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Rural Development Class 12 Notes and Solutions Economics

Rural Development Class 12 Notes are made with the proper assistance of NCERT books and contain all related information as well. These will help students to create an outline of the chapter and also assist them with making notes of their own. Rural development class 12 notes are provided to help students get linked with various aspects of rural development, rural credit, and agricultural marketing. These notes also enhance the critical ability of students to analyze the situation of rural development in present times and compare the development.

Rural development
Rural credit
Agricultural marketing

Rural Development Class 12

Rural development class 12 notes start with an easily understandable definition of Rural development.

Definition of Rural Development:

Rural development is a complete and perpetual process that focuses broadly on the social and monetary improvement of rural areas lagging behind in overall development.

It aims at improving the social and economic conditions of people living in rural areas.

Need for rural development

During the period 1950-90, the growth rate of agriculture was 2.7% per annum and after the economic reforms of 1991, the growth rate declined/ decreased to 2.3% due to a fall in public investment.
About 69% of the overall populace resides in rural regions and agriculture is a chief supply of livelihood wherein three-fourth of the overall workforce in rural regions is employed.
Inappropriate infrastructure services and fewer alternative employment opportunities.
Almost 75% of the total poor reside in rural regions.
Agriculture provides food grains and plays an important role in the development of the industrial sector.

Thus, it is essential to develop rural areas or it is essential to pay attention to rural development.

Major concerns of rural development

According to Rural development class 12 notes, the major concerns related to rural development are;

Infrastructural advancement- Infrastructure refers to all facilities which play an important role in social and economic development like rural credit, irrigation, rural marketing, means for transport, power/ electricity, agriculture research, means of communication, etc.
Land reforms: Land reforms refer to change in ownership of landholdings. It is concerned with reforms in the land tenure system and size in holdings: It includes:

Abolition of the zamindari system and elimination of exploitation.
Land ceiling.
Protection of the right of tillers.
Consolidation of landholdings.

Human capital formation: it is the process of acquiring and increasing the number of persons, who have the skills and expertise, which are important for social and economic development. It focuses on literacy, education, skill development, better health facilities including sanitation and drinking water, etc.
Poverty alleviation: -Around 30% of the total population is still below the poverty line and about 75% of the total poor (about 27.82 crores) lives in rural areas. Special measures/ schemes for alleviation of poverty must be undertaken.
Development of productive resources:-Productive resources of each locality in the rural areas is to be identified and developed so that available resources can be utilized optimally and opportunities for investment and employment in farm and non-farm areas can be enhanced.

RURAL CREDIT

Rural development class 12 notes define rural credit as;

Rural credit refers to credit for rural people, especially for farming families or farmers.

Need of rural credit

Most Indian farmers are marginalized smallholder farmers who produce sufficient to support themselves only and have no surplus to invest in.
The gestation period between sowing and harvesting (earning income after the sale) is quite long. As a result, Farmers must borrow from numerous assets to cover their primary investments in seeds, fertilizer, buying extra land, devices and tools, and previous debts, for different family charges which include marriage, death, spiritual ceremonies, etc. (effective and non-effective charges ).

Thus, rural credit is the lifeline for farming activities and the growth of the rural economy depends on the timely infusion of capital to realize higher productivity in agriculture and non-agriculture sectors.

Classification of rural credit

Rural development class 12 notes classify rural credit into;

(A) According to time

Short time credit:-These are required to meet short-term needs or to purchase inputs like seeds, tools, fertilizers, payment of wages, payment of electricity bill, etc. These loans are for 6-12months and are generally payable after harvesting and marketing (sale).

Medium-term credit: These are required to meet medium-term needs or for purchasing machinery, constructing fences, digging wells, purchasing animals and pump sets, constructing cattle sheds, etc. These loans are generally for about one year to five years.

Long-term credit: These are required to meet the long-term needs or for making permanent improvements, for purchasing additional land, for purchasing tractors and heavy machinery, etc. The duration of these loans is generally about 5 years to 20 years.

(B) According to purpose

Productive credit: These are required to meet production needs/ purposes or for purchasing seeds, tools, fertilizers, payment of wages, payment of electricity bill machinery, constructing a fence, digging well, purchasing animals and pump sets, constructing cattle sheds, making permanent improvement, for purchasing additional land, for purchasing tractors and heavy machinery, etc.
Unproductive credit:-These are required to meet unproductive needs/ purposes or consumption expenditure like marriages and other social and religious functions.

Sources of rural credit

According to Rural development class 12 notes the sources of rural credit are;

Sources of rural credit are broadly classified as:

(A) Non-institutional source (informal).

It consists of cash lenders, investors and free agents, landlords, family, and friends. Traditionally or in the past, most credit needs of farmers were satisfied/ fulfilled by non-institutional sources because of their easier procedure of lending and their readiness to lend even for unproductive purposes. However, they were unable to meet their medium and long term needs/ requirements due to their limited resources but they accounted for approximately 93% of the full credit score requirement of the agricultural people in 1950-51, however, currently, it accounts for 30% of the most effective credit score requirement.

They used to exploit small and marginal farmers by charging high rates of interest and by manipulating accounts to keep them in a debt trap.

(B) Institutional sources (formal)

It consists of the government, cooperatives society, rural local financial institutions, industrial financial institutions, etc. At the start of the primary 5 years plan (in 1950-51), it accounted for the most effective 7% of general credit score requirement, however, currently, it is owed for approximately 70%. In 1904 cooperative credit societies Act was adopted and the cooperatives society was established which played a major role in the expansion and diversification of credit in rural areas. But a major change occurred after 1969 when India adopted a social banking and multi-agency approach to meet rural credit needs. Under this approach,

In July 1969 14 major commercial banks were nationalized and further in April 1980, 6 more commercial banks were nationalized.
Rural regional banks were established in 1976.
NABARD, the apex bank was established in July 1982 to coordinate activities of various financial institutions involved in providing rural credit

The important goals of formal sources are the following;

To shield the agricultural bad from clutches of non-organization assets with the aid of offering a well-timed credit score at an inexpensive rate.
To increase banking behavior among the various rural people.
To assist in increasing employment possibilities in rural areas.

NABARD

National financial institution for agriculture and rural development was installed on July 12, 1982, primarily based totally on recommendations of a committee appointed through RBI in 1979 for reorganizing and strengthening the rural credit. It is an apex body that coordinates the activities of all financial institutions involved in the rural financial system or credit.

Functions of NABARD

To facilitate short, medium, and long-term credits to all financial institutions involved in rural credit and approved by the RBI.
To coordinate the functioning of different financial institutions involved in rural credit.
To adopt inspection of exceptional economic establishments concerned with rural credit.
To promote studies in agriculture and rural development
To give loans to the approved institutions to invest in securities or to contribute to the share capital of institutions entrusted in agriculture and rural development.
Sanction credit limits and refinance exceptional economic institutions that are involved in rural solvency (agriculture and non-agriculture purpose).

A self-help group (SHG)

Self-help groups and microcredit programs are emerging phenomena in the context of rural credit. Self-help groups have emerged to overcome the limitations of the formal credit system. The microcredit scheme was launched in 1992 and further extended to the poor through self-help groups and non-government organizations. It consists of rural loans up to Rs. 25000.
These self-help groups promote thrift in small proportions by a minimum contribution from each member, from pooled money, credit/ loan requirements/ needs of different members are fulfilled.
These credits are given without any security at a reasonable rate of interest which has been repaid in small installments. Such credit provision by SHG is generally known as a micro-credit program. These credit/ loan/ borrowings are mainly for consumption purposes. These micro credits have also helped in women’s empowerment.
NABARD has played a major role in the development of SHG and other microfinance institutions and in providing refinance at a special rate. At present (on March 331, 2011 about 74.62 lakhs SHG have been operated in India,
A self-help group (SHG) is a village-based financial intermediary committee usually composed of 10-20 local women or men… Most self-help groups are located in India, though SHGS can also be found in other countries, especially in South Asia and Southeast Asia.

RURAL BANKING/CREDIT A CRITICAL EVALUATION

Since 1969, after the adoption of social banking and multi-agency approach, the rapid expansion of the banking sector in India played a positive role as follow:

Helps in reducing the number of informal sources of credit and protects rural people from the clutches by providing credit facilities at cheaper rates of interest.
Helps in raising farm and non-farm output and income especially afterward the green revolution because credit facilities helped farmers to avails a variety of loans for meeting their production needs and we have achieved self-sufficiency/ food security in food grains.
Increase employment opportunities in rural areas by creating credit lines for the self-employed and non-agricultural activities. Instead of playing important role in rural credit, there are various followings problems of rural credit structure in India:
Insufficiency: The sources of institution financing or volume of rural credit are insufficient/inadequate to meet the agriculture credit requirement/ demand. So, farmers still depend on money lenders for their credit needs
Institutional credit sources are suffering from the problems of large unpaid loans because the loan default rate is chronically high and about 50% of defaulters are “willful defaulters”. So recovery of agricultural loans has become a serious problem in the functioning of rural banking institutions.
Commercial banks follow a cautious approach while lending to rural poor and always collateral. So small and marginal farmers receive only a very small portion of total rural credit and a large portion has been appropriated by rich farmers due to better creditworthiness.
Owing to political populism, the government shows leniency to some extent while recovering the loan. As a result, the default rate tends to rise over time.
Most financial institutions have failed to develop habits of saving among farming families.
Besides it, the expansion and promotion of rural banking have taken a backseat or have become sluggish after economic reforms in 1991.

Measure to improve the situation

Need to shift focus from pure lender to relationship building with borrowers.
Need to encourage farmers to use resources sparingly and efficiently.
An effective credit recovery mechanism should be developed.
Credit facilities should be granted to farmers on simple terms.
Needs more attention to meet the credit needs of rural and backward areas.

Rural development class 12 notes define agricultural marketing;

AGRICULTURAL MARKETING

Agricultural Marketing is a manner that entails the collection, storage, processing, transportation, packaging, class and distribution of numerous agricultural merchandise all through the country.

Problems of agricultural marketing in India

Lack of storage facilities: The government has opened very few warehouses with scientific techniques for storing agricultural products. So, farmers do not have proper and adequate storage facilities to store their produce

As a result,

a) They have to store their produce in pits, mud vessels, gunny bags, kutcha storehouses. These are unscientific methods of storing which leads to wastage of produce to the extent of 10% because the produce gets rotten or is eaten by rats and pests and thus becomes unfit for human consumption.

(b) They have to sell their produce immediately after harvesting at a lower price.

Lack of transportation: Transport facilities in rural areas are not only inadequate but also defective. Many villages are connected with pakka roads but most of the village roads are not suitable/ fit for transportation, especially in the rainy season. So, Due to the lack/ absence of transport facilities, the farmers cannot reach nearby markets to sell their produce at fair prices and have to sell it to local traders at a lower price.
Lack of market information: The farmers ordinarily do not have the necessary/ required information regarding prices prevailing in different markets of agricultural products and mostly depend on hearsay or reports received from local traders. As a result, they have to sell their produce at a lower price or fail to get a fair price.
A Multiplicity of middlemen: In India, there are a large number of middlemen between cultivators and farmers. These middlemen indulge in malpractices (wrong practices) to earn profit and exploit/ cheat both farmers as well consumers. On average, an Indian farmer receives just 60% of the price paid by the final consumer and the remaining 40% appropriated by middlemen.
Lack of adequate finance: Institutional sources like cooperative societies, commercial banks, etc are not able to fulfill the credit requirements/needs of farmers. Farmers are forced to borrow from money lenders and traders to meet their credit needs for production and consumption purposes. As a result, to pay off their old debts/ dues, they have to sell their produce to money lenders or traders at a lower price.
Lack of grading and standardization: In the international market, goods are valued based on their grading and standardization. It helps farmers to fetch/ get reasonable/ fair prices for their products. But Indian farmers do not give importance to grading their products which means the process of separating good quality products from bad/ poor quality products. Therefore, they fail to get a fair price.
Malpractices in unregulated markets: By the end of March 2010, about 7157 regulated markets were functioning in India but about 27000 markets are unregulated: A large number of malpractices prevailing in these unregulated markets like faulty weighing, lack of grading and standardization, manipulation of account, etc.

Measures to improve agricultural marketing

After independence, our government initiated/ adopted the following measures to improve the system of agricultural marketing.

Regulation of markets

The first measure was the regulation of markets to create systematic and transparent marketing conditions. Regulated markets have been set up/ organized to protect the farmers as well as consumers from the malpractices of sellers and brokers or commission agents.
The State Agricultural Produce Marketing (Development and Regulation) Act, 2003.
Under this act, the market committee manages the markets constituted by the state government for a specific period. These committees have representatives of the state government, traders, and farmers. This committee has strict vigil on all practices undertaken in markets.

Functions of the marketing committee

Enforcing the use of standard weight.
Fixation of charges, fees, brokerage, etc.
A Prevention of unauthorized/ unlawful deduction and control of wrong
middlemen/ commission agents.
Providing reliable marketing information
Settling the disputes.

Advantage of regulated markets

Farmers can get fair/ reasonable prices for their product
Consumers also get a regular supply of food grains at reasonable prices.
It promotes the commercialization of agriculture.
Banking facilities, storage facilities, etc. have grown.

Provision of infrastructure facilities

Infrastructure refers to all facilities/ elements/ changes that serve them as the foundation for the social and economic development of an economy/ country. It includes banking, communication, transportation, electricity/power, irrigation, storage, health, education, etc. In absence of infrastructure facilities like transportation, storage, communication, etc. farmers are not able to get a fair/ reasonable price for their products.
The second step/ measure initiated/ taken by the government was the provision of physical infrastructure facilities like roads, railways, warehouses, godowns, cold storage, processing units, dissemination of information, etc.
- A) Storage facilities:-Many godowns and warehouses have been built at the village and mandi town level Government is offering storage facilities to the farmers to avoid distress sales (sale just after harvesting the crops) and enhance their bargaining power.
- B) Transport facilities: During the last three-five years plans, the government launched various schemes/projects like the Bharat Nirman scheme, Pradhan Mantri Gram Sadak Yojana, etc. to develop transport facilities and to provide all-weather road connectivity to rural areas. Besides it, the government is also offering subsidized railways transport facilities to farmers to bring their produce to the urban markets.
- C) Electronic media and print media are actively engaged in offering market-related information to the farmers, especially the price of produce. It helps farmers in making decisions as to what to produce, how much to produce, how much to sell, when and where to sell it, and also helps in getting a fair price.
- D) Government has also taken steps to promote the facilities of standardization and grading for agricultural products so that farmers can get a fair reasonable price for their products. Like AGMARK

Encourage cooperative marketing

Cooperative marketing has become very important for India. The success of milk cooperatives in Gujarat is testimony/ evidence to the role of the cooperative which transformed the social and economic landscape and played a key role in bringing a white revolution in the country.

The third step/ measure taken/ initiated by the government is to encourage the formation of cooperative marketing societies. In this system, farmers come together and form marketing companies to sell products collectively and take advantage of collective bargaining to ensure better prices for their products.

Advantages of cooperative marketing societies

increases the bargaining power of farmers and helps in realizing the better price of their product
It provides infrastructure facilities:
It establishes linkage between credit, processing, and farming
It supplies agriculture inputs and consumer goods to farmers at a cheaper rate.

Other important policy instruments or measures to safeguard.

The government has also developed/ initiated some instruments/ measures to safeguard the interest of the farmers as well consumers.

These are:

(A) Policy of fixing MSP- It is an important step initiated by the government to improve agricultural markets.

The MSP is an assurance to the farmers that their products would be purchased by the government at prefixed/ announced price Farmers are free to sell their produce at the price higher than MSP (To safeguard the interest of farmers or to avoid the risk of fluctuation or to stabilize the income, at present government fixes/announces prices of 24 agricultural products

(B) Maintenance of buffer stock: Fixation of MSP helps the government in maintaining buffer stock because the government buys/purchases excess supply of food grains through The Food Corporation of India (FCI) at MSP and uses it during the period of emergencies. It also helps to ensure regularity in supply and stability in prices.

(C) Public distribution system-These buffer stock (maintained by the government) is used primarily for public distribution systems (PDS), besides to meet urgent needs during periods of low output and scarcity.

PDS Implies the distribution of food grains through a network of ration shops and fair price shops at subsidized prices (at lower than market price) to the weaker section of society.

Suggestions to improve agricultural marketing

Rural development class 12 notes suggest the following ways to improve the situation.

Need to develop about 27000 rural periodic markets as regulated markets so that the full potential of rural markets can be realized/ utilized.
Infrastructural facilities should be increased to prevent the farmers from distress sales like warehouses, cold storage, etc.
Intermediaries who exploit farmers needs to be abolished
The provision of standardization and grading should be modernized to make them comparable and competitive.
Information related to markets needs to be circulated properly and regularly to make farmers aware of current market conditions
Farmers should be encouraged to establish cooperative marketing societies and existing should be improved
Expansion of banking facilities and the process of providing credit should be made easy/ simplified
Government intervention should be increased in markets predominated by private traders.
In the era of globalization, there is a tremendous opportunity for the value addition of agro-based products through processing. So there is a need to train farmers and to create awareness in them.

OTHER MARKETING CHANNEL

According to Rural development class 12 notes, other emerging marketing channels are;

Emerging alternative agricultural marketing channels are the only hope to small and

marginal farmers who have been exploited by the Intermediaries. It is realized that if farmers sell their produce directly to consumers, farmers can increase their share in the price paid by the consumers.

Some examples of this channel are:

Apni mandi (Punjab, Haryana, and Rajasthan).
Hadapsar Mandi (Pune).
Rythu Mandi (Vegetable and Fruit mandi in Andhra Pradesh).
Uzhavar mandi (Tamil Nadu).

Besides it, several national and international fast-food chains and hotels are increasingly also entering into contracts with the farmers. They encourage farmers to grow crops of desired quality by providing them not only seeds and other inputs but also assured procurement of the produce at pre-decided prices.

Such agreements help in reducing the price risk of farmers and expand the market of farm agriculture product

DIVERSIFICATION IN AGRICULTURE

Rural development class 12 notes define diversification as;

It has two aspects

1. Diversification in crop production

This is the shift from a single cropping system to a multi-cropping system or a shift from subsistence farming to commercial farming.

2. Diversification of productive activities/ employment.

It refers to the shift of the workforce from agriculture activities to non-farm sector/activities

Allied activities consist of animal husbandry, poultry, fisheries, horticulture, etc.

Non-farming activities include

Dynamic sectors like agro-processing industries, food processing industries, industry, tourism, etc.
Traditional home-based industries like poultry, handloom, craft, etc.

Significance of diversification

Reducing the labor load on agriculture.
Reduce risk by relying solely on agriculture for your livelihood
Provide sustainable livelihood options for rural residents.
Reduce risk arising from price fluctuations and failure of seasons/bad weather conditions
Increase/raise income and raise the living standard of people. Therefore it helps in eradicating/ reducing poverty.

3. Horticulture

The period of 1991-2003 is known as the “Golden Revolution”.
This sector employs about 19% of the total labor force and flower harvesting, nursery maintenance, hybrid seeds production, tissue culture, propagation of fruits and flowers, and food processing are highly remunerative employment options for women in rural areas.

4. Animal husbandry

In India, farming communities use mixed farming systems: cattle, goats, and poultry are the most widespread species.
This system provides greater stability in terms of income, food security, transportation, fuel, and family nutrition without interfering with other food production activities.
Currently, the livestock sector alone offers alternative livelihood options to more than 70 million marginalized smallholders, including landless workers.
Poultry accounts for the largest share i.e.42% of the total livestock in India.
Domestic milk production more than quadrupled between 1960 and 2002.
Meat, eggs, wool, and other by-products are also emerging as important productive sectors for diversification.

5. Fisheries

Fishing communities regard water bodies as “mother” or “suppliers”. The body of water consists of seas, oceans, rivers, lakes, natural water ponds, rivers, etc.
Currently, fish production from inland sources accounts for around 49 percent of total fish production and the remaining 51 percent comes from the marine sector (sea and ocean). Currently, total fish production represents 1.4 percent of total GDP.
Among the states, Kerala, Gujarat, Maharashtra, and Tamil Nadu are the main producers of marine products

6. Other employment option-information technology

Information technology (IT) refers to that branch of engineering that deals with the use of computers and telecommunication to retrieve, store and disseminate information.

IT has revolutionized many sectors in the Indian economy and played a vital role in achieving sustainable development and food security.
Government can predict areas prone to food insecurity and vulnerability by using appropriate information and software tools so that action/ steps can be taken to prevent/ reduce the likelihood of an emergency.
It has a positive impact on agriculture because it can disseminate information regarding emerging technology and its applications, prices, weather, soil conditions for growing different crops, etc.
It has ushered in a knowledge economy that is a thousand times more powerful than the industrial revolution.
It has potential for employment generation in rural areas.

For example; M.S. Swaminathan Research Foundation, with support from Sri Ratan Tata Trust, established “Jamshedji Tata National Virtual Academy” for the rural areas. It provides training rural people to run their own “info-kiosks”.

Rural development class 12 notes give proper information on all the topics covered in the chapter. 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 centers with the urban and foreign (export) markets to realize 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 realizing the full potential of the sector.

CBSE Economics Class 12 Notes Term I Syllabus

Part A: Introductory Macroeconomics

Part B: Indian Economic Development

Development Experience (1947-90) and Economic Reforms since 1991:- 12 Marks

Current challenges facing Indian Economy – 10 Marks

- Poverty Class 12 Notes
- Human Capital Formation Class 12
- Rural Development Class 12 Notes