NCERT Notes Class 11 Indian Economic Development Chapter 5: Rural Development (Free PDF)

Rural development is essential for India’s overall progress, given that more than two-thirds of the population depends on agriculture, and one-fourth of rural India lives in abject poverty. This chapter examines key aspects such as credit and marketing systems, agricultural diversification, and sustainable practices like organic farming to enhance productivity, alleviate poverty, and improve living conditions in rural areas. These notes summarise key concepts from Chapter 5 of the NCERT textbook Indian Economic Development for effective revision. You can also download the free PDF for quick reference.

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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. It is because more than two-thirds 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 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. Here are some of the important pointers about rural development:

• 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 productivity. They also need to be given opportunities to diversify into various non-farm productive 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 the 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 the agriculture sector decelerated to about 3 per cent per annum during the 1991-2012 period, which was lower than the earlier years. 
• In recent years, this sector has become volatile. During 2023-24, the GVA growth rate of agriculture and its allied sectors was about two per cent. Scholars identify the 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.

Credit and Marketing in Rural Areas

Growth of the rural economy depends primarily on the infusion of capital, from time to time, to realise higher productivity in the agriculture and non-agriculture sectors. As the time of the 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 at 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 a multi-agency approach to adequately meet the needs of rural credit. Later, the 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, a vast proportion of poor rural households were automatically out of the credit network. 

The SHGs promote thrift in small proportions with a minimum contribution from each member. From the pooled money, credit is given to the needy members to be repaid in small instalments at reasonable interest rates. By May 2019, nearly 6 crore women in India had become members of 54 lakh women SHGs. About Rs 10-15,000 per SHG and another Rs 2.5 lakhs per SHG as a Community Investment Support Fund (CISF) are provided as part of the renovation fund to take up self-employment 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.

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 production 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. Thus, the expansion and promotion of the rural banking sector has taken a backseat after reforms. To improve the situation, in recent years, all adults have been encouraged to open bank accounts as 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 work under MNREGA; old age pension and other social security payments of the government are transferred to bank accounts. There is no need to keep a minimum bank balance. This has led to more than 50 crore people opening bank accounts; indirectly, it has promoted thrift habits and efficient allocation of financial resources, particularly in rural areas. Banks also could mobile funds of more than Rs. 2,00,000 crores through these accounts.

Agricultural Market System

Have you ever asked yourself how food grains, vegetables and fruits that we consume daily come from different parts of the country? The mechanism through which these goods reach different places depends on the market channels. Agricultural marketing is a process that involves the assembling, storage, processing, transportation, packaging, grading and distribution of different agricultural commodities across the country. 

Before 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 their produce for selling later at a better price. Even today, more than 10 per cent of goods produced in farms are wasted due to a lack of storage. Therefore, government intervention became necessary to regulate the activities of the private traders. Let us discuss four such measures that were initiated to improve the marketing aspect. 

• The first step was the 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 marketplaces to realise the full potential of rural markets. 
• The second component is the 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, a 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 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 need for government intervention is imminent, particularly when a large share of agricultural products is handled by the private sector. Agricultural marketing has come a long way with the intervention of the government in various forms. Some scholars argue that the commercialisation of agriculture offers tremendous scope for farmers to earn higher incomes, provided the government intervention is restricted.

Emerging Alternative Marketing Channels

It has been realised that if farmers directly sell their produce to consumers, it increases their incomes. Some examples of these channels are Apni Mandi (Punjab, Haryana and Rajasthan); Hadaspar Mandi (Pune); Rythu Bazars (vegetable and fruit markets in Andhra Pradesh and Telangana) 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. 

It is argued that such arrangements will help in reducing the price risks of farmers and would also expand the markets for farm products. In 2020, the Indian Parliament passed three laws to reform the agriculture marketing system. While some sections of farmers support these reforms, the rest of the farmers oppose, and these Acts are still being debated.

Diversification into Productive Activities

Diversification includes two aspects – one relates to a change in cropping pattern and the other relates to a shift of workforce from agriculture to other allied activities (livestock, poultry, fisheries, etc.) and the non-agriculture sector. The need for diversification arises from the fact that there is a greater risk in depending exclusively on farming for livelihood. Diversification towards new areas is necessary not only to reduce the risk from the agriculture sector but also to provide productive, sustainable livelihood options to rural people. 

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 to realise 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. 

As agriculture is already overcrowded, a major proportion of the increasing labour force needs to find alternative employment opportunities in other non-farm sectors. Non-farm economy has several segments in it; some possess dynamic linkages that permit healthy growth, while others are in subsistence, low productivity propositions. The dynamic sub-sectors include agro-processing industries, food processing industries, the leather industry, tourism, etc. Those sectors which have the potential but seriously lack infrastructure and other support include traditional home-based industries like pottery, crafts, handlooms, etc. The majority of rural women find employment in agriculture, while men generally look for non-farm employment. In recent times, women have also begun looking for non-farm jobs.

Animal Husbandry

In India, the farming community uses the mixed crop-livestock farming system; cattle, goats, and fowl are the widely held species. Livestock production provides increased stability in income, food security, transport, fuel and nutrition for the family without disrupting other food-producing activities. Today, the livestock sector alone provides alternate livelihood options to over 70 million small and marginal farmers, including landless labourers. A significant number of women also find employment in the livestock sector. Poultry accounts for the largest share with 61 per cent, followed by others. 

Other animals, which include camels, asses, horses, ponies and mules, are in the lowest rung. India had about 303 million cattle, including 110 million buffaloes, in 2019. The performance of the Indian dairy sector over the last three decades has been quite impressive. Milk production in the country has increased by about twelve times between 1951-2021. This can be attributed mainly to the successful implementation of ‘Operation Flood’. It is a system whereby all the farmers can pool their milk produced according to different grading (based on quality), processed and marketed to urban centres through cooperatives. 

In this system, the farmers are assured of a fair price and income from the supply of milk to urban markets. As pointed out earlier, Gujarat state is held as a success story in the efficient implementation of milk cooperatives, which has been emulated by many states. Gujarat, Madhya Pradesh, Uttar Pradesh, Andhra Pradesh, Maharashtra, Punjab and Rajasthan are major milk-producing states. Meat, eggs, wool, and other by-products are also emerging as important productive sectors for diversification.

Fisheries

The fishing community regards the water body as ‘mother’ or ‘provider’. The water bodies, consisting of sea, oceans, rivers, lakes, natural aquatic ponds, streams, etc., are, therefore, an integral and life-giving source for the fishing community. In India, after a progressive increase in budgetary allocations and the introduction of new technologies in fisheries and aquaculture, the development of fisheries has come a long way. 

• Presently, fish production from inland sources contributes about 65 per cent to the total value of fish production, and the balance 35 per cent comes from the marine sector (sea and oceans). Today, total fish production accounts for 0.9 per cent of the total GDP. 
• In India, West Bengal, Andhra Pradesh, Kerala, Gujarat, Maharashtra and Tamil Nadu are major fish-producing states. A large share of fishworker families are poor. Rampant underemployment, low per capita earnings, absence of mobility of labour to other sectors and a high rate of illiteracy and indebtedness are some of the major problems the fishing community faces today. 
• Even though women are not involved in active fishing, about 60 per cent of the workforce in export marketing and 40 per cent in internal marketing are women. There is a need to increase credit facilities through cooperatives and SHGs for fisherwomen to meet the working capital requirements for marketing.

Horticulture

Blessed with a varying climate and soil conditions, India has adopted the growing of diverse horticultural crops such as 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. The horticulture sector contributes nearly one-third of the value of agricultural output and six per cent of the Gross Domestic Product of India. 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. 

The economic condition of many farmers engaged in horticulture has improved, and it has become a means of improving livelihood for many unprivileged classes. Flower harvesting, nursery maintenance, hybrid seed production and tissue culture, propagation of fruits and flowers and food processing are highly remunerative employment options for women in rural areas. Though in terms of numbers, our livestock population is quite impressive, its productivity is quite low compared to other countries. 

It requires improved technology and promotion of good breeds of animals to enhance productivity. Improved veterinary care and credit facilities to small and marginal farmers and landless labourers would enhance sustainable livelihood options through livestock production. Production of fisheries has already increased substantially. However, problems related to over-fishing and pollution need to be regulated and controlled. Welfare programmes for the fishing community have to be reoriented in a manner which can provide long-term gains and sustenance of livelihoods. 

Horticulture has emerged as a successful, sustainable livelihood option and needs to be encouraged significantly. Enhancing its role requires investment in infrastructure like electricity, cold storage systems, marketing linkages, small-scale processing units and technology improvement and dissemination.

Other Alternate Livelihood Options

The IT has revolutionised many sectors in the Indian economy. There is a broad consensus that IT can play a critical role in achieving sustainable development and food security in the twenty-first century. Governments 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. It also has a positive impact on the agriculture sector as it can disseminate information regarding emerging technologies and their applications, prices, weather and soil conditions for growing different crops, etc. Though IT is, by itself, no catalyst of change but it can act as a tool for releasing the creative potential and knowledge embedded in the society. It also has the potential for employment generation in rural areas. Experiments with IT and its application to rural development are carried out in different parts of India.

Sustainable Development and Organic Farming

In recent years, awareness of the harmful effects of chemical-based fertilisers and pesticides on our health has been on the rise. Conventional agriculture relies heavily on chemical fertilisers and toxic pesticides, etc., which enter the food supply, penetrate the water sources, harm the livestock, deplete the soil and devastate natural ecosystems. Efforts in evolving technologies which are eco-friendly are essential for sustainable development, and one such technology which is eco-friendly is organic farming. In short, organic agriculture is a whole system of farming that restores, maintains and enhances the ecological balance. There is an increasing demand for organically grown food to enhance food safety throughout the world.

Also Read: NCERT CBSE Class 10 Economics Chapter 4 Notes

Benefits of Organic Farming

Organic agriculture offers a means to substitute costlier agricultural inputs (such as HYV seeds, chemical fertilisers, pesticides, etc.) with locally produced organic inputs that are cheaper and thereby generate good returns on investment. Here are certain benefits of organic farming

:

• Organic agriculture also generates income through exports as the demand for organically grown crops is on the rise. Studies across countries have shown that organically grown food has more nutritional value than chemical farming, thus providing us with healthy foods. 
• Since organic farming requires more labour input than conventional farming, India will find organic farming an attractive proposition. 
• Finally, the produce is pesticide-free and produced in an environmentally sustainable way. Popularising organic farming requires awareness and willingness on the part of farmers to adapt to new technology. 
• Inadequate infrastructure and the problem of marketing the products are major concerns which need to be addressed, apart from an appropriate agriculture policy to promote organic farming. 
• It has been observed that the yields from organic farming are less than modern agricultural farming in the initial years. Therefore, small and marginal farmers may find it difficult to adapt to large-scale production. 
• Organic produce may also have more blemishes and a shorter shelf life than sprayed produce. 

Moreover, choice in the production of off-season crops is quite limited in organic farming. Nevertheless, organic farming helps in the sustainable development of agriculture, and India has a clear advantage in producing organic products for both domestic and international markets.

Conclusion

It is clear that until and unless some spectacular changes occur, the rural sector might continue to remain backward. There is a greater need today to make rural areas more vibrant through diversification into dairying, poultry, fisheries, vegetables and fruits and linking up the rural production centres with the urban and foreign (export) markets to realise higher returns on the investments for the products. 

Moreover, infrastructure elements like credit and marketing, farmer-friendly agricultural policies and a constant appraisal and dialogue between farmers’ groups and state agricultural departments are essential to realise the full potential of the sector. Today, we cannot look at the environment and rural development as two distinct subjects. There is a need to invent or procure alternate sets of eco-friendly technologies that lead to sustainable development in different circumstances. 

From these, each rural community can choose whatever will suit its purpose. We need to learn from, and also try out when found relevant, practices from the available set of ‘best practice’ illustrations (which means success stories of rural development experiments that have already been carried out in similar conditions in different parts of India), to speed up this process of ‘learning by doing’.

Important Definitions in NCERT Notes Class 11 Indian Economic Development Chapter 5: Rural Development

This section lists key terms for clarity and revision:

• Rural Development: A comprehensive term focusing on action for the development of areas lagging behind in the overall village economy, including human resource development, land reforms, infrastructure, poverty alleviation, and productive employment opportunities.
• Self-Help Groups (SHGs): Groups that promote thrift among members by pooling small contributions, providing credit to needy members at reasonable rates, often referred to as micro-credit programmes, and helping in women’s empowerment.
• Minimum Support Prices (MSP): Assurance by the government of minimum prices for agricultural products to protect farmers’ income.
• Operation Flood: A system where farmers pool milk according to quality grading, processed and marketed through cooperatives, ensuring fair prices and income, leading to impressive growth in India’s dairy sector.
• Organic Farming: A whole system of farming that restores, maintains, and enhances ecological balance, using eco-friendly technologies to substitute chemical inputs with locally produced organic ones.

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