

Features of Agricultural Marketing:

1. Agricultural products involve high storage and transportation costs as they are bulky.
2. Agricultural products are generally perishable by nature. So, a farmer has to sell it off as early as possible.
3. If price of agricultural products falls, demand will not increase in a greater portion.
4. If price of agricultural products rises, supply cannot increase instantly.
5. Concept of advertising and other sales promotion activities do not exist in agricultural marketing.
6. There is problem of standardisation and grading of agricultural products.

Defects of Agricultural Marketing:

1. Inadequate Warehouses
2. Multiplicity of Middlemen
3. Malpractices in Unregulated Markets
4. Improper Measuring for Weighing, Grading and Standardisation.
5. Lack of Adequate Finance
6. Inadequate means of Transport and Communication,
7. Inadequate Market Information.

Steps Undertaken by the Government for Improving Agricultoral Marketing:

1. Establishment of Regulated Markets: Regulated market have been organised with a view to protect the
farmers from the malpractices of sellers and brokers.

PGT ECONOMICS – BHAVESH SONI (8349965291)

Functions of Regulated Markets:
- Enforcement of standard weights.
- Fixation of charges, fees etc.
- Settling of disputes oing the operating parties in the market.
- Prevention of unlawful deduction and control of wrong practices of middlemen.

Advantages of Regulated Markets

- Farmers have been able to get fair price for their product.
- Consumers are able to get regular supply of food grains and pulses at reasonable prices.
- It has led to commercialisation of farming.
- Banking system, warehousing facilities, etc, have grown.

Provision of Infrastructural Facilities: The government has taken measures to develop infrastructural
facilities like roads railways, warehouses godowns, cold storages and processing units.

2. Co-operative Market: Co-operative marketing is a measure to ensure a fair price to farmers. Member
farmers sell their surplus to the society which substitutes collective bargaining in place of individual
bargaining.
The co-operative marketing structure in the country is working at various levels. At present we find primary
co-operative marketing societies at the mandi level, district/central federations, and the National Agricultural
co-operative Marketing Federation of India Ltd. (NAFED).
NAFED is the apex co-operative marketing organisation dealing in procurement, distribution, exports and
imports of selected agricultural commodities.
3. Standardization and grading: Promotion of standardization and grading of agricultural products is the
main function under agricultural marketing. Grading and quality control helps the farmers to fetch a good
price for quality product produced by them.

Important Instruments to Safeguard the Interests of Farmers:

1. Fixation of Minimum Support Price (MSP): Presently government fixes MSP for 24 agricultural
products. Minimum support price is announced before the sowing season and assures the farmer of a
minimum price. It provides long-term guarantee to the farmer since price cannot fall below the minimum
support price.
2. Buffer Stock: Buffer stock is an instrument used by government to stabilise prices. It is built up in the
years of surplus production and is used during shortages.
3. Public Distribution System (PDS): The PDS operates through fair price shops and ration depots. The
government offers essential commodities like wheat, rice, sugar, kerosene, edible oils, coal, cloth, etc., at a
price below the market price to poor section of the society. A two-tier subsidised pricing system was
introduced known as Targeted PDS.
Emerging Alternative Marketing Channels:
Through these channels directly sell their produce to the consumers. This system increases, share in the
price paid by the consumers. For example:
(a) Apani Mandi (Punjab, Haryana and Rajasthan),
(b) Hadaspar -(Pune); Rythu Bazars (Vegetable and fruit market in Andhra Pradesh) and
(c) Uzhavar Sandies (Tamil Nadu),
(d) Several national and international fast food chains and hotels are also entering into contracts with
the farmers to supply them fresh vegetables and fruits.

DIVERSIFICATION OF AGRICULTURAL ACTIVITIES

Meaning: Diversification towards new areas is necessary to reduce the risk from agriculture sector and to
provide sustainable livelihood options to rural people.

PGT ECONOMICS – BHAVESH SONI (8349965291)

Diversification includes two aspects:
Diversification of Crop Production: It means production of a diverse variety of crops rather than one
specialised crops. It implies a shift from mono cropping system to multi cropping system.
Diversification of Productive Activity: It means a shift from crop farming to other areas of productive
activity with a view to raising income and exploring alternative avenues s of sustainable livelihood.

Significance:
(a) Reduce the risk from agriculture sector.
(b) Provide sustainable livelihood options to people living in villages.
(c) Provide ecological balance.

Operation Flood: It is a system whereby all the farmers can pool their milk produce according to different
grading (based on quality) and the same is processed and marketed to urban centres through cooperatives.
Gujarat state has the success story in the efficient Implementation of milk cooperatives.

Agricultural Diversification in India:

1. Animal Husbandry:
(a) In India, the farming community uses mixed crop live-stock farming.
(b) This system provides increased stability in income, food security, transport, fuel and nutrition for the
family without disrupting other food-producing activities.
(c) Livestock sector alone provides alternate livelihood options to over 70 million small and marginal farmers
including landless labourers.
(d) Poultry accounts for the largest share. It is 61% of total livestock in India. (2019)
(e) Milk production in the country has increased by about ten times between 1951-2016 . This can be attributed
mainly to the successful implementation of 'Operation Flood' from 1966 onwards.
(f) Meat, eggs, wool and other by-products are also emerging as important productive sectors for
diversification.
Box 5.2: Tamil Nadu Women in Agriculture (Tanwa)
'Tamil Nadu Women in Agriculture (Tanwa)' project initiated in Tamil Nadu to train women in latest
agricultural techniques. It induces women to actively participate in raising agricultural productivity and
family income.
At a farm women's group in Thiruchirapalli, run by Anthoniammal, trained women are successfully making
and selling vermicompost and earning money from this venture. Many other farm women's groups are
creating saving in their group by functioning like mini banks through a micro credit system. With the
PGT ECONOMICS – BHAVESH SONI (8349965291)
 accumulated savings, they promote small scale household activities like mushroom cultivation soap
manufacturing, doll making or other income generating activities.

Though its number is quite impressive but its productivity is quite low as compared to other countries. The
solution is:
(a) Promotion of good breeds of animals to raise productivity.
(b) Improved veterinary care is essential.
(c) Better credit facilities to small and marginal farmers and landless labourers would raise sustainable
livelihood options through livestock.

2. Fisheries
(a) The fishing community regards the water body as 'mother' or 'provider. The water bodies consist of sea,
oceans, rivers, lakes, natural aquatic ponds, streams, etc.
(b) Presently, fish production from inland sources contributes about 65% balance 35% comes from marine
sector (sea and oceans). Today total fish production accounts for 0.9% of the total GDP.
(c) Among states, West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu are the
major producers of marine products.
(d) The socio-economic status of fishermen is comparatively lower because of:
(i) Rampant underemployment.
(ii) Low per capita earnings.
(iii) Absence of mobility of labour to other sectors.
(iv) High rate of illiteracy.
(v) Indebtedness.
(e) There is a need to raise credit facilities-cooperatives and SHGs - for fisherwomen to meet the working
Problems related to over-fishing and pollution needs to be solved. The solution is:
(a) Welfare programmes for the fishing community have to be reoriented in a manner which can provide
long-term gains and sustenance of livelihoods.
(b) Pollution of water bodies needs to be controlled.

3. Horticulture:
(a) Due to 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,
(b) These crops play an important role in providing:
(i) food (ii) nutrition (iii) employment
(c)The period between 1991-2003 is called 'Golden Revolution because during this period, the planned
investment in horticulture became highly productive and the sector emerged as a sustainable livelihood

PGT ECONOMICS – BHAVESH SONI (8349965291)

option.
(d) Flower harvesting, nursery maintenance, hybrid seed production and tissue culture, propagation of fruits
and flowers and food processing are highly profitable employment opportunities for rural women.

Problem is that of more investment in this sector. The solution lies in more investment in infrastructure like:
electricity, cold storage systems, marketing linkages, small-scale processing units and technology
improvement.

4. IT-Every Village a Knowledge Centre: Information technology plays a very significant role in achieving
sustainable development and food security in the following ways:
(a) The IT has revolutionised many sectors in the Indian economy. There is a strong belief that IT can play a
critical role in achieving sustainable development and food security in 21st century.
(b) Government 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.
(c) 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.
Accordingly quality and quantity of crops can be increased manifold.
(d) IT has potential of employment generation in rural areas. Experiments with IT and its application to rural
development are carmed out in different parts of India.
(e) IT has entered into knowledge economy and has great potential of generating employment in rural areas.
(f) It acts as a tool for utilising the creative potential and capabilities embedded in the society.

Organic Farming
It is the form of agriculture that relies on techniques such as crop rotation, green manure, compost and
biological pest control.
Box 5.3: Adoption of Village by Parliamentarians
In October, 2014, The Government of India introduced a new scheme called Saansad Adarsh Gram Yojana
(SAGY). Under this scheme, Members of India's Parliament need to identify and develop one village from
their constituencies.
To begin with MPs can develop one village as a model village by 2016, and two more by 2019, covering
over 2,500 villages in India. According to the scheme, the village can have a population of 3,000-5,000 in
the plains and 1,008 3,000 in the hills and should not be MPs' own or their spouse's village. MPs are
expected to facilitate a development plan, motivate villagers to take up activities and built infrastructure in
the areas of health, nutrition and education.
PGT ECONOMICS – BHAVESH SONI (8349965291)
Benefits of Organic Farming:
(a) Economical Farming for the small and marginal farmers: Conventional technology is to be adopted as
a package including HYV seeds, fertilizers, pesticides, insecticides, besides good irrigation facilities. Due to
it lot of farmers slip into indebtedness. No such package of expensive inputs is required for organic farming.
(b) Generates income through exports: As demand of organically grown crops is increasing day by day so
Indian farmers can generate income through exports.
(c) Healthier and Tastier Food: Organic farming offers healthier and tastier food compared to conventional
farming. Recent studies have found that organically grown food is more nutritious than the food from chemical
farming. Existing trends indicate that demand for organic food is trending up, even when high price is
constraining factor.
(d) Source of Employment: Organic farming requires more labour input than conventional farming. Due to
this reason, India has advantage in organic farming as we have abundance of labour.
(e) Environment friendly: Conventional farming uses chemical fertilizers. It pollute the groundwater by
raising it nitrate content. Nitrates are health hazard and pollute the environment. Organic farming discards the
use of chemical fertilizers.
(f) Sustains Soil Fertility: Organic farming improves soil fertility through the application of organic matter
inputs in the form of animal manures, compost and farmyard manure. On the other hand, conventional farming
makes use of chemical fertilizers, which erode soil fertility.
Box 5.4 : Organic Food
Organic food is growing in popularity across the world. Many countries have around 10 % of their food
system under organic farming. There are many retails chains and supermarket which are accorded with
green status to sell organic food. Moreover, organic foods command higher price of around 10-100 % than
conventional areas.

Box 5.5: Organically Produced Cotton in Maharashtra

In 1995, when Kisan Mehta of Prakruti (an NGO) first suggested that cotton, the biggest user of chemical
pesticides, could be grown organically, the then Director of the Central Institute for Cotton Research,
Nagpur, famously remarked, "Do you want India to go naked?"
At present, as many as 130 farmers have committed 1,200 hectares of land to grow cotton organically on
the International Federation of Organic Agriculture Movement's standards.
The produce was later tested by the German Accredited Agency (AGRECO), and found to be of high
quality. Kisan Mehta feels that about 78% of Indian farmers are marginal farmers owing about less than 0.8
hectare but accounting for 20% of India's cultivable land. For such farmers, organic agriculture is more
profitable in terms of money and soil conservation in the long run.

Challenges before Organic Farming:

(a) Less Popular: Many countries have around 10% of their food system under organic farming. So it needs
to be popularized by creating awareness and willingness on the part of farmers, for adopting of new
technology. There is a serious need for an appropriate agriculture policy to promote organic farming.
(b) Lack of infrastructure and marketing facilities: Organic farming faces problems of inadequate
infrastructure and marketing facilities.
(c) Low Yield: Organic farming has a less yield in the initial years as compared to modern agricultural
farming. As a result, small and marginal farmers find difficult to adapt to large scale production.
(d) Shorter food life: Organic produce has a shorter shelf life as compared to sprayed produce.
(e) Limited choice of crops: The choice in production of off season crops is quite limited in organic farming.
Inspite of all these limitations, organic farming helps in sustainable development of agriculture, India has a
clear advantage in producing organic products, for both domestic and international markets.

PGT ECONOMICS – BHAVESH SONI (8349965291)

 Question and Answer

Question 1. What do you mean by rural development? Bring out the key issues in rural development.
Answer. Rural development is a comprehensive term which 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 in need of fresh initiatives for rural development are:
- Development of human resources like literacy, more specifically, female literacy, education and skill
development.
- Development of human resources like health, addressing both sanitation and public health.
- Honest implementation of land reforms.
- Development of the productive resources in each locality.
- Infrastructure development like electricity, irrigation, credit, markseting, 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.

Question 2. Discuss the importance of credit in rural development.

Answer. Farmers need money to buy additional land, implements and tools, fertilizers and seeds, paying off
old debt, personal expenses like marriage, death, religious ceremonies, etc. Since the gestation period between
crop sowing and realisation of income after sale of agricultural produce is very long, farmers need to take
credit.

Question 3. Explain the role of micro-credit in meeting credit requirements of the poor.
Answer. SHGs (Self-Help Groups) and micro credit programmes promote thrift in small proportions by a
minimum contribution from each member. From the pooled money, credit needs are fulfilled. The member
have to repay the credit in small instalments at low rate of interest. The borrowings are mainly for consumption
purposes.

Question 4. Explain the steps taken by the government in developing rural markets.
Answer. The government has taken various steps for improving agricultural marketing system. These are:
Establishment of Regulated Markets. Government has formed regulated markets to remove most of the evils
of an unorganised market system.
Functions of regulated markets are:
(i) Enforcement of standard weights.
(ii) Fixation of charges, fees, etc.
(iii) Settling of disputes among the operating parties in the market.
(iv) Prevention of unlawful deductions and control of wrong practices of middlemen.
(v) Providing reliable market information.

Provision of Infrastructural Facilities. The government has taken measures to develop ; infrastructural
facilities like roads, railways, warehouses, godowns, cold storages and processing units.

Co-operative Market. Co-operative marketing is a measure to ensure a fair price to fanners. Member farmers
sell their surplus to the co-operative society which substitutes collective bargaining in place of individual
bargaining. It links rural credit farming marketing processes to the best advantage of the farmers.

PGT ECONOMICS – BHAVESH SONI (8349965291)

Important Instruments to Safeguard the Interests of Farmers. The Government has also developed some
instruments to safeguard the interests of farmers. These instruments are:
Fixation of Minimum Support Price (MSP)
(ii) Buffer Stock
(iii) Public Distribution System (PDS).

Question 5. Why is agricultural diversification essential for sustain-able livelihoods?

Answer. Diversification into non-farm activities is important because it will:
- reduce the risk from agriculture sector.
- provide sustainable livelihood options to people living in villages.
- provide ecological balance.

Question 6. Critically evaluate the role of the rural banking system in the process of rural development
in India.
Answer. Since 1969, when the nationalisation of commercial banks took place, rural banking has expanded a
great deal. Significant expansion of rural banking system played a positive role in:
- Raising farm and non-farm output by providing services and credit facilities to farmers.
- Providing long term loans with better repayment options. It, thus helped in eliminating moneylenders from
the scene.
- Generating credit for self-employment schemes in rural areas.
- Achieving food security which is clear from the abundant buffer stocks of grains.

Limitations of rural banking are:

- The sources of institutional finance are inadequate to meet the requirements of agricultural credit. Farmers
still depend on money-lenders for their credit needs.
- There exist regional inequalities in the distribution of institutional credit.
- Rural banking is suffering from the problems of large amount of overdues and default rate.
- Small and marginal farmers receive only a very small portion of the institutional credit. A large portion of
institutional credit is taken away by the rich farmers.

Question 7. What do you mean by agricultural marketing?

Answer. Agricultural Marketing is defined as a process of marketing farm produce through wholesalers and
stockists to ultimate consumers.

Question 8. Mention some obstacles that hinder the mechanism of agricultural marketing.
Answer. Defects of Agricultural Marketing are :
- Inadequate Warehouses
- Multiplicity of Middlemen
- Malpractices in Unregulated Markets
- Improper Measuring for Weighing, Grading and Standardisation
- Lack of Adequate Finance
- Inadequate means of Transport and Communication
- Inadequate Market Information.

Question 9. What are the alternative channels available for agricultural marketing? Give some
examples.
Answer. In India, alternative marketing channels are emerging. Through these channels farmers directly
sell their produce to the consumers. This system increases farmers’, share in the price paid by the consumers.
Important examples of such channels are:

PGT ECONOMICS – BHAVESH SONI (8349965291)

(a) Apani Mandi (Punjab, Haryana and Rajasthan),
(b) Hadaspar Mandi (Pune); Rythu Bazars (Vegetable and fruit market in Andhra Pradesh) and
(c) Uzhavar Sandies (Tamil Nadu),
(d) Several national and international fast food chains and hotels are also entering into contracts with the
farmers to supply them fresh vegetables and fruits.

Question 10. Explain the term ‘Golden Revolution’.

Answer. The period between 1991-2003 is called ‘Golden Revolution’ because during this period, the planned
investment in horticulture became highly productive and the sector emerged as a sustainable livelihood option.
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.

Question 11. Explain four measures taken by the government to improve agricultural marketing.
Answer. The government has taken various steps for improving agricultural marketing system. These are:
Establishment of Regulated Markets. Government has formed regulated markets to remove most of the evils
of an unorganised market system. Functions of regulated markets are:
(i) Enforcement of standard weights.
(ii) Fixation of charges, fees, etc.
(iii) Settling of disputes among the operating parties in the market.
(iv) Prevention of uMawful deductions and control of wrong practices of middlemen.
(v) Providing reliable market information.
Provision of Infrastructural Facilities. The government has taken measures to develop infrastructural facilities
like roads, railways, warehouses, godowns, cold storages and processing units.
Co-operative Market. Co-operative marketing is a measure to ensure a fair price to farmers. Member farmers
sell their surplus to the co-operative society which substitutes collective bargaining in place of individual
bargaining. It links rural credit farming marketing processes to the best advantage of the farmers.
Important Instruments to Safeguard the Interests of Farmers. The Government has also developed some
instruments to safeguard the interests of farmers. These instruments are:
(i) Fixation of Minimum Support Price (MSP)
(ii) Buffer Stock
(iii) Public Distribution System (PDS).

Question 12. Explain the role of non-farm employment in promoting rural diversification.
Answer. The non-farm sectors include agro-processing industries, food processing industries, leather industry,
tourism, etc. Some other sectors which have the potential but lack infrastructure are traditional household-
based industries like pottery, crafts, handlooms, etc.

Question 13. Bring out the importance of animal husbandry, fisheries and horticulture as a source of
diversification.
Answer. Animal Husbandry
(a) In India, the farming community uses the mixed crop-livestock farming system—cattle, goats, fowl are the
widely held species.
(b) This system provides increased stability in income, food security, transport, fuel and nutrition for the
family without disrupting other food-producing activities.
(c) Today, livestock sector alone provides alternate livelihood options to over 70 million small and marginal
farmers including landless labourers.
(d) Poultry accounts for the largest share. It is 42 per cent of total livestock in India.
(e) Milk production in the country has increased by more than four times between 1960-2002.

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(f) Meat, eggs, wool and other by-products are also emerging as important productive sectors for
diversification.

Fisheries
(a) The fishing community regards the water body as ‘mother’ or ‘provider’. The water bodies consist of sea,
oceans, rivers, lakes, natural aquatic ponds, streams, etc.
(b) Presently, fish production from inland sources contributes about 49 per cent to the total fish production
and the balance 51 per cent comes from the marine sector (sea and oceans). Today total fish production
accounts for 1.4 per cent of the total GDP.
(c) Among states, Kerala, Gujarat, Maharashtra and Tamil Nadu are the major producers of marine products.

Horticulture
(a) Due to 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 crpps..
(b) These crops play an important role in providing food, nutrition and employment.
(c) 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.
(d) Flower harvesting, nursery maintenance, hybrid seed production and tissue culture, propagation of fruits
and flowers and food processing are highly profitable employment opportunities for rural women. It has been
estimated that this sector provides employment to around 19 per cent of the total labour force.

Question 14. ‘Information technology plays a very significant role in achieving sustainable development
and food security’—comment.
Answer. Information technology plays a very significant role in achieving sustainable development and food
security in the following ways:
- It can act as a tool for releasing the creative potential and knowledge embedded in our poeple.
- Issues like weather forecast, crop treatment, fertilizers, pesticides, storage conditions, etc. can be well
administered if expert opinion is made available to the farmers.
- The quality and quantity of crops can be increased manifold if the farmers are made aware of the latest
equipments, technologies and resources.
- IT has ushered in a knowledge economy.
- It has potential of employment generation in rural areas.

Question 15. What is organic farming and how does it promote sustainable development?
Answer. Organic farming is a system of farming that maintains, enhances and restores the ecological balance.
Need for organic farming arises because:
- In the past, modem farming methods made excessive use of chemical fertilizers and pesticides. It led to soil,
water and air pollution, loss of soil fertility and too much chemical contents in foodgrains.
- There is urgency to conserve the environment and eco-system and promote sustainable development.
- Organic farming is an inexpensive farming technology. It can be purchased by small and marginal farmers.

Question 16. Identify the benefits and limitations of organic farming. .

Answer. The advantages of organic farming are:

Inexpensive Process. Organic agriculture offers a means to substitute costlier agricultural inputs (such as
HYV seeds, chemical fertilizers, pesticides, etc.) with locally produced organic inputs that are cheaper and
thereby generate more return on investment.
Generates Income. It generates income through international exports as the demand for organically grown
crops is on a rise.

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 Healthier and Tastier Food. Organically grown food has more nutritional value than food grown with
chemical farming. It, thus, provides us with healthy foods.
Solves Unemployment Problem. Since organic farming requires more labour input than conventional
farming, it will solve unemployment problem.
Environment Friendly. The produce is pesticide-free and produced in an environmentally sustainable way.

Limitations of organic farming are:

- It has been observed that the yield from organic farming is much less than modern agricultural farming.
Thus, goods produced organically command a higher price.
- Small and marginal farmers may not adapt to this type of farming due to lack of awareness and limited choice
of alternate production in off-seasons.
- Organic produce may have a shorter shelf life.

Question 17. Enlist some problems faced by farmers during the initial years of organic farming.
Answer.
- Organic farming requires:
(a) Organic Manure
(b) Bio-fertilizers
(c) Organic Pesticides
- Although they are cheaper to qjatain, yet farmers find it difficult to get them.
- The yield from organic farming is much less than modem agricultural farming.
- The price of organic foods is high, so it is difficult to sell them.
Organic produce generally has a shorter shelf life.

PGT ECONOMICS – BHAVESH SONI (8349965291)