Ch 03 Rural Economy a Reality Check

8/6/2019 Ch 03 Rural Economy a Reality Check

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Chapter ObjectivesAn overview of the rural economic scenario

The impact of economic growth on rural

incomes and purchasing power in rural India The rural infrastructure and potential

applications for marketing

Key government initiatives and impact of

economic reforms on rural economy

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Economic ScenarioRural economy shifting from a barter economy to a

cash rich economy

The allocation for rural development has gone up

from Rs. 8,900 crores in the 7th

Plan to Rs. 1,20,000crores in the 10th Plan

The flow of agricultural credit up from Rs. 32,000crores in 1997-98 to Rs. 1,05,000 crores in 2004-05

The Human Development Index improved by 26% in

the 80s and another 24% in the 90sThe Human Poverty Index reduced from 53% in 1981

to 44% in 1991 for rural closing the gap with urban

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Share of the SectorsPrimary sector agricultural and allied activities such as

livestock, fisheries and forestry

Secondary sector mining and manufacturing

Tertiary sector services such as transport,communications, trade, financial services and

community services

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Percentage share of different sectors in GDP(at 1993-94 prices)

Year Primary Secondary Tertiary

1950-51 57.2 14.8 28.0

1980-81 39.7 23.7 36.6

2001-02 23.9 26.6 49.5

Source: National Account Statistics,1951-2001


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The Transition of theRural Economy Transition at three levels resulting in higher

employment and productivity

The farm sector now contributes to only 53% of

the rural economy

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1. Food graincrops

2. On landactivities

3. Farm activities

1. Non-food graincrops, cash crops

2. Off land alliedactivities likelivestock andfisheries

3. Non-farmactivitiesincludingmanufacturingand services


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RuralEconomy

Farm SectorAgri & Allied

Agriculture

Non-farmSector

(Formal andinformal)

RuralIndustries

RuralServices

Transport &Storage

Mining &Quarrying

Forestry

Communication

ConstructionFishing

AnimalHusbandry

(Dairy, goats,poultry)

Agro Processing(Sugarcane,

Oilseeds etc.)

Retailing andTrading

Community and

Social Services

Manufacturing

(Handloom,Handicrafts etc.)

Horticulture


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Farm SectorAgriculture contributes 24% to GDP and has been growing at an

average of 5% between 1992-93 and 1997-98

The agricultural sector registered a growth of 9.1% in 2003-04 withfood grain production touching 211 million tonnes

India is the largest milk producer in the world and the second

largest inland producer of fish.India has emerged as a leading tractor producing country.

As a result share of animal power has reduced from 45.3% in 1971-72 to 9.5% in 2001-02

Consumption of fertilisers has grown by 300% between 1980-81 to2001-02

The gross irrigated area has grown from 29% in 1980-81 to 38% in1996-97

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Rural Enterprise

There are 1.7 crore enterprises in the ruralsector employing 3.8 crore workers in 1998

Rural non-farm employment has grown from

18.4% in 1983 to 23.8% in 1999-2000The major activity groups in non-farming are:

Retail and wholesale trade

Community and social servicesManufacturing

The migration in urban areas has come downfrom 62.2% in 1990 to 56.5% in 2000

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Size and Distribution of RuralAssets

Percentage Distribution of Households and Assets inIndia

Rural (%) Urban (%)

Asset Group Households

Assets Households

Assets


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Land OwnershipLandholding Pattern

Size Category No. of landholdings in

millions (per cent)

Area in millionhectares (per cent)

1970-71 1990-91

1970-71 1990-91

Marginal (Below 1ha)

36 (51) 62 (58) 15 (9) 25 (15)

Small holding (1 to4 ha)

24 (34) 34 (33) 49 (30) 67 (41)

Medium (4 to 10

ha)

8 (11) 8 (7) 48 (30) 67 (27)

Large (10 ha andabove)

3 (4) 2 (1) 50 (31) 29 (17)

TOTAL 71 (100) 106(100)

162 (100) 166(100)

Source: Reserve Bank of India, All India Debt and Investment Survey, 1991-

92, RBI Bulletin May 1999RBM 03 10

Increasing population has led to fragmentation with average landholding

declining from 2.28 hectares in 1970-71 to 1.57 hectares in 1990-91


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Rural Income

Per capita income for the rural sector hasgone up from Rs.5,783 to Rs 9,481 in 1999-2000

The urban rural disparity has reduced from2.45 to 2.04

The distribution of landholding and cropping

pattern are the two key determinants of farmprofitability

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Wage WorkersWorkforce RuralIncome

Rs. Billions

RuralEmployedMillions (%)

Per Capita PerAnnum Income(RS.)

Self Employed 43% 40% 10,150

Wage Earner 10% 33% 2,860

Agricultural 53% 73% 6,855

Formal 31% 15% 19,514

Informal 16% 12% 12,595

Non-agriculture

47% 27% 16,464

TOTAL 7,006 312 9,481

Source: MART Research on NCAER data and Census 2001

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1. The lowest wages are in Orissa and the highest in Kerala

2. The top slot is occupied by formal non-agriculture and the lowest is

the agricultural wage earner


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Rural ExpenditureThe rural spending per person

at Rs. 5,830 is a little abovehalf the urban spend of Rs.10,260

Due to the higher populationthe total spend is muchhigher in rural

Bulk of the expenditures aredaily or irregular

99% of the households reportone unusual expenditure inlast six months either formedical reasons or births,weddings, etc.

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Source: Rural Finance Access Survey,

World Bank NCAER 2003


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The Rural InfrastructureRoad Connectivity

A good indicator of the inclusionary aspect ofdevelopment

At the village level of less than 1000 population ithas gone up from 36.5% in 1991-92 to 49.2% in1996-97

Kerala has the highest road length per hundred

square Kms.Post Offices 1,38,756 in rural India. On an

average each post office serves 6,614 peoplewithin an area of 21.17 square kilometers

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The Rural InfrastructureCommunication Radio with 149 medium wave, 55 short wave and 123 FM

transmitters covers 98.8% of the population in the countryTelevision

Doordarshan with 1042 terrestrial transmitters reach over87% of the population. A high degree of community viewing in the rural sector

Press and Print Media The reach is barely 15% in the rural sector

Telecom By 2004, 80% of villages had been connected

through 5.4 lakh Village Public TelephonesTele density is only 1.74% in rural against 26.2% in urban in

2005Mobile - 15% of the mobile users were in rural area in 2005

Electrification By 2002 86% of the total villages had been electrified

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Social Infrastructure

Health

Sub-Centres (1,37,292) are the contact pointsbetween primary health care and the community

Primary Health Centres (22,807) are the first contactpoints between a village and a medical officer

Community Health Centres (3,027) are establishedand maintained by state governments. They havethirty indoor beds and all basic hospital facilities

Education

The total number of educational institutions in ruralIndia including colleges are 1,228, 501 (Source:Census 2001)

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The Rural Infrastructure

Public Distribution SystemDistribution of essential commodities through Fair Price

Shops on a regular basis

PDS has a network of about 4.76 lakh Fair Price Shops ofwhich nearly 80% are in the rural sector

Agri InfrastructureGovernment intervention is limited to protecting the

interests of the producers, consumers and promoting theorganised marketing of agricultural commodities

Government also provides assistance in setting upwarehousing through Food Corporation of India, CottonCorporation of India and Jute Corporation of India

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Mandis Haats and MelasMandis These agricultural markets are set

up by state governments to procureagricultural produce

Total Mandis 6,800

Most agricultural areas with population morethan 10,000 have Mandis

Average population catered to each Mandi 1.36 lakhs

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Mandis Haats and MelasHaats periodic markets

A place for political, social, andcultural contact

Most of these are held once aweek; others twice a week

Total Haats 47,000

Average number of visitors 4,600

Average sale per day Rs.2.25 lakhs

Number of stalls/Haats 300+

Villages covered per Haat 15to 20

Categories of Outlets %

Agricultural products 39.5

Manufactured goods 24.3

Processed foods 13.2

Handlooms and handicrafts 8.4

Services 3.3

Fish, meat and poultry 3.2

Forest products 2.1

Others 6.0

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Source: MART study


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Mandis Haats and MelasMelas fairs and festivals

A place for entertainment and shopping

Number ofMelas

500 major ones

25,000 total

Average number of visitors 7.5 lakhsAverage number of outlets - 850

Average sales Rs. 2.5 crores

Melas may be classified as:

Religious, cultural or commercial

Local, regional or national One day, short duration or long duration

Categories of Outlets %

Manufactured goods 42.5

Processed foods 19.5

Handlooms andhandicrafts 15.6

Agricultural products 5.6

Services 4.2

Entertainment 4.0

Others 6.0

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Source: MART study


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Commercial Infrastructure

Regional Rural Banks Authorised capital Rs. 5 crore

The issued and paid up capital is shared in the ratio of 50:15:35

by the Central Government, the State Government and thecommercial bank

As of 31st March 2003 there are 14,777 RRBs in the country

Scheduled Commercial Banks with 37,098 branches inrural India

Cooperative Banks 3 tier pyramidal cooperative creditstructure with state (30 with 847 branches) at the apexlevel, district(368 with 12,652 branches) at theintermediate level and primary agricultural cooperativesociety (98,247) at the village level

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Government Policies and

ReformsPradhan Mantri Gramodaya Yojana a fund for the

development of infrastructure in rural sectorPradhan Mantri Rojgar Yojana employment

opportunities for ruralSampoorna Grameen Rojgar Yojana for employmentopportunities

Rural Housing for providing Housing for AllSwarnajayanti Gram Swarozgar Yojna self

employment of the rural poorDistrict Rural Development Agency principal organ at

the district level for overseeing the implementation ofvarious anti-poverty programmes

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Institutional Finance in Rural

IndiaNABARD is the main Government body for

Providing refinancing assistance for financingfarm mechanisation

Issue of Kisan Credit Cards. At the end ofDecember 2005 there were 55.6 million KisanCredit Cards

Setting up of Agriclinic and agribusiness centres

by agriculture graduatesRefinance Schemes for financing Farm Service

Centres

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Land ReformsRedistribution of ownership based on social justice

and optimum land utilisation Surplus land from large landowners distributed amongst

landless Rent regulation

Protection of interests of tribals

Development of public land for the poor

Make land accessible to women

Land ceiling imposed at three times the economicholding

10 acres of best land or 18 acres of average landfixed as the ceiling

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Ch 03 Rural Economy a Reality Check

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Transcript of Ch 03 Rural Economy a Reality Check