Sunday, December 9, 2018

Indian-Economic-Development Pg 39-46

Page 39
Rural Development
We all know what importance has been placed with ‘rural development’ ever since it became a
part of the national narrative. We will cover the core concepts here and it’ll be covered in detail
(schemes and contemporary issues) later on (Coverage of Ramesh Singh)
Rural Development as a concept: Focuses on action for the development of areas that are
lagging behind in the overall development of the village economy
Areas requiring special attention—
 Development of human resources– literacy (female literacy), education and skill
development – health (sanitation and public health)
 Land reforms
 Development of the productive resources of each locality
 Infrastructure development: electricity, irrigation, credit, marketing, transport
facilities—
? Construction of village roads and feeder roads to nearby highways
? Facilities for agriculture research and extension
? 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
 Enabling farming communities—
? Increase the productivity of grains, cereals, vegetables and fruit
? More opportunities to diversify into various non-farm productive activities such as
food processing
? Giving them better and more affordable access to healthcare, sanitation facilities at
workplaces and homes
? Education for all


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Factors impeding Rural development
? Inadequate infrastructure
? Lack of alternate employment opportunities in the industry or service sector
? Increasing casualisation of employment
Credit:
 More infusion of capital is required to realise higher productivity in agriculture and nonagriculture
sectors
 The gestation between crop sowing and realisation of income after production is quite
long, and the farmers end up borrowing from various sources to meet their initial
investment on seeds, fertilisers, implements and other family expenses of marriage,
death, religious ceremonies etc.
 Post 1969 with the adoption of social banking and multiagency approach, the needs of
rural credit was marginally met with
 National Bank for Agriculture and Rural Development (NBARD) 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 turned out to be a harbinger of major changes in the credit
system- led to the diversification of the portfolio of rural credit towards productionoriented
lending
 Present institutional structure of rural banking: Set of multiagency institutionscommercial
banks, regional rural banks (RRBs), cooperatives and land development
banks- to dispense adequate credit at cheaper rates
 Self-Help Groups (henceforth SHGs) have emerged to fill the gap in the formal credit
system; promote thrift in small proportions by a minimum contribution from each
member
Although, 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


 Page 41
production needs. But the banking sector is facing chronic underperformance of formal
credit institutions and high incidences of overdue instalments by the farmers.
 High agriculture loan default rates; Need to change their approach from just being
lenders to building up relationship banking with the borrowers and inculcating the habit
of thrift and efficient utilisation of financial resources
Marketing aspect of Agriculture
 Regulation of markets to create orderly and transparent marketing conditions
 Provision of physical infrastructure facilities like roads, railways, warehouses, godowns,
cold storages and processing units
 To realise fair prices for farmer’s products: Cooperative marketing (success of milk
cooperatives in transforming the social and economic landscape of Gujarat and some
other parts of the country (marred with inadequate coverage of farmer members, lack
of appropriate link between marketing and processing cooperatives and inefficient
financial management)
 Policy instruments—
? Assurance of minimum support prices (MSP) for minimum agricultural products
? Maintenance of buffer stocks of wheat and rice by Food Corporation of India
? Distribution of food grains and sugar through PDS
Commercialisation of agriculture in the era of globalisation: Need to tap this potential for
value addition of agro-based products through processing and by building awareness and
training of the farmers to improve their marketing ability
Alternatively, farmers indulge in directly selling their produce to consumers thereby,
increasing their share in the price paid by the consumers
Eg: Apni Mandi (Punjab, Haryana, Rajasthan); Hadaspar Mandi (Pune); Rythu Bazars
(vegetable and fruit market in Andhra Pradesh) and Uzhavar Sandies (farmers markets in
Tamil Nadu)


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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.) and are assuring them of not just the inputs but also the procurement at predecided
prices? Reduces the price risks of farmers and expands the markets for farm
products
Diversification
1. Diversification of crop production
2. Shift of workforce from agriculture to other allied activities (livestock, poultry,
fisheries etc.) and non-agriculture sector
Objective: Greater risk in depending exclusively on farming for livelihood and diversification
towards new areas would not only reduce the risk from agriculture sector but will also
provide productive sustainable livelihood options to rural people
Way Ahead: Need to tap into the dynamic sub-sectors—agro-processing industries, food
processing industries, leather industry, tourism, etc. These sectors lack infrastructure and
other supporting elements
Animal Husbandry:
 Increased stability in income
 Food security
 Transport
 Fuel
 Nutrition for the family without disrupting other food-producing activities
Fisheries:
 The fishing community regards the water body as ‘mother’ or ‘provider’ but they face
rampant underemployment, low per capita earnings, absence of mobility of labour to
other sectors and a high rate of illiteracy and indebtedness
 Need to increase credit facilities —cooperatives and SHGs — for fisherwomen to meet
the working capital requirements for marketing.


 Page 43
Horticulture:
 Horticultural crops: Fruits, vegetables, tuber crops, flowers, medicinal and aromatic
plants, spices and plantation crops? play a vital role in providing food and nutrition,
besides addressing employment concerns
 1991-2003: An effort to heralding a ‘Golden Revolution’—the planned investment in
horticulture became highly productive and the sector emerged as a sustainable
livelihood option
 Improvement of the economic condition of many farmers engaged in horticulture—
means of improving livelihood for many unprivileged classes too
 Remunerative employment opportunities for women: Flower harvesting, nursery
maintenance, hybrid seed production and tissue culture, propagation of fruits and
flowers and food processing
 Problems related to overfishing and pollution needs to be regulated and controlled
 Welfare programmes for the fishing community have to be reoriented in a manner in
which they can provide long-term gains and sustenance of livelihoods
 Urgent need to invest in infrastructure like electricity, cold storage systems, marketing
linkages, small-scale processing units and technology improvement and dissemination
Organic Farming:
Awareness of the harmful effect of chemical-based fertilisers and pesticides on our health is
on a rise and this has led to the demand for evolving technologies which are eco-friendly
and are essential for sustainable development? Organic Farming—a whole system of
farming that restores, maintains and enhances the ecological balance
Benefits of Organic Farming:
 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
 Generates incomes through international exports as the demand for organically grown
crops is on a rise— has more nutritional value than chemical farming thus providing us
with healthy foods


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 Requires more labour input than conventional farming and India with its large
unemployed population would love to tap on to it
 Pesticide-free produce and is produced in an environmentally sustainable way
Way Ahead:
 Need to generate 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.
Refer:
State of Indian Agriculture & Rural Economy
Rural Banking in India
Agricultural issues: Going against the grain
RRB’s further distance themselves from the poor


 Page 45
GLOSSARY
Balance of Payments
According to the RBI, balance of payment is a statistical statement that shows –
 The transaction in goods, services and income between an economy and the rest of
the world
 Changes of ownership and other changes in that economy's monetary gold, special
drawing rights (SDRs), and financial claims on and liabilities to the rest of the world
 Unrequited transfers
The transactions in BOP are categorised in –
 Current account showing export and import of visibles (also called merchandise) and
invisibles (also called non-merchandise). Invisibles take into account services,
transfers and income.
 Capital account showing a capital expenditure and income for a country. It gives a
summary of the net flow of both private and public investment into an economy.
External commercial borrowing (ECB), foreign direct investment, foreign portfolio
investment, etc form a part of capital account
 Errors and omissions: Sometimes the balance of payment does not balance. This
imbalance is shown in the BOP as errors and omissions. BOP is compiled using the
double entry book keeping system consisting assets and liabilities
Explainer Video – Click Here


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Cash Reserve Ratio (CRR)
CRR is a specified minimum fraction of the total deposits of customers, which commercial
banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set
according to the guidelines of the central bank of a country.
The amount specified as the CRR is held in cash and cash equivalents, is stored in bank
vaults or parked with the Reserve Bank of India.
The aim here is to ensure that banks do not run out of cash to meet the payment demands
of their depositors. CRR is a crucial monetary policy tool and is used for controlling money
supply in an economy.
CRR specifications give greater control to the central bank over money supply.
Commercial banks have to hold only some specified part of the total deposits as reserves.
This is called fractional reserve banking.
Statutory Liquidity Ratio (SLR)
The ratio of liquid assets to net demand and time liabilities (NDTL) is called statutory
liquidity ratio (SLR)
Apart from Cash Reserve Ratio (CRR), banks have to maintain a stipulated proportion of
their net demand and time liabilities in the form of liquid assets like cash, gold and
unencumbered securities.
Treasury bills, dated securities issued under market borrowing programme and market
stabilisation schemes (MSS), etc also form part of the SLR. Banks have to report to the RBI
every alternate Friday their SLR maintenance, and pay penalties for failing to maintain SLR
as mandated.
Explainer Video (CRR & SLR) – Click Here



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