Chapter 5: Rural Development

Rural development focuses on the social and economic development of rural areas. These programmes help to accelerate the growth and development of rural areas, which ultimately helps in the development of the country. The key issues that need to get highlighted are as follows:

1. The focus should be on creating human resources or, in other words, human capital by providing support in education, vocational skills, good healthcare facilities and job training.

2. Alternative sources of employment should be generated so as to address the issue of unemployment or disguised unemployment, and the development of alternative sources will reduce the burden on agriculture.

3. Infrastructure development is essential as it supports other growth initiatives. These developments can include the creation of banks, transport, electricity and means of irrigation.

4. Land reforms should be undertaken with the help of modern techniques, which increase overall production.

5. Poverty removal should be one of the focus points of rural development. It gives rise to many associated issues like unemployment, poor quality of human capital, social inequality etc.

Credit plays an important role in rural development. Farmers in rural areas have lower incomes and, accordingly, lower savings. Therefore, it results in less productivity. Banks also prefer paying loans to farmers having a good earning. Those farmers that are small or marginal take loans from moneylenders and fall into a trap. Credit infusion is very much essential for the agricultural sector in order to usher in rural development. The importance of credit can be as shown below:

1. It helps modernise farming by getting access to the latest tools through credit.

2. There exists a long time between sowing and harvesting. It is known as the gestation period. In this period, farmers need financial support to meet the requirements of farming, like seeds.

3. It helps farmers from poverty and provides funds for sustenance.

4. Agriculture is dependent primarily on weather and season. During a bad season, there is a possibility of crop failure, which is detrimental to farmers. In that case, credit and crop insurance help recover the cost.

Credit offered to the poor through the SHGs (Self Help Groups) and non-governmental organisations are known as microfinance organisations, and they offer micro-credit. The SHGs play a significant role in meeting the credit requirements of the poor and also encourage savings among the rural people. Money is pooled from the individual accounts of many farmers to finance the requirements of members. Finance made from SHGs reduces the cost of transactions for borrowers and lenders. The National Bank for Agricultural and Rural Development (NABARD) provides loan/credit at reduced rates. This type of finance is becoming the preferred choice for small farmers due to the ease of credit and faster disbursal.

The Steps taken by the Indian Government to develop rural markets are listed below:

1. The concept of regulated markets was introduced, where a market committee regulated the sale and purchase of products. This committee consisted of farmers, traders and government agents. Using proper scales and weights, the marketing system introduced greater transparency and ensured that farmers received good prices for their products.

2. The government introduced cold storage and warehouses, where farmers to sell products in the market when an attractive price can be obtained. Railways also offered transport facilities for selling products to the city market and earning good profit.

3. The government started cooperative marketing to make farmers get access to fair price policies. Farmers get better bargains for sale in the market.

4. MSP or Minimum Support Policy determines a price that a farmer may charge in exchange for his products in the open market. The policy of MSP protects a farmer in case there is a fall in price. It is especially beneficial as farming in India is prone to uncertainties.

Agricultural diversification refers to the diversity in crop production and allocating of the agricultural workforce in other allied activities such as fisheries, poultry and livestock, also in the non-agriculture sector. The following points explain the importance of agricultural diversification:

1. Indian farmers are dependent on monsoon for farming which is risky, so diversification enables farmers to earn more from occupations that are non-agricultural.

2. While there are a lot of farming opportunities in the Kharif season, the Rabi season brings with it difficulties in irrigation which makes employment less, diversification helps by providing an alternative source of income.

3. Agriculture as a job-providing proposition is already saturated and is unable to generate further employment; therefore, non-agricultural sectors can be explored as a potential source of revenue.

4. Due to possessing dynamic linkages, several non-farm sectors help in enhancing economic growth.

After the nationalisation of banks took place in 1969, rural banking grew a lot. This has helped in rural development in the following ways:

1. It helped increase farm and non-farm output by supplying credit facilities to customers.

2. Provided long-term loans with better repayment options. It helped dependency on moneylenders.

3. Achieving food security by the production of food grains in abundance.

4. Assisting self-employment schemes in rural areas to generate credit.

Agricultural marketing refers to the services that are involved in the movement of an agricultural product from the farm to the consumer. It includes planning, organising, directing and handling products in a way to satisfy farmers, intermediaries and, finally, the customer.

The steps involved in agricultural marketing are as follows:

1. Collecting the product after harvesting

2. Processing the collected product

3. Grading of the product as per the quality standards

4. Packing the product

5. Storage of the product for future use

6. Sale of product in the market at the best price

Obstacles that hinder the mechanism of agricultural marketing are as follows:

1. Inadequate storage spaces or warehouses

2. Multiple middlemen eating into profits

3. Malpractices present in unregulated markets

4. Lack of a proper weighing, grading and standardisation system

5. No scope of finance

6. Lack of proper market information

7. Transport and communication are not that developed.

The small and marginal farmers were the ones who were selling their products by taking the help of middlemen and losing profits to those middlemen. They were not receiving appropriate prices for their products. Hence, it led to the creation of an alternative channel. The features of these channels were that farmers could sell directly to consumers and get a higher price in comparison to selling through middlemen. Some of these examples are Hadapsar Mandi in Pune, Uzhavar Sandies in Tamil Nadu, Rythu Bazars in Andhra Pradesh and Telangana and Apni Mandi in Punjab, Haryana and Rajasthan. Apart from this, another alternative channel was the sale of produce to national and international companies on a contract basis. Payments were made in advance for products at pre-determined rates. The use of these channels helped farmers in raising income.