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Chapter 6 Rural development class 12th Commerce


Introduction & Meaning of Rural Development


Rural development refers to continuous and comprehensive socio-economic process, attempting to improve all aspects of rural life.



Rural development aims at comprehensive change and improvement of rural life in all aspects. Some of the areas, which are challenging and need fresh initiates for development in India include:

  • Development in human resources
  • Development of infrastructure
  • Land reforms
  • Alleviation of poverty
  • Development of productive resources


Development of Human Resources:

The quality of the human resource needs to be improved through following measures: Proper attention to literary (specifically on female literacy), education and skill development; and Better Health facilities for the physical growth.


Development of infrastructure:

It involves: Improvement in electricity, irrigation, credit, marketing and transport facilities (including construction of village roads and feeder roads to nearby highways); Better Health facilities for agriculture research and extension and information dissemination


Land Reforms:

It includes the following objectives; Elimination of exploitation in hand relations; Actualisation of the goal of ‘land to the tiller’. Improvement of socio-economic conditions of rural poor by widening their land base; Increasing agricultural productivity and production.


Alleviation of Poverty:

As stated earlier, around 30 per cent of total population is still below the poverty line. So, there is a serious need for taking serious steps for alleviation of poverty and bringing significant improvement in living conditions of weaker sections.


Development of the productive resources:

Productive resources helps in generating employment opportunities. In rural areas, excess burden is on agriculture and in rural and urban areas each locality should enhance opportunities of employment (particularity other than farming).


Rural Credit

Growth of rural economy depends on timely infusion of capital, to realize higher productivity in agriculture and non-agriculture sectors. In agriculture, farmers are in strong need for credit due to long time gap between crop sowing and realization of income.  Farmers borrow from various sources to meet initial investment on seeds, fertilizers and other family expenses. So credit is one of the important factors, which contribute to agriculture production.


Sources of rural credit

  • Non institutional
  • Institutional


They are not linked with govt or any private institution


  • Broadly, there are two sources, from which the farmers can raise loans:
  • Non-Institutional Sources
  • Institutional Sources
  • Non-Institutional Sources
  • Non-Institutional sources have been the traditional sources of agricultural credit in India.


The major non-institutional sources are;

  • Money lender
  • Relatives
  • Trader and commission agents
  • Rich landlords



From the very beginning, moneylenders have been advancing a major share of farm credit. The peasants are exploited through exorbitant (very high) rates of interest. Quite frequently, their accounts are manipulated without their knowledge.


Relatives :

Cultivators borrow funds from their own relatives in times of crisis. These loans are a kind of informal loans and carry no interest and are normally returned after harvest.


Traders and Commission agents:

They provide credit to the peasants on the mortgage of crops at high rates of interest, on a condition, that the crops will be sold to them at low prices.


Rich Landlords:

Small as well as marginal farmers and tenants, take loans from landlords, for meeting their financial requirements. Landlords also charge high rates of interest on such loans and exploit the peasants, particularly small farmers and tenants.


Institutional sources

  • Co-operation credit
  • Land development banks
  • Commercial bank credit
  • Regional rural banks
  • The government
  • National bank for agriculture and rural development
  • Self-helped group bank linkages program for micro finance


Some of the important institutional sources of agricultural credit are:

Co-operative society

Co-operative Credit:

The primary objective of the co-operatives is to liberate the Indian peasantry from the clutches of moneylenders and to provide them credit at low rates of interest.


Land Development Banks:

They provide credit to the farmers against the mortgage of their lands. Loans are provided for permanent improvement of land, purchasing agriculture implements and for repaying old debts.


Commercial Bank Credit:

Initially, commercial banks played a marginal role in advancing rural credit. However, after nationalization in 1969, they expanded their branches in rural areas and started directly financing the farmers.


Regional Rural Banks:

They are opened up in those areas where there are no banking facilities. Their main objective is to provide credit and other facilities, especially to small and marginal farmers, agricultural labourers, artisans and small entrepreneurs in rural areas.


The government

The loans provided by the government are known as taccavi loans and are lent during emergency or distress, like famines, floods, etc. The rate of interest charged against such loan is as 6 per cent.



National Bank for Agricultural and Rural Development (NABARD):

It is the Apex Bank which coordinates the functioning of different financial institutions, working for expansion of rural credit.

Its objective is to promote health and strength of credit institutions (namely, cooperatives, commercial banks and regional rural banks).

Besides providing finance to credit institutions, NABARD also provides financial assistance to the non-farm sector, to promote integrated rural development and prosperity of backward rural areas.


Self help group bank

Self-Help Group (SHG) Bank Linkage Programme for Micro Finance: SHG has emerged as the major micro finance programme in the country in recent years.

Their focus is largely on those rural poor, who have no sustainable access to the formal banking system.


SHGs promote thrift in small proportions by a minimum contribution from each member.


From the pooled money, credit is given to the needy members at reasonable interest rates, which is to be rapid in small installments.


By March 2012, more forty three lakh SHGs had reportedly been credit linked.


Critical appraisal of rural banking

There are number of problems faced by the agricultural credit structure of the country. Some of the problems faced in rural banking are:


  1. Insufficiency

The volume of rural credit in the country is still insufficient in comparison to its demand.


  1. Inadequate coverage of institutional sources

The institutional credit arrangement continues to be inadequate as compared to growing needs. They have failed to cover the entire rural farmers of the country.


  1. Inadequate amount of sanction

The amount of loan sanctioned to the farmers is also inadequate. As a result, farmers often divert such loans for unproductive purposes, which dilute the very purpose of such loan.


  1. Less attention to poor or marginal farmers

Lesser attention has been given on the credit requirements of needy (small and marginal) farmers. On the other hand, well-to-do farmers are getting more attention due to better credit worthiness.


  1. Growing Overdues

The problem of overdues in agricultural credit continues to be an area of concern. A he basic reason for growing overdues is the poor repaying capacity of farmers. As a result, credit agencies are becoming cautious of granting loan to farmers.


MCQ Type question-

The scheme of micro finance is extended through

  2. Self Help Groups
  3. Regional Rural Banks
  4. Commercial banks

Answer is a NABARD


Meaning of Agriculture marketing system

Agricultural marketing is a process that involves assembling, storage, processing, transporation, packaging, grading and distribution of different agricultural commodities across the country.


Problems faced by the farmers

Manipulation by big traders:

Prior to independence, farmers suffered from faulty weighing and manipulation of accounts while selling their produce to traders.


Lack of market information:

Farmers were often forced to sell at low price due to lack of required information on price prevailing in market.


Lack of storage facilities:

They also did not have proper storage facilities to keep back their produce for selling later at a better price. Even today, more than 10% of goods produced in farms are wasted due to lack of storage.


Measures to Improve Agriculture Marketing System

Measure to Improve Agricultural Marketing

  • Regulated markets
  • Infrastructural facilities
  • Cooperative marketing
  • Different policy instruments


Regulated Markets:

Main aim was to create orderly and transparent marketing conditions. Regulated markets have been organised with a view to protect the farmers from the malpractices of sellers and brokers. This policy benefitted farmers as well as consumers.


Infrastructural Facilities:

The Government aims to provide physical infrastructure facilities like roads, railways, warehouses, godowns, cold storages and processing units. The current infrastructure facilities are quite inadequate to meet the growing demand and need to be improved.


Cooperative Marketing:

The aim of cooperative marketing is to realize fair price for farmer’s products. Under this, marketing societies are formed by farmers to sell the output collectively and to take advantage of collective bargaining, in order to obtain better price.

However, cooperatives have received a setback during the recent past because of:

  • Inadequate coverage of farmer members;
  • Lack of appropriate link between marketing and processing cooperatives;
  • Inefficient financial management.


Different policy instruments:

In order to protect the farmers, the government has initiated the following policies:  wheat, rice, maize, cotton, sugarcane, pulses, etc


Minimum Support Prices (MSP): To safeguard the interest of farmers, government fixes the minimum support prices of 24 agricultural products, like wheat, rice, maize, cotton, sugarcane, pulses, etc. Such a price may be regarded as an offer price, at which the Government is willing to buy any amount of grains from the farmers.


Maintenance of Buffer Stock: The Food Cooperation of India (FCI) purchases wheat and rice at the procurement prices, to maintain buffer stock. Buffer stock is created in the years of surplus production and is used during shortages. It helps to ensure regularity in supply and stability in prices.


Public Distribution System (PDS): The public distribution system in our country operates through a network of ration shops and fair price shops. Fair price shops offer essential commodities like wheat, rice, kerosene, etc. at a price below the market price, to the weaker sections of the society.


Emerging Alternate Marketing Channels

Origin of Farmers Market: Farmers can increase their share in the price paid by the consumers, if they directly sell their produce to consumers. As a result, the concept of “farmers market” was started, to give boost to the small farmers by providing them provide direct access to the consumers and eliminating the middlemen. Some examples of these channels are:


  • Alliance with National and Multinational Companies: Several nation and multinational fast food chains are increasingly entering into contracts/alliances with farmers.
  • They encourage the farmers to cultivate farm products (vegetables, fruits, etc.) of the desired quality.
  • They provide them with not only seeds and other inputs, but also assure procurement of the produce at pre-decided prices.
  • Such arrangements help in reducing the price risk of farmers and expand the market for farm products.


Diversification of Agricultural Activities

Reason for diversification

Agriculture plays a very important role in the economic development. The need for diversification arises because:

There is greater risk in depending exclusively on farming for livelihood; and

To provide productive sustainable livelihood options to rural people.


Benefit of Diversification

Much of the agricultural employment activities are concentrated in the Kharif season. But during the Rabi season, in areas where there are inadequate irrigation facilities, it becomes difficult to find gainful employment. Therefore, expansion into other sectors is essential to provide supplementary gainful employment and in realizing higher levels of income for rural people to overcome poverty and other tribulations. Hence, there is a need to focus on allied activities, non-farm employment and other emerging alternatives of livelihood, though there are many other options available for providing sustainable livelihoods in rural areas.

  • Types of Diversification
  • Types of Diversification
  • Diversification includes two aspects:
  • Diversification of Crop Production;


Diversification of Productive Activities (shift of workforce from agriculture to other allied activities and non- agriculture sector).

It involves a shift from single-cropping system to multi-cropping system.

Diversification involves a shift in cropping pattern from food grains to cash crops. Basically, the main aim is to promote shift from s subsistence farming to commercial farming.

Multi-cropping system reduces the dependence of farmers on one or two crops as they are engaged in growing a wide variety of crops. It also raises their income. 


Diversification of productive Activities

As agriculture is already overcrowded, a major proportion of the increasing labour force needs to find alternate employment opportunities in other non-farm sectors.

Non-farm Activities has several segments. Some segments of non-farm activities possess dynamic linkage that permit healthy growth, while others are in subsistence, low productivity propositions.


Those sectors which have the potential but seriously lack infrastructures and other support, include traditional household-based industries, like pottery, crafts, handlooms, etc.


Non -farm areas of employment

  • Informational technology
  • Formation Technology


Information Technology (IT) refers to that of engineering that deals with the use of computers and telecommunications to retrieve and store and transmit information.


Information Technology has revolutionized may sectors in the Indian economy. There is broad agreement that it will play a critical role in achieving sustainable development and food security in the 21st century.


Animal husbandry




Let us now discuss some of the important non-farm areas of employment.

Animal Husbandry and Dairying

Animal Husbandry

Animal Husbandry (or Livestock farming) is that branch of agriculture, which is concerned with the breeding, rearing and caring for farm animals.

Under livestock farming, cattles, goats and fowls (duck, goose, etc.) are the widely held species.


India owns one of the largest livestock populations in the world.


Livestock production provides increased stability in income, food security, transport, fuel and nutrition for the family, without disrupting other food producing activities.







Dairying is that branch of agriculture which involves breeding, raising and utilization of dairy animals for the production of milk and the various dairy products from it.


Dairying is the business of producing, storing and distributing milk and its products.

Due to the successful implementation of “Operation Flood”, India ranks first in the world in milk production. India’s milk production increased from 17 million tonnes in 1950-51 to 102.6 million tonnes in 2006 -07 and increased to 133.7 million tonnes in 2012-13.


Operation Flood (or white Revolution) was started by National Dairy Development Board (NDDB) in 1970 under the expert guidance of then chairman, Dr. VergheseKurien. The objective of this programme was to create a nationwide milk milk meat etc…



Horticulture refers to the science or art of cultivating fruits, vegetables, tuber crops, flowers, medicinal and aromatic plants, spices and plantation crops. These crops play a vital role in providing food and nutrition, besides addressing employment concerns. India has adopted horticulture as it is blessed with a varying climate and soil conditions.



Fisheries refer to the occupation devoted to the catching, processing or selling of fish and other aquatic animals. Fisheries sector plays an important role in the socio-economic development of the country.


Sustainable development and organic farming

Meaning of Organic Farming

Organic farming is the form of agriculture that relies on techniques such as crop rotation, green manure, compost and biological pest control. This method avoids the use of synthetic chemical fertilisers and genetically modified organisms.


Benefit of organic farming

Organic Farming is beneficial because of following reasons:


Economical Farming:

Organic Farming offers a means to substitute costlier agricultural inputs (such as HYV seeds, chemical fertilisers, pesticides, etc.) with locally produced cheaper organic inputs.


Generates income through exports:

It generates income through international exports as demand for organically grown crops is on a rise.


Provide healthy food. Provides Healthy Food: It provides healthy food as organically grown food has more nutritional value than food grown through chemical farming.


Source of employment Source of Employment: Organic farming generates more employment opportunities as it requires more labor input than conventional farming.


Challenges of organic farming Organic Farming suffers from following drawbacks:


Less popular Less Popular: Organic farming needs to be popularized by creating awareness and willingness on the part of farmers, for adoption of new technology. There is a serious need for an appropriate policy to promote organic farming.


Lack of infrastructure and marketing facilities: Organic farming faces problems of inadequate infrastructure and marketing facilities.


Low Yield:

Organic farming has a lesser 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.


Shorter food life:

Organic produce has a shorter shelf life as compared to sprayed produce.



MCQ type question-

Organic farming is beneficial because-

a. It generates income

b. It produce in an environmentally sustainable way

c. It provides healthy food

d. All of these.


Answer is d all of these

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