NCERT Textbook: Rural Development | Economics Class 12 - Commerce PDF Download

 Page 1


75 RURAL DEVELOPMENT
 After studying this chapter, the learners will
• understand rural development and the major issues associated with it
• appreciate how crucial the development of rural areas is for India’s overall
development
• understand the critical role of credit and marketing systems in rural
development
• learn about the importance of diversification of productive activities to
sustain livelihoods
• understand the significance of organic farming in sustainable
development.
RURAL
DEVELOPMENT
5
2024-25
Page 2


75 RURAL DEVELOPMENT
 After studying this chapter, the learners will
• understand rural development and the major issues associated with it
• appreciate how crucial the development of rural areas is for India’s overall
development
• understand the critical role of credit and marketing systems in rural
development
• learn about the importance of diversification of productive activities to
sustain livelihoods
• understand the significance of organic farming in sustainable
development.
RURAL
DEVELOPMENT
5
2024-25
76 INDIAN ECONOMIC DEVELOPMENT
5.1 INTRODUCTION
Previously we have studied how poverty
was a major challenge facing India. We
also know that the majority of the poor
live in rural areas where they do not
have access to the basic necessities
of life.
Agriculture is the major source of
livelihood in the rural sector. Mahatma
Gandhi once said that the real progress
of India did not mean simply the growth
and expansion of industrial urban
centres but mainly the development of
the villages. This idea of village
development being at the centre of the
overall development of the nation is
relevant even today. Why is this so?
Why should we attach such significance
to rural development when we see
around us fast growing cities with large
industries and modern information
technology hubs? It is because more
than two-third of India’s population
depends on agriculture that is yet to
become productive enough to provide
for them;  one-fourth of rural India still
lives in abject poverty. That is the
reason why we have to see a developed
rural India if our nation has to realise
real progress. What, then, does rural
development imply?
5.2 WHAT IS RURAL DEVELOPMENT?
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.
Some of the areas which are
challenging and need fresh initiatives
for development in rural India include
• Development of human resources
including
– literacy, more specifically, female
literacy, education and skill
development
– health, addressing both sanitation
and public health
• Land reforms
• Development of the productive
resources of each locality
• 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
• 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 people engaged
in farm and non-farm activities in
rural areas have to be provided with
various means that help them increase
the productivity. They also need to be
given opportunities to diversify
into various non-farm productive
“Only the tillers of the soil live by the right. The rest form their train and eat
only the bread of dependence”.
Thiruvalluvar
2024-25
Page 3


75 RURAL DEVELOPMENT
 After studying this chapter, the learners will
• understand rural development and the major issues associated with it
• appreciate how crucial the development of rural areas is for India’s overall
development
• understand the critical role of credit and marketing systems in rural
development
• learn about the importance of diversification of productive activities to
sustain livelihoods
• understand the significance of organic farming in sustainable
development.
RURAL
DEVELOPMENT
5
2024-25
76 INDIAN ECONOMIC DEVELOPMENT
5.1 INTRODUCTION
Previously we have studied how poverty
was a major challenge facing India. We
also know that the majority of the poor
live in rural areas where they do not
have access to the basic necessities
of life.
Agriculture is the major source of
livelihood in the rural sector. Mahatma
Gandhi once said that the real progress
of India did not mean simply the growth
and expansion of industrial urban
centres but mainly the development of
the villages. This idea of village
development being at the centre of the
overall development of the nation is
relevant even today. Why is this so?
Why should we attach such significance
to rural development when we see
around us fast growing cities with large
industries and modern information
technology hubs? It is because more
than two-third of India’s population
depends on agriculture that is yet to
become productive enough to provide
for them;  one-fourth of rural India still
lives in abject poverty. That is the
reason why we have to see a developed
rural India if our nation has to realise
real progress. What, then, does rural
development imply?
5.2 WHAT IS RURAL DEVELOPMENT?
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.
Some of the areas which are
challenging and need fresh initiatives
for development in rural India include
• Development of human resources
including
– literacy, more specifically, female
literacy, education and skill
development
– health, addressing both sanitation
and public health
• Land reforms
• Development of the productive
resources of each locality
• 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
• 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 people engaged
in farm and non-farm activities in
rural areas have to be provided with
various means that help them increase
the productivity. They also need to be
given opportunities to diversify
into various non-farm productive
“Only the tillers of the soil live by the right. The rest form their train and eat
only the bread of dependence”.
Thiruvalluvar
2024-25
77 RURAL DEVELOPMENT
activities such as food processing.
Enabling them better and more
affordable access to healthcare,
sanitation facilities at workplaces and
homes and education for all would also
need to be given top priority for rapid
rural development.
It was observed in an earlier chapter
that although the share of agriculture
sector’s contribution to GDP was on a
decline, the population dependent on
this sector did not show any significant
change. Further, after the initiation of
reforms, the growth rate of agriculture
sector decelerated to about 3 per cent
per annum during the 1991-2012,
which was lower than the earlier years.
In recent years, this sector has become
volatile. During 2014-15, the GVA
growth rate of agriculture and its allied
sectors was less than one per cent.
Scholars identify decline in public
investment since 1991 as the major
reason for this. They also argue that
inadequate infrastructure, lack of
alternate employment opportunities in
the industry or service sector,
increasing casualisation of employment
etc., further impede rural development.
The impact of this phenomenon can be
seen from the growing distress
witnessed among farmers across
different parts of India. Against this
background, we will critically look at
some of the crucial aspects of rural
India like credit and marketing
systems, agricultural diversification
and the role of organic farming in
promoting sustainable development.
5.3 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 of
gestation period 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 multi-
agency approach to adequately meet
the needs of rural credit. Later,  the
Work These Out
Ø On a monthly basis, go through the
newspapers of your region and
identify the problems raised by
them in relation to rural areas and
the solutions offered.  You could also
visit a nearby village and identify
the problems faced by people there.
Discuss this in the classroom.
Ø Prepare a list of recent schemes
and their objectives from the
government website https://
www.rural.nic.in. Collect the details
of how anyone of these schemes
implemented in your region/rural
neighbourhood areas. Discuss your
observations in class.
2024-25
Page 4


75 RURAL DEVELOPMENT
 After studying this chapter, the learners will
• understand rural development and the major issues associated with it
• appreciate how crucial the development of rural areas is for India’s overall
development
• understand the critical role of credit and marketing systems in rural
development
• learn about the importance of diversification of productive activities to
sustain livelihoods
• understand the significance of organic farming in sustainable
development.
RURAL
DEVELOPMENT
5
2024-25
76 INDIAN ECONOMIC DEVELOPMENT
5.1 INTRODUCTION
Previously we have studied how poverty
was a major challenge facing India. We
also know that the majority of the poor
live in rural areas where they do not
have access to the basic necessities
of life.
Agriculture is the major source of
livelihood in the rural sector. Mahatma
Gandhi once said that the real progress
of India did not mean simply the growth
and expansion of industrial urban
centres but mainly the development of
the villages. This idea of village
development being at the centre of the
overall development of the nation is
relevant even today. Why is this so?
Why should we attach such significance
to rural development when we see
around us fast growing cities with large
industries and modern information
technology hubs? It is because more
than two-third of India’s population
depends on agriculture that is yet to
become productive enough to provide
for them;  one-fourth of rural India still
lives in abject poverty. That is the
reason why we have to see a developed
rural India if our nation has to realise
real progress. What, then, does rural
development imply?
5.2 WHAT IS RURAL DEVELOPMENT?
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.
Some of the areas which are
challenging and need fresh initiatives
for development in rural India include
• Development of human resources
including
– literacy, more specifically, female
literacy, education and skill
development
– health, addressing both sanitation
and public health
• Land reforms
• Development of the productive
resources of each locality
• 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
• 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 people engaged
in farm and non-farm activities in
rural areas have to be provided with
various means that help them increase
the productivity. They also need to be
given opportunities to diversify
into various non-farm productive
“Only the tillers of the soil live by the right. The rest form their train and eat
only the bread of dependence”.
Thiruvalluvar
2024-25
77 RURAL DEVELOPMENT
activities such as food processing.
Enabling them better and more
affordable access to healthcare,
sanitation facilities at workplaces and
homes and education for all would also
need to be given top priority for rapid
rural development.
It was observed in an earlier chapter
that although the share of agriculture
sector’s contribution to GDP was on a
decline, the population dependent on
this sector did not show any significant
change. Further, after the initiation of
reforms, the growth rate of agriculture
sector decelerated to about 3 per cent
per annum during the 1991-2012,
which was lower than the earlier years.
In recent years, this sector has become
volatile. During 2014-15, the GVA
growth rate of agriculture and its allied
sectors was less than one per cent.
Scholars identify decline in public
investment since 1991 as the major
reason for this. They also argue that
inadequate infrastructure, lack of
alternate employment opportunities in
the industry or service sector,
increasing casualisation of employment
etc., further impede rural development.
The impact of this phenomenon can be
seen from the growing distress
witnessed among farmers across
different parts of India. Against this
background, we will critically look at
some of the crucial aspects of rural
India like credit and marketing
systems, agricultural diversification
and the role of organic farming in
promoting sustainable development.
5.3 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 of
gestation period 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 multi-
agency approach to adequately meet
the needs of rural credit. Later,  the
Work These Out
Ø On a monthly basis, go through the
newspapers of your region and
identify the problems raised by
them in relation to rural areas and
the solutions offered.  You could also
visit a nearby village and identify
the problems faced by people there.
Discuss this in the classroom.
Ø Prepare a list of recent schemes
and their objectives from the
government website https://
www.rural.nic.in. Collect the details
of how anyone of these schemes
implemented in your region/rural
neighbourhood areas. Discuss your
observations in class.
2024-25
78 INDIAN ECONOMIC DEVELOPMENT
Box 5.1: The Poor Women’s Bank
‘Kudumbashree’ is a women-oriented community-based poverty reduction
programme 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 and credit 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.
Source:  www.kudumbashree.org. Visit this website and explore various other initiatives
undertaken by this organisation. Identify some factors which contributed to
their successes and discuss in the class.
National Bank for Agriculture and
Rural Development (NABARD) 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
multi-agency institutions, namely,
commercial banks, regional rural banks
(RRBs), cooperatives and land
development banks. They are expected
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 May 2019, nearly 6 crore
Work These Out
Ø In your locality/neighbourhood, you might notice self-help groups providing
credit. Attend few meetings of such self-help groups. Write a report on the
profile of a self-help group. The profile may include — when it was started,
the number of members, amount of savings and type of credit they provide
and how borrowers use the loan.
Ø You might also find that those who take a loan for starting self-employment
activities but use it for other purposes. Interact with few such borrowers.
Identify the reasons for not starting self employment activities and discuss
in the classroom.
2024-25
Page 5


75 RURAL DEVELOPMENT
 After studying this chapter, the learners will
• understand rural development and the major issues associated with it
• appreciate how crucial the development of rural areas is for India’s overall
development
• understand the critical role of credit and marketing systems in rural
development
• learn about the importance of diversification of productive activities to
sustain livelihoods
• understand the significance of organic farming in sustainable
development.
RURAL
DEVELOPMENT
5
2024-25
76 INDIAN ECONOMIC DEVELOPMENT
5.1 INTRODUCTION
Previously we have studied how poverty
was a major challenge facing India. We
also know that the majority of the poor
live in rural areas where they do not
have access to the basic necessities
of life.
Agriculture is the major source of
livelihood in the rural sector. Mahatma
Gandhi once said that the real progress
of India did not mean simply the growth
and expansion of industrial urban
centres but mainly the development of
the villages. This idea of village
development being at the centre of the
overall development of the nation is
relevant even today. Why is this so?
Why should we attach such significance
to rural development when we see
around us fast growing cities with large
industries and modern information
technology hubs? It is because more
than two-third of India’s population
depends on agriculture that is yet to
become productive enough to provide
for them;  one-fourth of rural India still
lives in abject poverty. That is the
reason why we have to see a developed
rural India if our nation has to realise
real progress. What, then, does rural
development imply?
5.2 WHAT IS RURAL DEVELOPMENT?
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.
Some of the areas which are
challenging and need fresh initiatives
for development in rural India include
• Development of human resources
including
– literacy, more specifically, female
literacy, education and skill
development
– health, addressing both sanitation
and public health
• Land reforms
• Development of the productive
resources of each locality
• 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
• 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 people engaged
in farm and non-farm activities in
rural areas have to be provided with
various means that help them increase
the productivity. They also need to be
given opportunities to diversify
into various non-farm productive
“Only the tillers of the soil live by the right. The rest form their train and eat
only the bread of dependence”.
Thiruvalluvar
2024-25
77 RURAL DEVELOPMENT
activities such as food processing.
Enabling them better and more
affordable access to healthcare,
sanitation facilities at workplaces and
homes and education for all would also
need to be given top priority for rapid
rural development.
It was observed in an earlier chapter
that although the share of agriculture
sector’s contribution to GDP was on a
decline, the population dependent on
this sector did not show any significant
change. Further, after the initiation of
reforms, the growth rate of agriculture
sector decelerated to about 3 per cent
per annum during the 1991-2012,
which was lower than the earlier years.
In recent years, this sector has become
volatile. During 2014-15, the GVA
growth rate of agriculture and its allied
sectors was less than one per cent.
Scholars identify decline in public
investment since 1991 as the major
reason for this. They also argue that
inadequate infrastructure, lack of
alternate employment opportunities in
the industry or service sector,
increasing casualisation of employment
etc., further impede rural development.
The impact of this phenomenon can be
seen from the growing distress
witnessed among farmers across
different parts of India. Against this
background, we will critically look at
some of the crucial aspects of rural
India like credit and marketing
systems, agricultural diversification
and the role of organic farming in
promoting sustainable development.
5.3 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 of
gestation period 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 multi-
agency approach to adequately meet
the needs of rural credit. Later,  the
Work These Out
Ø On a monthly basis, go through the
newspapers of your region and
identify the problems raised by
them in relation to rural areas and
the solutions offered.  You could also
visit a nearby village and identify
the problems faced by people there.
Discuss this in the classroom.
Ø Prepare a list of recent schemes
and their objectives from the
government website https://
www.rural.nic.in. Collect the details
of how anyone of these schemes
implemented in your region/rural
neighbourhood areas. Discuss your
observations in class.
2024-25
78 INDIAN ECONOMIC DEVELOPMENT
Box 5.1: The Poor Women’s Bank
‘Kudumbashree’ is a women-oriented community-based poverty reduction
programme 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 and credit 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.
Source:  www.kudumbashree.org. Visit this website and explore various other initiatives
undertaken by this organisation. Identify some factors which contributed to
their successes and discuss in the class.
National Bank for Agriculture and
Rural Development (NABARD) 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
multi-agency institutions, namely,
commercial banks, regional rural banks
(RRBs), cooperatives and land
development banks. They are expected
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 May 2019, nearly 6 crore
Work These Out
Ø In your locality/neighbourhood, you might notice self-help groups providing
credit. Attend few meetings of such self-help groups. Write a report on the
profile of a self-help group. The profile may include — when it was started,
the number of members, amount of savings and type of credit they provide
and how borrowers use the loan.
Ø You might also find that those who take a loan for starting self-employment
activities but use it for other purposes. Interact with few such borrowers.
Identify the reasons for not starting self employment activities and discuss
in the classroom.
2024-25
79 RURAL DEVELOPMENT
women in India have become member
in 54 lakh women SHGs. About ` 10-
15,000 per SHG and another `2.5 lakhs
per SHG as a Community Investment
Support Fund (CISF) are provided as part
of renovating fund to take up self
employement for income generation.
Such credit provisions are generally
referred to as micro-credit programmes.
SHGs have helped in the empowerment
of women. It is alleged that the borrowings
are mainly confined to consumption
purposes. Why are borrowers not
spending for productive purposes?
Rural Banking — a Critical Appraisal:
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.
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. Why farmers failed to pay back
loans? It is alleged that farmers are
deliberately refusing to pay back
loans. What could be the reasons?
Thus, the expansion and promotion
of the rural banking sector has taken a
backseat after reforms. To improve the
situation, In recent years, all the adults
are encouraged to open bank accounts
as a part of a scheme known as Jan-
Dhan Yojana. Those bank account
holders can get Rs. 1-2 lakh accidental
insurance coverage and overdraft
facilities for Rs. 10,000 and get their
wages if they get any government-related
jobs and works under MNREGA;
old age pension and other social
security payments of  the government are
Work These Out
Ø In the last few years, you might have taken note — in your neighbourhood if you
are living in rural areas or read in the newspapers or seen on TV — of farmers
commiting suicides. Many such farmers had borrowed money for farming and other
purposes. It was found that when they were unable to pay back due to crop failure,
insufficient income and employment opportunities, they took such steps. Collect
information relating to such cases and discuss in the classroom.
Ø Visit banks that cater to rural areas. They may be primary agricultural cooperative
banks, land development banks, regional rural banks or district cooperative banks.
Collect details such as how many rural households borrowed from them,  amount
generally borrowed, kinds of collateral used, interest rates and dues.
Ø If farmers who borrowed from cooperative banks could not pay back due to crop
failure and other reasons, their loans should be waived otherwise they may take
drastic decisions like committing suicides. Do you agree?
2024-25