Rural development

The essentials

Rural development means action to improve villages where a large share of India's population lives, by developing human resources, land reforms, infrastructure, credit, marketing and alternative sources of livelihood. Agriculture is central to it.

Rural credit

• Farmers need credit for seeds, fertilisers and equipment, and over a long gestation period between sowing and selling.
• Earlier, moneylenders and traders charged high interest rates and trapped farmers in debt.
• Institutional sources: commercial banks (expanded after nationalisation in 1969), Regional Rural Banks, cooperative societies and land development banks. NABARD, set up in 1982, is the apex body coordinating rural finance.
• Self-help groups (SHGs) encourage small savings by members and give small loans to them; this is called micro-credit and has helped women in particular.

Agricultural marketing

• Regulated markets to ensure fair prices and orderly practices, cooperative marketing, infrastructure such as storage and roads, and policy tools such as minimum support price (MSP), buffer stocks and the public distribution system.
• Alternative channels allow farmers to sell directly to consumers.

Diversification and organic farming

• Diversification: shifting part of the workforce and output to other farm activities (livestock, fisheries, horticulture) and to non-farm work (agro-processing, handicrafts), which lowers risk and provides jobs.
• Operation Flood organised milk producers into cooperatives and greatly expanded dairy output; Gujarat is often cited as a success story.
• Organic farming: a system that restores and maintains soil health without synthetic fertilisers and pesticides. It can give healthier food and reduce input costs, but yields may be lower at first and marketing can be difficult.

Common mistakes

• Treating SHGs as government banks; they are groups of members who save and lend among themselves, often linked to banks.