RURAL DEVELOPMENT
BASIC CONCEPT
Rural development is a comprehensive term.
It essentially focuses on action for the development of areas that are lagging behind in the overall development of the village economy.
The challenging part and the things that are needed for the development of India is mentioned below:
a. Development of human resources including – literacy, more specifically, female literacy, education
and skill development – health, addressing both sanitation and public health
b. Land reforms
c. Development of the productive resources of each locality
d. 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
e. Special measures for alleviation of poverty and bringing about significant improvement in the living conditions of the weaker sections of the
population emphasising access to productive employment opportunities.
All this means that farming communities have to be provided with various means that help them increase the productivity of grains, cereals, vegetables and fruits.
They also need to be given opportunities to diversify into various non-farm productive activities such as food processing.
Rural development is a comprehensive term.
It essentially focuses on action for the development of areas that are lagging behind in the overall development of the village economy.
The challenging part and the things that are needed for the development of India is mentioned below:
a. Development of human resources including – literacy, more specifically, female literacy, education
and skill development – health, addressing both sanitation and public health
b. Land reforms
c. Development of the productive resources of each locality
d. 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
e. Special measures for alleviation of poverty and bringing about significant improvement in the living conditions of the weaker sections of the
population emphasising access to productive employment opportunities.
All this means that farming communities have to be provided with various means that help them increase the productivity of grains, cereals, vegetables and fruits.
They also need to be given opportunities to diversify into various non-farm productive activities such as food processing.
CREDIT AND MARKETING IN RURAL AREAS
CREDIT
Growth of rural economy depends primarily on infusion of capital, from time to time, to realise higher productivity in agriculture
and non-agriculture sectors.
As the time gestation between crop sowing and realisation of income after production is quite long, farmers borrow from various sources to meet their
initial investment on seeds, fertilisers, implements and other family expenses of marriage, death, religious ceremonies etc.
At the time of independence, moneylenders and traders exploited small and marginal farmers and landless labourers by lending to them on high interest rates
and by manipulating the accounts to keep them in a debt-trap.
A major change occurred after 1969 when India adopted social banking and multiagency approach to adequately meet the needs of rural credit.
Later, the National Bank for Agriculture and Rural Development (NBARD) was set up in 1982 as an apex body to coordinate the activities of all
institutions involved in the rural financing system.
The Green Revolution was a harbinger of major changes in the credit system as it led to the diversification of the portfolio of rural credit towards
production- oriented lending.
The institutional structure of rural banking today consists of a set of multiagency institutions, namely, commercial banks, regional rural banks (RRBs),
cooperatives and land development banks. The major aim of designing this multi-agency system is to dispense adequate credit at cheaper rates.
Recently, Self-Help Groups (henceforth SHGs) 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 been fully integrated into the overall rural social and community development.
Since some kind of collateral is required, vast proportion of poor rural households were automatically out of the credit network.
The SHGs 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. By March end 2003, more than seven lakh SHGs had reportedly been credit linked.
Such credit provisions are generally referred to as micro-credit programmes.
SHGs have helped in the empowerment of women but the borrowings are mainly confined to consumption purposes and negligible proportion is borrowed for
agricultural purposes.
Growth of rural economy depends primarily on infusion of capital, from time to time, to realise higher productivity in agriculture
and non-agriculture sectors.
As the time gestation between crop sowing and realisation of income after production is quite long, farmers borrow from various sources to meet their
initial investment on seeds, fertilisers, implements and other family expenses of marriage, death, religious ceremonies etc.
At the time of independence, moneylenders and traders exploited small and marginal farmers and landless labourers by lending to them on high interest rates
and by manipulating the accounts to keep them in a debt-trap.
A major change occurred after 1969 when India adopted social banking and multiagency approach to adequately meet the needs of rural credit.
Later, the National Bank for Agriculture and Rural Development (NBARD) was set up in 1982 as an apex body to coordinate the activities of all
institutions involved in the rural financing system.
The Green Revolution was a harbinger of major changes in the credit system as it led to the diversification of the portfolio of rural credit towards
production- oriented lending.
The institutional structure of rural banking today consists of a set of multiagency institutions, namely, commercial banks, regional rural banks (RRBs),
cooperatives and land development banks. The major aim of designing this multi-agency system is to dispense adequate credit at cheaper rates.
Recently, Self-Help Groups (henceforth SHGs) 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 been fully integrated into the overall rural social and community development.
Since some kind of collateral is required, vast proportion of poor rural households were automatically out of the credit network.
The SHGs 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. By March end 2003, more than seven lakh SHGs had reportedly been credit linked.
Such credit provisions are generally referred to as micro-credit programmes.
SHGs have helped in the empowerment of women but the borrowings are mainly confined to consumption purposes and negligible proportion is borrowed for
agricultural purposes.
Rural Banking
Rapid expansion of the banking system had a positive effect on rural farm and non-farm output, income and employment, especially after
the green revolution — it helped farmers to avail services and credit facilities and a variety of loans for meeting their prodution needs.
Famines became events of the past; we have now achieved food security which is reflected in the abundant buffer stocks of grains.
However, all is not well with our banking system. This is largely because of the chronic underperformance of formal credit institutions and
high incidence of overdue instalments by the farmers.
With the possible exception of the commercial banks, other formal institutions have failed to develop a culture of deposit mobilisation —
lending to worthwhile borrowers and effective loan recovery.
Agriculture loan default rates have been chronically high and many studies reveal that about 50 per cent of the defaulters were categorised as
‘wilful defaulters’ which is a threat to the smooth functioning of the banking system and needs to be controlled.
Thus, the expansion and promotion of the rural banking sector has taken a backseat after reforms.
To improve the situation, banks need to change their approach from just being lenders to building up relationship banking with the borrowers.
Inculcating the habit of thrift and efficient utilisation of financial resources needs to be enhanced among the farmers too.
the green revolution — it helped farmers to avail services and credit facilities and a variety of loans for meeting their prodution needs.
Famines became events of the past; we have now achieved food security which is reflected in the abundant buffer stocks of grains.
However, all is not well with our banking system. This is largely because of the chronic underperformance of formal credit institutions and
high incidence of overdue instalments by the farmers.
With the possible exception of the commercial banks, other formal institutions have failed to develop a culture of deposit mobilisation —
lending to worthwhile borrowers and effective loan recovery.
Agriculture loan default rates have been chronically high and many studies reveal that about 50 per cent of the defaulters were categorised as
‘wilful defaulters’ which is a threat to the smooth functioning of the banking system and needs to be controlled.
Thus, the expansion and promotion of the rural banking sector has taken a backseat after reforms.
To improve the situation, banks need to change their approach from just being lenders to building up relationship banking with the borrowers.
Inculcating the habit of thrift and efficient utilisation of financial resources needs to be enhanced among the farmers too.
AGRICULTURAL MARKET SYSTEM
Agricultural marketing is a process that involves the assembling, storage, processing, transportation, packaging, grading and
distribution of different agricultural commodities across the country.
Prior to independence, farmers, while selling their produce to traders, suffered from faulty weighing and manipulation of accounts.
Farmers who did not have the required information on prices prevailing in markets were often forced to sell at low prices.
They also did not have proper storage facilities to keep back their produce for selling later at a better price.
Four measures that were initiated to improve the marketing aspect.
The first step was regulation of markets to create orderly and transparent marketing conditions.
By and large, this policy benefited farmers as well as consumers.
However, there is still a need to develop about 27,000 rural periodic markets as regulated market places to realise the full potential of rural markets.
Second component is provision of 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, in realising fair prices for farmers’ products, is the third aspect of government initiative.
The success of milk cooperatives in transforming the social and economic landscape of Gujarat and some other parts of the country is testimony to the
role of cooperatives. However cooperatives have received a setback during the recent past due to inadequate coverage of farmer members,
lack of appropriate link between marketing and processing cooperatives and inefficient financial management.
The fourth element is the policy instruments like
(i) assurance of minimum support prices (MSP) for 24 agricultural products
(ii) maintenance of buffer stocks of wheat and rice by Food Corporation of India and
(iii) distribution of food grains and sugar through PDS.
These instruments are aimed at protecting the income of the farmers and providing foodgrains at a subsidised rate to the poor.
However, despite government intervention, private trade (by moneylenders, rural political elites, big merchants and rich farmers) predominates agricultural markets.
The quantity of agricultural products, handled by the government agencies and consumer cooperatives,
constitutes only 10 per cent while the rest is handled by the private sector.
Agricultural marketing has come a long way with the intervention of the government in various forms.
The rapid commercialisation of agriculture in the era of globalisation offers tremendous opportunities for value addition of agro-based products
through processing and this needs to be encouraged apart from awareness and training of the farmers to improve their marketing ability.
distribution of different agricultural commodities across the country.
Prior to independence, farmers, while selling their produce to traders, suffered from faulty weighing and manipulation of accounts.
Farmers who did not have the required information on prices prevailing in markets were often forced to sell at low prices.
They also did not have proper storage facilities to keep back their produce for selling later at a better price.
Four measures that were initiated to improve the marketing aspect.
The first step was regulation of markets to create orderly and transparent marketing conditions.
By and large, this policy benefited farmers as well as consumers.
However, there is still a need to develop about 27,000 rural periodic markets as regulated market places to realise the full potential of rural markets.
Second component is provision of 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, in realising fair prices for farmers’ products, is the third aspect of government initiative.
The success of milk cooperatives in transforming the social and economic landscape of Gujarat and some other parts of the country is testimony to the
role of cooperatives. However cooperatives have received a setback during the recent past due to inadequate coverage of farmer members,
lack of appropriate link between marketing and processing cooperatives and inefficient financial management.
The fourth element is the policy instruments like
(i) assurance of minimum support prices (MSP) for 24 agricultural products
(ii) maintenance of buffer stocks of wheat and rice by Food Corporation of India and
(iii) distribution of food grains and sugar through PDS.
These instruments are aimed at protecting the income of the farmers and providing foodgrains at a subsidised rate to the poor.
However, despite government intervention, private trade (by moneylenders, rural political elites, big merchants and rich farmers) predominates agricultural markets.
The quantity of agricultural products, handled by the government agencies and consumer cooperatives,
constitutes only 10 per cent while the rest is handled by the private sector.
Agricultural marketing has come a long way with the intervention of the government in various forms.
The rapid commercialisation of agriculture in the era of globalisation offers tremendous opportunities for value addition of agro-based products
through processing and this needs to be encouraged apart from awareness and training of the farmers to improve their marketing ability.
Emerging Alternate Marketing Channels
It has been realised that if farmers directly sell their produce to consumers, it increases their share in the price paid by the consumers.
Some examples of these channels are Apni Mandi (Punjab, Haryana, Rajasthan); Hadaspar Mandi (Pune); Rythu Bazars (vegetable and
fruit market in Andhra Pradesh) and Uzhavar Sandies (farmers markets in Tamil Nadu).
Further, several national and multinational fast food chains are increasingly entering into contracts/alliances with farmers to encourage them to
cultivate farm products (vegetables, fruits, etc.) of the desired quality by providing them with not only seeds and other inputs but
also assured procurement of the produce at pre-decided prices.
Such arrangements will help in reducing the price risks of farmers and would also expand the markets for farm products.
Some examples of these channels are Apni Mandi (Punjab, Haryana, Rajasthan); Hadaspar Mandi (Pune); Rythu Bazars (vegetable and
fruit market in Andhra Pradesh) and Uzhavar Sandies (farmers markets in Tamil Nadu).
Further, several national and multinational fast food chains are increasingly entering into contracts/alliances with farmers to encourage them to
cultivate farm products (vegetables, fruits, etc.) of the desired quality by providing them with not only seeds and other inputs but
also assured procurement of the produce at pre-decided prices.
Such arrangements will help in reducing the price risks of farmers and would also expand the markets for farm products.
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