CHAP TER

10 Rural Economics

‘India Lives in Villages’ – Mahatma Gandhi

LEARNING OBJECTIVES

1 To understand the features of rural economy and to highlight the need to

develop rural areas, and

2 To bring into the light the problems of rural villages and to familiarise the
initiatives undertaken.

10.1
Introduction

Rural Economics deals with the application

of economic principles in understanding
and developing rural areas. In general,
rural areas are geographical areas located
outside towns and cities. According to the
Census of India, the basic unit for rural
areas is the revenue village. Rural economy
refers to villages, and rural community
refers to people living in villages. Rural productivity, lower prices of agricultural
areas have problems like backwardness of products, surplus labour force, larger
agriculture, low income , low employment population, high level of migration and
opportunities, poverty, low infrastructural high dependency on natural resources and
development, low illiteracy, low labour nature. According to the 2011 Population

Rural Economics 205

Census, there are 6,40,867 villages in India 5. Employment: There exists
and 68.84 percent of the 121crore total unemployment, seasonal unemployment
population live in rural areas. and underemployment in rural areas.
Unemployment refers to the situation
10.2 of people with willingness and ability
to work but is not getting employed.
Features of Rural Economy
Underemployment also called disguised
unemployment is the situation of people
Main characteristics of rural economy are: employed in excess, over and above the
1. Village is an Institution: The requirement. Disguised unemployment
Village is a primary institution and is a situation Where people work but
it satisfies almost all the needs of the no increase in production. Both the
rural community. The rural people situations are common in rural areas.
have a feeling of belongingness and a 6. Poverty: Poverty is a condition
sense of unity towards each other. where the basic needs of the people
2. Dependence on Agriculture: The like food, clothing and shelter are not
rural economy depends much on being met. According to the 2011-12
nature and agricultural activities. estimates, About 22 crores of people
Agriculture and allied activities are in rural areas are poor and live below
the main occupation in rural areas. the poverty line.
3. Life of Rural People: Lifestyles 7. Indebtedness: People in rural
in villages are very simple. Public areas are highly indebted owing to
services like education, housing, poverty and underemployment, lack
health and sanitation, transport and of farm and non-farm employment
communication, banking, roads and opportunities, low wage employment,
markets are limited and unavailable. seasonality in production, poor
Rural people rely much on faith, marketing network etc. A famous
superstitions and traditional cultural British writer Sir Malcolm Darling
practices. The standards of living (1925) stated that ‘An Indian farmer
of majority of rural people are poor is born in debt, lives in debt, dies
and pitiable. In terms of methods of in debt and bequeaths debt’. Since
production, social organization and formal loan facilities are not available
political mobilization, rural sector to the villagers, they depend on local
is extremely backward and weak. In money lenders who, like a parasite,
recent years, the incidence of alcohol squeeze the villagers. Hence the
drinking has gone up. villagers commit suicide frequently.
4. Population Density: Population 8. Rural Income: The income of the
density, measured by number of rural people is constrained as the
persons living per sq. km is very low rural economy is not sufficiently
and houses are scattered in the entire vibrant to provide them with jobs
villages. or self – employment opportunities.

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 Large proportion of labourers and 10.3
skilled persons are underemployed
Meaning of Rural
and the scope for increasing their
Development
income is limited.
9. Dependency: Rural households are
Rural Development is defined as an overall
largely dependent on social grants and
improvement in the economies and social
remittances from family members
well being of villagers and the institutional
working in urban areas and cities.
and physical environments in which they
10. Dualism: Dualism means the live. According to the World Bank, ‘Rural
co existence of two exteremely Development is a strategy designed to
different features like developed improve the economic and social life of a
and underdeveloped, organised specific group of people - rural poor’. In
and unorganised, traditional and short, rural development is a process of
modern, regulated and unregulated, improving the rural areas, rural people
poor and rich, skilled and unskilled and rural living.
and similar contradicting situations
in a region. These characteristics are
very common in rural areas. 10.4
11. Inequality: The distributions of Need for Rural
income, wealth and assets are highly Development
skewed among rural people. There are
number of historical, social, economic
Rural development is very urgent in
and political reasons behind the
the context of the overall growth and
existence of inequality. Landlords
development of Indian economy due to
and landowners dominate the rural
the following reasons.
activities. Land, livestock and other
assets are owned by a few people. 1. A major share of population lives in
rural areas, and their development
12. Migration: Rural people are forced to
and contributions are very much
migrate from villages to urban areas
supportive for the nation building
in order to seek gainful employment
activities. India cannot be developed
for their livelihood. This character
by retaining rural as backward.
of the development gives rise to the
formation of cities. Enmity and Lack 2. The rural economy supports the urban
of basic amenities in rural areas also sectors by way of supplying drinking
push the people to migrate to urban water, milk, food and raw materials.
areas. This is called’ double poisoning’ Hence, the backwardness of the rural
by Schumacher, one side villages are sector would be a major impediment
empty, on the other side towns are to the overall progress of the economy.
congested. His book is ‘’ Small is 3. Improvements in education, health
Beautiful “describes the dangers of and sanitation in villages can help
the present kind of development. avoid many urban problems namely,
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 begging, rack picking and road side 1. People Related Problems: The
slumming. problems related to individuals
4. Development of agriculture and and their standard of living consist
allied activities are necessary for of illiteracy, lack of technical
providing gainful employment in knowhow, low level of confidence,
rural areas and improving overall dependence on sentiments and
food production. beliefs etc.
5. The evils of brain-drain and rural- 2. Agriculture Related Problems:
urban migration can be reduced if The problems related to agriculture
rural areas are developed. include 1.Lack of expected
awareness, knowledge, skill
6. In order to better utilise the unused
and attitude, 2.Unavailability of
and under-utilised resources, there is
inputs, 3.Poor marketing facility,
a need to develop the rural economy.
4.Insufficient extension staff and
7. Rural development should minimise services, 5.Multidimensional tasks
the gap between rural and urban to extension personnel, 6.Small
areas in terms of the provision of size of land holding, 7.Sub-division
infrastructural facilities. It was and fragmentation of landholdings,
called as PURA by former President 8.Absence of infrastructure to work
Abdul Kalam. and stay in rural areas, 9.Primitive
8. In order to improve the nation’s technology and low adoption of
status in the global arena in terms of modern technologies 10. Reduced
the economic indicators like Human public investment and absence of
Development Index (HDI), Women role for farmers in fixing the prices
Empowerment Index (WEI), Gender for their own products..
Disparity Index (GDI), Physical
Quality of Life Index (PQLI) and Gross
National Happiness Index (GNHI)
should be given due attention. Agricultural
related
problems
People
related Infrastructure
10.5 problems related
problems

Problems of Rural Economy Problems

of Rural
Administrative
Problems
Economy
Rural areas are facing number of problems Economic
problems
relating to, 1) People, 2) Agriculture, 3)
Infrastructure, 4) Economy, 5) Society and Leadership
related Social
Culture, 6) Leadership and 7) Administration. Problems & Cultural
problems
The problems of rural economy are
discussed below.

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3. Infrastructural Related Problems: 10.6
Poor infrastructure facilities like, water,
electricity, transport, educational Rural Poverty
institutions, communication, health,
employment, storage facility, banking Rural poverty refers to the existence of
and insurance are found in rural poverty in rural areas. Poverty in India has
areas. been defined as the situation in which an
individual fails to earn sufficient income
4. Economics related Problems: The
to buy the basic minimum of subsistence.
economic problems related to rural
Poverty line is a hypothetical line based
areas are: inability to adopt high
on income or consumption levels that
cost technology, high cost of inputs,
divides the population as people below
under privileged rural industries, low
poverty line and above poverty line. On
income, indebtedness and existence of
the basis of recommended nutritional
inequality in land holdings and assets.
intake, persons consuming less than
In fertile areas, a few absentee landlords
2,400 calories per day in rural areas
own large area and they do not evince
are treated as they are under rural
greater Interest in improving the
poverty.
performance of agriculture.
5. Leadership Related Problems: The As per the Planning Commission
specific leadership related problems estimates, the percentage of people living
found in rural areas are: Leadership below poverty in rural areas was 54.10
among the hands of inactive and which accounted for 33.80 per cent
incompetent people, self-interest during 2009-10. Poverty is deepest among
of leaders, biased political will, members of scheduled castes and tribes
less bargaining power and negation in the rural areas. In 2005 these groups
skills and dominance of political accounted for 80 per cent of rural poor,
leaders. although their share in the total rural
population is much smaller. In 2015, more
6. Administrative Problems: The rural
than 80 crores of India’s people lived in
administrative problems consist
villages. One quarter of village population
of political interference, lack of
(22  crores people) list below the poverty
motivation and interest, low wages
line. India is the home to 22 per cent of the
in villages, improper utilization of
world’s poor. It is needless to state that the
budget, and absence of monitoring
country has been successful in reducing
and implementation of rural
the proportion of poor people, in spite of
development programme.
increasing of population.

Rural poverty, rural unemployment, rural

industries, micro finance, rural heath and 10.6.1 Causes for Rural
sanitation and rural infrastructures are Poverty
the issues that are considered for detailed Various forces responsible for rural
discussion. poverty are highlighted below:

Rural Economics 209

1. The distribution of land is highly Therefore, poor are not in a position
skewed in rural areas. Therefore, to get employed and to come out
majority of rural people work as hired from the poverty in villages.
labour to support their families. 9. Social Evils: Social evils prevalent in
2. Lack of Non-farm Employment: the society like custom, believes etc.
Non-farm employment opportunities increase unproductive expenditure.
do not match the increasing labour
force. The excess supply of labour 10.6.2 Remedial Measures to
in rural areas reduces the wages and Rural Poverty
increases the incidence of poverty.
Since rural unemployment and rural
3. Lack of Public Sector Investment: The poverty are interrelated, creation of
root cause of rural poverty in our country employment opportunities would support
is lack of public sector investment on elimination of poverty. Poverty alleviation
human resource development. schemes and programmes have been
4. Inflation: Steady increase in prices implemented, modified, consolidated,
affects the purchasing power of the expanded and improved over time. However,
rural poor leading to rural poverty. unemployment, begging, rag picking and
5. Low Productivity: Low productivity slumming continues. Unless employment
of rural labour and farm activities is a is given to all the people poverty cannot be
cause as well as the effect of poverty. eliminated. Who will bell the cat?
6. Unequal Benefit of Growth: Major
Poverty Eradication Schemes
gains of economic development are
enjoyed by the urban rich people Schemes Year of
leading to concentration of wealth. Due launch
to defective economic structure and 20 Point Programme 1975
policies, gains of growth are not reaching Integrated Rural development 1976
the poor and the contributions of poor Programme(IRDP)
people are not accounted properly. Training Rural Youths for Self- 1979
7. Low Rate of Economic Growth: Employment (TRYSEM)
The rate of growth of India is always Food for Work Programme 1977
below the target and it has benefited (FWP)
the rich. The poor are always denied National Rural Employment 1980
of the benefits of the achieved growth Programme (NREP)
and development of the country.
Rural Landless 1983
8. More Emphasis on Large Industries: Employment Guarantee
Huge investment in large industries Programme(RLEGP)
catering to the needs of middle and Jawahar Rozgar Yojana(JRY) 1989
upper classes in urban areas are
Mahatma Gandhi National Rural 2006
made in India. Such industries are
Employment Guarantee Scheme
capital-intensive and do not generate
(MGNREGS)
more employment opportunities.
Rural Economics 210
 Development Schemes India are categorised into three classes:
(i) Open Unemployment (ii) Concealed
Pradhan Mantri Adarsh Gram 2010
Unemployment or Under employment
Sadak Yojana (PMAGSY)
and (iii) Seasonal Unemployment. In
Bharat Nirman Yojana 2005 Open Unemployment, unemployed
Indira Awas Yojana 1985 persons are identified as they remain
Jawaharlal Nehru National Urban 2005 without work. This type of unemployment
Renewal Mission (JNNURM) is found among agricultural labourers,
Rajiv Awas Yojan (RAY) 2009 rural artisans and literate persons. In
National Rural Health Mission 2005 Concealed Unemployment, it is difficult
to identify who are under employed; for
National Rural Livelihood 2011
many are employed below their productive
Mission
capacity and even if they are withdrawn
National Food Security Scheme 2013
from work the output will not diminish.
It is also called Disguised Unemployment
10.7 or Under employment. This type of
unemployment is found among small and
Rural Unemployment marginal farmers, livestock rearers and
rural artisans. This kind of unemployment
Unemployment is a situation in which a situation is more serious in villages than in
person is actively searching for employment urban areas. Disguised unemployment in
but unable to find work at the prevailing rural India is 25 per cent to 30 per cent. In
wage rate. It is a tragic waste of manpower Seasonal Unemployment, employment
and under utilisation of human resources. occurs only on a particular season
As long as there is unemployment, social supported by natural circumstances
problems cannot be stopped; and, economy and the remaining period of a year the
cannot achieve development. rural people are unemployed or partially
employed. In seasons like ploughing,
Peter Diamond, sowing, weeding and harvesting there is
Dale Mortensen and scarcity of labour and in the rest of the
Christopher Pissarides yearthere is unemployment. It is pathetic
shared 2010 Economics to note that a farmer who cultivates one
Nobel prize for jobs study.Their model, crop in a year usually goes without a job
called DMP model, helps us understand for almost 5 to 7 months and ultimately
how regulation and economic policies affect commit suicide.
unemployment, job vacancies and wages.
According to the Agricultural
As on 4 th October 2016, rural Labour Enquiry Committee Report,
unemployment was 7.8 per cent which is “the extent of under employment is on
less than urban unemployment (10.1 per the average, 82 days of unemployment
cent) and all India unemployment rate in a year for 84 per cent of agricultural
(8,5 per cent). Rural unemployment in labours.”

Rural Economics 211

 5. Capital-Intensive Technology: The
10.7.1 Causes for Rural expanding private industrial sector
Unemployment is largely found in urban areas and
Causes for rural unemployment in India not creating additional employment
are discussed below: opportunities due to the application
of capital intensive technologies.
1. Absence of skill development
Government must establish firms to
and employment generation:
absorb surplus labour power.
Lack of Government initiatives to
give required training and then to 6. Defective System of Education: The
generate employment opportunities. present system of education has also
aggravated the rural unemployment
2. Seasonal Nature of Agriculture:
problem.Large number of degree-
Agricultural operations are seasonal
producing institutions has come
in nature and depend much on nature
in the recent years. Students also
and rainfall. Therefore, the demand
want to get degrees only, not any
for labour becomes negligible
skill. Degrees should be awarded
during off-season. So, non-farm
only on the basis of skills acquired.
employment opportunities must be
The unemployed youth should get
created.
sufficient facilities to update their
3. Lack of Subsidiary Occupation: skills.
Rural people are not able to start
subsidiary occupations such as
10.7.2 Remedies for Rural
poultry, rope making, piggery etc. due
Unemployment
to shortages of funds for investment
and lack of proper marketing In order to reduce rural unemployment
arrangements. This restricts the in the country there is a need to take
employment opportunity and rural integrated and coordinated efforts from
family incomes. Government must various levels. A few remedial measures
arrange funds for these people. are listed below:
However, as now they pay huge 1. Subsidiary Occupation: To reduce
interest to the local money lenders, the seasonal unemployment rural
for they are unable to get loans from people should be encouraged to
formal sources. adopt subsidiary occupations.
4. Mechanization of Agriculture: The Loans should be granted and proper
landlords are the principal source arrangements should be made for
of employment to the farm labour. marketing their products.
Mechanization of agricultural 2. Rural Works Programme: Rural
operations like ploughing, irrigation, Works Programme such as
harvesting, threshing etc. reduces construction and maintenance of
employment opportunities for the roads, digging of drains, canals, etc
farm labour. should be planned during off-season

Rural Economics 212

 to provide gainful employment to 1. These industries are carried out by
the unemployed. artisans in their own homes at their
3. Irrigation Facilities: Since rainfall is own risk and for their own benefit.
uncertain irrigation facilities should Artisans may combine this work
be expanded to enable the farmers with another regular job.
to adopt multiple cropping. The 2. No or little outside labour is
increased cropping intensity creates employed. Normally, the members of
additional demand for labour. the household provide the necessary
4. Rural Industrialization: To provide labour.
employment new industries should 3. These industries are generally
be set up in rural areas. This will open hereditary and traditional in
new fields of employment and also character.
change the attitude of rural people 4. No or little power is used.
towards work. For this, government
5. These industries usually serve the
has to do something. Private sector
local market and generally work on
would not take up this responsibility.
the orders placed by other industries.
5. Technical Education: Employment
Examples of cottage industries are mat,
oriented courses should be
coir and basket making industries. The
introduced in schools and colleges to
principal cottage industries of India are
enable the litrate youth to start their
hand-loom weaving (cotton, silk, jute,
own units.
etc.) pottery, washing soap making, conch
shell, handmade paper, horn button,
10.8 mother-of-pearl button, cutlery, lock and
Rural Industries key making industries.

Village Industries: Village industries are

Rural industries embrace all industries
traditional in nature and depend on local
which are run by rural people in rural areas.
raw-material. They cater to the needs
These industries are based primarily on the
of local population. Examples of village
utilization of locally available raw materials,
industries are gur and khandsari, cane and
skills and small amount of capital. The rural
bamboo basket, shoe making, pottery and
industries can be broadly classified into a)
leather tanning. These are almost similar
cottage industries, b) village industries, c)
to the cottage industries.
small industries, d) tiny industries and e)
agro-based industries. Small Scale Industries (SSIs): Most small
scale industries are located near urban
Cottage Industries: Cottage industries
centres. They produce goods for local as
are generally associated with agriculture
well as foreign markets. Examples of such
and provide both part-time and full-time
small scale industries are manufacture
jobs in rural areas.
of sports goods, soaps, electric fans, foot
The important characteristics of wear, sewing machines and handloom
this type of industries are as follows: weaving.
Rural Economics 213
SSIs are also known as Micro, Small &
Medium Enterprises (MSMEs). They are
defined and categorized by the Micro,
Small & Medium Enterprises Development
Act, 2006. The Act categorizes different
scale of industries on the basis of
investment in plant and machinery in case
of manufacturing industries and on the
basis of investment in equipment in case
of service sector industries.
The farmers borrow loan for various
purposes like agricultural operations,
supporting the family in the lean season or
purchase of equipments in the recent years,
expenses on celebrations, liquor consumption
and medicines go on increasing without any
limit. Due to lower income, the villagers are
unable to repay the loans or pay the pending
interest on the principal amount.

Agro-based Industries: These industries

are based on the processing of agricultural According to the Government of
produce. Agro-based industries may India’s Socio Economic and Caste
be organised on a cottage-scale, small- Census (SECC), 2015, around 73
scale and large-scale. These industries per cent of households in India are
tend to develop household settlements rural. Of these, 18.5 per cent are
around them as they employ more labour scheduled caste households and 11
on a regular basis. Examples are textile, per cent belong to the scheduled tribe
sugar, paper, vegetable oil, tea and coffee category.
industries.

The data of the National Sample Survey

10.9
Organisation (NSSO, 2002-03) reveals
Rural Indebtedness that only about 30 per cent of the poor
borrowers get credit from the formal
Rural indebtedness refers to the situation banks. According to the All India Debt
of the rural people unable to repay the loan and Investment Survey (AIDIS) 2002, the
accumulated over a period. Existence of share of institutional credit has declined
the rural indebtedness indicates the weak from 66.3 per cent in 1991 to 57.1 percent
financial infrastructure of our country, in 2002, with a corresponding increase
in reaching the needy farmers, landless in informal channels of credit (RBI,
people and the agricultural labourers. 2006).
Rural Economics 214
 leads to perpetuate indebtedness of
10.9.1 Features of Rural
the farmer.
Indebtedness
Nearly three fourth of rural families in the
10.9.3 Measures to Remove
country are in debt. The amount of debt
Rural Indebtedness
is heavier in the case of small farmers.
Cultivators are more indebted than the Several remedial measures have been
non-cultivators. Most of the debts taken introduced to reduce rural indebtedness.
are short term and of unproductive nature. It includes regulation of money lenders,
The proportion of debts having higher development of rural banks, Regional Rural
rates of interest is relatively high. Most Banks (RRBs), Micro Finance, formation
of the villagers are indebted to private of Self Help Groups (SHGs), Primary
agencies particularly money lenders. Cooperative Banks and Land Development
Banks, Crop Loan Schemes, Lead Bank
Schemes, Micro Units Development
10.9.2 Causes for Rural and Refinance Agency Bank (MUDRA),
Indebtedness promotion of subsidiary occupation, off
The causes for rural indebtedness may be farm employment opportunities, skill
summarized as below: development programmes and so on.
However, the interest rate charged plus
1. Poverty of Farmers: The vicious transaction cost for poor people and Self-
circle of poverty forces the farmers to Help Groups are much higher as compared
borrow for consumption, cultivation to that for rich people. For instance,
and celebrations. Thus, poverty, debt education loan is costlier than car loans.
and high rates of interest hold the
farmer in the grip of money lenders.
Regional Rural Banks (RRBs)
2. Failure of Monsoon: Frequent
Regional Rural Banks came into existence
failure of monsoon is a curse to the
based on the recommendation made by a
farmers and they have to suffer due
working group on rural banks appointed by
to the failure of nature. Therefore,
the Government of India in 1975. RRBs are
farmers find it difficult to identify
recommended with a view to developing
good years to repay their debts.
rural economy by providing credit and
3. Litigation: Due to land disputes other facilities particularly to the small and
litigation in the court compels them marginal farmers, agricultural labourers,
to borrow heavily. Being uneducated artisans and small entrepreneurs. RRBs
and ignorant they are caught in the are set up by the joint efforts of the Centre
litigation process and dry away their and State Governments and commercial
savings and resources. banks. At present, there are 64 Regional
4. Money Lenders and High Rate of Rural Banks in India. The RRBs confine
Interest: The rate of interest charged their lending’s only to the weaker sections
by the local money lenders is very and their lending rates are at par with the
high and the compounding of interest prevailing rate of cooperative societies.
Rural Economics 215
Micro Finance
In 2009-10, the number of new SHGs
Micro finance, also known as micro credit, having credit-linked with banks
is a financial service that offers loans, was 1.59 million and a bank loan of
savings and insurance to entrepreneurs Rs.14,453 Crores was disbursed to
and small business owners who do not these SHGs. Further, the number
have access to traditional sources of of SHGs which maintained savings
capital, like banks or investors. The goal of accounts with banks at the end of
micro financing is to provide individuals March 2010 was 6.95 million.
with money to invest in themselves or
their business. Microfinance is available
through micro finance institutions, which of 6 months, they lend small amounts
range from small nonprofit organizations to their members for interest. Based on
to larger banks. In India, Non Government their performance, they are linked with
Organizations (NGOs) play a pivotal role in the bank for further assistance under
the development of micro finance service. SHG Bank Linked Programme (SBLP)
Microfinance industry in India have grown started in 1992. It is a holistic programme
vastly in the last two decades. In 2009, the of micro-enterprises covering all aspects
total number of micro finance institutions of self-employment, organization of the
in India was around 150 (Tripathi, 2014). rural poor into self Help groups and
their capacity building, planning of
Self-Help Groups (SHGs) activity clusters, infrastructure build up,
technology, credit and marketing.
The main objective of this programme is to
bring the beneficiaries above the poverty
line by providing income generating
assets to them through bank credit and
government subsidy. NABARD estimates

Under NABARD SHG Linkage

Self Help Groups are informal Programme, SHGs can borrow
voluntary association of poor people, from credit from bank on showing their
the similar socio-economic background, successful track record of regular
up to 20 women (average size is 14). They repayments of their borrowers. It
come together for the purpose of solving has been successful in the states like
their common problems through self- Andhra Pradesh, Tamil Nadu, Kerala
help and mutual help. The SHG promotes and Karnataka during 2005-06. These
small savings among its members. They States received approximately 60 per
save small amounts Rs.10 to Rs.50 a cent of SHG linkage credit (Taruna
month. The savings are kept with a bank. and Yadav, 2016).
After saving regularly for a minimum

Rural Economics 216

that there are 2.2 million SHGs in India,
representing 33 million members that
have taken loans from banks under
its linkage program to date. The SHG
Banking Linkage Programme since its
beginning has been predominant in
certain states, showing spatial preferences
especially for the southern regions like
Andhra Pradesh, Tamil Nadu, Kerala
and Karnataka. These SHGs have helped
the Banks to accumulate more funds.
Actually the banks change higher interest
for the SHGs than car owners.
The principal objectives of the
Major Features of SHGs are 08'5$%DQNDUHWKHIROORZLQJ
1. Regulate the lender and the borrower
1. SHG is generally an economically
homogeneous group formed through of microfinance and bring stability
a process of self-selection based upon to the microfinance system .
the affinity of its members. 2. Extend finance and credit support to
Microfinance Institutions (MFI) and
2. Most SHGs are women’s groups with
agencies that lend money to small
membership ranging between 10 and
businesses, retailers, self-help groups
20.
and individuals.
3. SHGs have well-defined rules and
3. Register all MFIs and introduce a
by-laws, hold regular meetings and
system of performance rating and
maintain records and savings and
accreditation for the first time.
credit discipline.
4. Offer a Credit Guarantee scheme for
4. SHGs are self-managed institutions
providing guarantees to loans being
characterized by participatory and
offered to micro businesses.
collective decision making.
5. Introduce appropriate technologies
to assist in the process of efficient
Micro Units Development
lending, borrowing and monitoring
DQG5H¿QDQFH$JHQF\
of distributed capital.
%DQN08'5$%DQN
It is a  public sector  financial institution
10.10
which provides loans at low rates to micro-
finance institutions and non-banking Rural Health, Nutrition and
financial institutions which then provide Sanitation
credit to Micro, Small and Medium
Enterprises (MSMEs). It was launched on Health is an important component for
8th April 2015. ensuring better quality of life. Large
Rural Economics 217
masses of the Indian poor continue to especially the vulnerable groups. NRHM
fight hopeless and constantly losing the seeks to provide equitable, affordable and
battle for survival and health. Indian quality health care to the rural population,
rural people are suffering with various especially the vulnerable groups.
epidemics such as small pox, cholera, NRHM focuses on Reproductive,
malaria, typhoid, dengue, chicken guniya, Maternal, Newborn, Child Health and
etc. This is mainly due to lack of medical Adolescent (RMNCH+A) Services.
facilities, deep ignorance and poverty. The emphasis here is on strategies for
Indian Constitution clearly lays down improving maternal and child health
that “States shall regard the rising of the through a continuum of care and the life
level of nutrition and standard of living cycle approach.
of its people and improvement of public
health as among its primary duties”.
To meet this constitutional directive. 10.11
Several programmes for nutrition have
Rural Infrastructure
been implemented. These include
Supplementary Feeding Programmes
including Mid Term Meal Programme, Rural Housing
Nutrition Education through Printed House is one of the basic needs of every
Media and Television and Compulsory family. Provision of better housing facilities
Fortification of Common Salt within increases the productivity of labour. The
Iodine. Still in terms of health standard, housing problem is getting aggravated due to
Sri Lanka is better than India, and in india, rapid adoptation of nuclear families. Housing
Kerala is better than Tamil Nadu. does not mean provision of house alone but
also proper water supply, good sanitation,
proper disposal of sewage etc. The problem
National Rural Health Mission of housing can be tackled by the development
The National Rural Health Mission of low cost technology in house construction,
(NRHM) was launched on 12th April provision of adequate housing finance and
2005, to provide accessible, affordable and provision of land sites to landless workers in
quality health care to the rural population, rural areas.
Rural Economics 218
 As per the NSSO data, 38 per cent of the farmers to bring their produce to the
the households lived in with one room while urban markets and to have access to distant
another 36 per cent lived with two rooms. markets and other services.

Rural Market 5XUDO(OHFWUL¿FDWLRQ

Road Market refers to the infrastructure Rural Electrification refers to providing
created to buy and sell the products electrical power to rural areas. The main
produced in rural areas and also to aims of rural electrification are to provide
purchase the needed products and farm electricity to agricultural operations and
inputs produced in urban and other to enhance agricultural productivity, to
regions. The rural marketing is still increase cropped area, to promote rural
defective as farmers lack bargaining industries and to lighting the villages. In
power, long chain of middlemen, lack order to improve this facility the supply of
of organisation, insufficient storage electricity is almost free for agricultural
facilities, poor transport facilities, absence purpose in many states and the electricity
of grading, inadequate information and tariff charged in rural areas is kept very
poor marketing arrangements. low. In India 99.25% of villages were
electrified at the end of March 2017. As
on 31.03.2017, 100 percent electrification
Rural roads in India constitute 26.50
was achieved in villages of 20 States/UTs
lakh kms, of which 13.5 percent of
namely, Chandigarh, Delhi, Haryana,
the roads are surfaced.
Himachal Pradesh, Punjab, Rajasthan,
Daman & Diu, D & N Haveli, Goa, Gujarat,
Maharashtra, Andhra Pradesh, Kerala,
India’s road network is one of the Lakshadweep, Puducherry, Tamil Nadu,
world’s largest. The road length of Telangana, Andaman & Nicobar Island,
India increased from about 4 lakh Sikkim and Tripura.
kms in 1950-51 to 34 lakh kms at The factors hindering the progress
present (2018). of rural electrification in India are:
1. Lack of Funds: The generation and
Rural Roads transmission of power involves huge
expenditure and the fund allocation
Road transport is an important constituent
is low.
of the transport system. Rural roads
constitute the very life line of rural economy. 2. Inter-state Disputes: As there are
A well-constructed road network in rural inter-state disputes in managing power
area would bring several benefits including projects, power distribution is affected.
the linking of remote villages with urban 3. Uneven Terrain: As rural topography
centres, reduction in cost of transportation is uneven without proper connection,
of agricultural inputs and promotion of developing new lines are costlier and
marketing for rural produces. It helps difficult.

Rural Economics 219

4. High Transmission Loss: Transmission 3. Coordinated and integrated
loss in power distribution is almost 25 programmes for solving the
per cent in rural areas. present problems and to achieve
5. Power Theft: Unauthorized use and sustainable developmentneed to be
diversion of power are evil practices designed.
adopted by affluent people that hinders 4. Persons and leaders with an
the rural electrification process. understanding of reality of rural
problems and with the required
10.12 foresight vision should be consulted
Requirements for Rural while designing development
Development programmes.

10.13
Slater Villages: Gilbert Slater, the first Conclusion
professor of economics at Madras
University, published his book, Crucial steps to strengthening the rural
Some South Indian Villages, in 1918 economy are already being taken through
following a survey of some villages various policies.  These steps include
like Vadamalaipuram (Ramnad), investments in areas ranging from health,
Gangaikondan (Tirunelveli), information technology, education,
Palakkuurichi (Tanjore) and Dusi infrastructure and small business. The
(North Arcot) in Tamil Nadu by his Administration is committed to building
students. It was subsequently done by on these unprecedented measures in the
different groups of researchers in the months and years to come. PURA (Provision
1930s, 1950s, 1960s, and two of the of Urban facilities for Rural Areas) needs
villages only in the early 21st century. to be given due emphasis, without which
The resurveys became an important Indian villages cannot prosper.
historical record. They provided a
baseline for several later revisits to Glossary
his villages, and have inspired many
successors. Much of our knowledge Rural Economics Application of
of rural change depends on Economic Principles
these studies. in rural areas.
Population Number of persons
Density living per sq.km
or per sq. mile.
1. Efforts need to be made to raise farm Unemployment Situation of people
and non-farm rural real incomes. with willingness
2. Investment in basic infra-structure and ability to work
and social services need to be but not getting
increased. employed.

Rural Economics 220

Open Unemployed persons Poverty Condition where
Unemployment are identified as they the basic needs
remain without of the people like
work. food, clothing and
Seasonal Employment occurs shelter are not
Unemployment only in a particular being met.
season and workers Dualism Co-existence of
remain unemployed in two extremely
the remaining period different features.
of a year. Rural Pro cess of
Under Situation where Development improving the rural
employment people employed areas, rural people
in excess over and rural living.
and above the Rural Providing
requirements. Electrification electrical power to
rural areas.

MODEL QUESTIONS

Part - A Choose the Best Answer

1. Which is considered as the basic unit 3. Identify the feature of rural economy.
for rural areas? a. Dependence on agriculture
a. Panchayat b. High population density
b. Village c. Low level of population
c. Town d. Low level of inequality
d. Municipality
4. What percentage of the total
2. Which feature is identified with rural population live in rural area, as per
areas? 2011 censes?
a. Low population density a. 40
b. High population density b. 50
c. Low natural resources c. 60
d. Low human resources d. 70

1. Rural Economics 221

 5. How do you term people employed in 10. Indicate the cause for rural poverty.
excess over and above the requirements? a. Lack of non-farm employment
a. Unemployment b. High employment
b. Underemployment or c. Low inflation rate
Disguised Unemployment
d. High investment.
c. Full employment
10. Indicate the cause for rural poverty.
d. Self-employment
a. Lack of non-farm employment
6. What is the term used to denote the
b. High employment
coexistence of two different features
in an economy? c. Low inflation rate

a. Technology d. High investment.

b. Dependency 11. What is the other name for concealed

unemployment?
c. Dualism
a. Open
d. Inequality
b. Disguised
7. The process of improving the rural
c. Seasonal
areas, rural people and rural living is
defined as d. Rural

a. Rural economy 12. How do you term the employment

occurring only on a particular season?
b. Rural economics
a. Open
c. Rural employment
b. Disguised
d. Rural development
c. Seasonal
8. Identify the agriculture related d. Rural
problem of rural economy.
13. Identify an example for rural industries?
a. Poor communication
a. Sugar factory
b. Small size of landholding
b. Mat making industry
c. Rural poverty
c. Cement industry
d. Poor banking network
d. Paper industry
9. The recommended nutritional intake 14. How much share of rural families in
per person in rural areas. India is in debt?
a. 2100 calories a. Half
b. 2100 calories b. One fourth
c. 2300 calories c. Two third
d. 2400 calories d. Three fourth
1. Rural Economics 222
15. Identify the cause for rural 18. Identify the year in which National
indebtedness in India. Rural Health Mission was launched.
a. Poverty a. 2000 b. 2005
b. High population c. 2010 d. 2015
c. High productivity 19. Identify the advantages of rural roads.
d. Full employment a. Rural marketing
16. In which year, Regional Rural Banks b. Rural employment
came into existence? c. Rural development
a. 1965 b. 1970 d. All the above
c. 1975 d. 1980
20. “ An Indian farmer is born in debt, lives
17. Identify the year of launch of MUDRA in debt, dies in debt and bequeaths
Bank? debt”-who said this?
a. 1995 b. 2000 a. Adam Smith
c. 2010 d. 2015 b. Gandhi
c. Amartya Sen
d. Sir Malcolm Darling

Answers Part - A

1 2 3 4 5 6 7 8 9 10
b a a c b c d b d a
11 12 13 14 15 16 17 18 19 20
b c b d a c d b d d

Part - B Answer the following questions in one or two sentences

21. Define Rural Economy. 26. Define Cottage Industry.

22. What do you mean by Rural 27. What do you mean by Micro Finance?
Development?
28. State any two causes of housing
23. Rural Poverty – Define. problem in rural areas.

24. Define Open Unemployment. 29. Define Rural Electrification.

25. What is meant by Disguised 30. State any two factors hindering Rural
Unemployment? Electrification in India.

1. Rural Economics 223

Part - C Answer the following questions in about a paragraph
each

31. State the importance of Rural 34. What are the remedial measures for
Development. Rural Unemployment?

32. Explain the causes for Rural 35. Write a note on Regional Rural Banks.
Backwardness.
36. Mention the features of SHGs.
33. Enumerate the remedial measures to
37. List out the objectives of MUDRA
Rural Poverty.
Bank.

Part - D Answer for each question in about a page

38. ‘The features of Rural Economy are 40. Analyse the causes for Rural
peculiar’- Argue. Indebtedness.

39. Discuss the problems of Rural

Economy.

ACTIVITY
1. VTake a case of a village where you or nearby you live.
Collect the basic information such as, geographical area,
boundary areas, population, number of houses, area under
cultivation, major crops cultivated, type of infrastructure
etc., with the collected information, prepare a report about
the village.

References

1. Annual Report, Ministry of Rural Development, GOI.

2. Rural Economics by Patel KV, A C Shah and LD’Mello, Himalaya
Publishing House, Bombay.
3. Rural Economics by Grewal PS, Kalyani Publishers, New Delhi.
4. Rural Economics by Dhingara IC, Sultan Chand & sons, New Delhi.
5. Agricultural Economics and Rural Development by Tyagi BP, Jai
Prakash Nath & Co., Meerut.
6. Integrated Rural Development by Ramasamy AS, Oxford & IBH
Publishing Co Pvt Ltd, New Delhi.

Rural Economics 224