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Meaning of Rural Economics:

Rural economics, according to Professor Taylor, “has to do with the harmonious
adjustment of the relations between useful forms of plant and animal production and
the human environment; also between the various people who participate in the
production, transportation and marketing of farm products. It is the function of
economics to make clear the economic forces with which the farmer has to deal and to
develop methods of ascertaining what to produce and how to produce it in order to
secure maximum net profits for the farmer and maximum well-being for the nation".
Rural Economics, as its title implies is that branch of economics which deals with
all aspects of problems related to agriculture. According to Snodgrass and Wallace,
“Rural Economics is an applied phase of the social science of economics in which
attention is given to all aspects of problems related to agriculture.”

Scope of Rural Economics:

The foregoing definitions indicate the scope of Rural Economics. A common
theme of scarcity of resources and choice of uses runs almost through all of these
definitions. That way, Rural Economics is not different from the general economics. All
the tools of analysis used in general economics are employed in Rural Economics as
well. We have the same branches of Rural Economics i.e. Economics of production,
consumption, distribution, marketing, financing and planning and policy making as in
case of general economics.
A study at the micro and macro level for the agricultural sector is also generally
made. Static and dynamic analyses are also relevant for the agricultural sector of the
economy. To be more specific, these definitions point out that Rural Economics
examines how a farmer chooses various enterprises e.g., production of crops or rising of
cattle and how he chooses various activities in the same enterprise. E.g., which crop to
grow and which crop to drop; how the costs are to be minimized; what combination of
inputs for an activity are to be selected; but amount of each crop is to be produced but
type of commercial relation the farmer have to have with people from whom they
purchase their input or to whom they sail their product. Rural Economics does not
study only the behavior of a farmer at the farm level. That is, in a way, the micro
analysis.
Agricultural problems have a macro aspect as well. Instability of agriculture and
agricultural unemployment are the problems which have to be dealt with, mainly at the
macro level. And then, there are the general problems of agricultural growth and the
problems like those concerning tenurial systems and tenurial arrangements, research
and extension services which are again predominantly macro in character. Such
problems their origin, their impact and their solutions are the rural economics Again,
‘Rural Economics’ as at present does not confine itself to the principles concerning
‘economizing of resource in agriculture’ only whether at the micro or macro level or
from the ‘static’ a ‘dynamic’ point of view.
The scope of Rural Economics is larger than ‘mere economizing of resources’.
Agriculture is, as we know an important sector, of the overall economy. The mutual
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dependence of the various sectors of the economy on each other is well established.
Growth of one sector is necessary for the growth of the other sector. As such, in Rural
Economics, we also study how development of agriculture helps the development of the
other sectors of the economy; how can labour and capital flow into the non-agricultural
sectors; how agricultural development initiates and sustains the development of other
sectors of the economy.
What this implies is that Rural Economics not only develops concerning the use
of scarce resources in agriculture proper but also examines the principles.
 Regarding the out flow of scare resources to other sectors of the economy
and
 About the flow of these resources from other sectors into the agricultural
sector itself.

Nature of Rural Economics:

Rural economics makes use of the principles of general economics. The first to
the nature of agricultural economics is that, in general, it borrows most of its principle
from its parent body of knowledge i.e., the general economics.
Even the main branches of rural economics are similar to those of general
economics. But then a question arises. If the principles of general economics are not
different from the principal of rural economics, why is there a need for separate study of
rural economics?
The answer lies in the fact that rural economics does not merely imply a direct
application of principles of economics to the field of agriculture. The principles of
economics are too general in nature and the general theory of economics has been
considered as an abstraction from reality.
Before this theory is applied to agriculture which includes, besides crop
production, forestry and animal husbandry for the purpose of economic analysis, its
principles have to be modified so

Structure of the Rural Economy of India:

 Pastoral Economy: In the beginning of the Rigvedic period (c. 1500 -1000 BC)
there occurred a complete rupture with the earlier economy. The life of the
Rigvedic people was pastoral and semi-nomadic. Their main occupation was
cattle rearing. Cows, goats, sheep and horses were domesticated. Pasture ground
was under common control. Towards the end of the period people started
settling in villages. They also took to cultivation by means of the plough drawn
by oxen. Arts and crafts such as leatherwork and wool weaving were practiced.
The society was largely egalitarian and unhierarchical.
 State and Agriculture: State control of agriculture became an important feature
of the Mauryan period (c. 322-200 BC). Big farms were established and managed
by the state. Slaves and hired labourers belonging to the Shudra varna were
employed in them. Moreover, the state provided tax concessions and support in

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the form of cattle, seed and money to the Vaisya and Shudra to settle in new
settlements for extension of agriculture. Royal tax on agriculture was one-sixth
of the produce, which could be raised in the time of emergency. State provided
some irrigation facilities and levied cess for the same. But in the post- Mauryan
period (c. 200BC-AD 300) no state farm was maintained. Land was mainly in the
possession of individual cultivators.
 Feudal Relationships: Village economy assumed a somewhat self-sufficient
character with the decline of trade and urban centres. Local needs were met
through local production. The jajmani system got reinforced by the royal
charters instructing the peasants and artisans to stick to their villages. Artisans
were paid in kind for their services to the peasants at harvest time. Thus through
the increase in landlords we find the development of a feudal type of society.
These landlords had control over the instrument of production operated by the
peasants. Society was divided into two basic classes, one of landlords and the
other of peasant producers.
 Farming: The Rural areas were available with abundance of cultivable land.
Agriculture provided food for people and fodder for cattle. A large number of
crops are grown such as wheat, barley, millet, peas, rice, sesame, gram, oilseeds,
cotton etc. Land was irrigated by wells, dams and canals. Some water-lifting
devices are also used. But generally use of the traditional implements in
agriculture and crafts continued. The vast area of land depended mainly on
nature (rainfall) for sustenance, as is largely the case even now.
 Arts and Crafts: A variety of arts and crafts based on agricultural produce were
practiced in rural areas. Villagers manufactured ropes and baskets, sugar and
jaggery (gur), bows and arrows, drums, leather buckets, etc. Various categories
of craftsmen specialized in their hereditary caste occupations such as weaver,
carpenter, leather-worker, blacksmith, potter, cobbler, washerman, barber,
water-carrier, scavenger and oil-presser. These manufacturers and craftsmen
fulfilled most of the needs of the rural people.
 Classes in Rural Areas: The entire rural population was divided into two broad
classes, i.e. the big land-holders who collected land revenue from peasants in
addition to owning tax-free land and the masses comprising peasants, artisans
and landless labourers. The big land-holders constituted the rural segment of the
ruling class. The peasants constituted the majority of the rural population. They
cultivated their land with family labour and earned their livelihood. They had to
pay land tax, which was usually, one-third but sometimes reached one-half of the
produce. Land revenue was generally paid in cash.
 Landless labourers: Landless labourers formed another significant portion of
the rural population. They worked on the land of wealthy landholders. They
were in agricultural bondage of the large landowners. Some were slaves of the
plough and others in domestic slavery of wealthy land-holders.
 The Land Use Pattern: There is a gradual change in general land use pattern by
the size of land holdings. Obviously, the small and marginal size of land holders
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have higher percentage share of its land under Net Area Sown. On the other
hand, the larger land holding enjoy the diverse land use patterns, the percentage
share under Net Area Sown decreases and area under fallow land other than
current fallow and the uncultivated area in land use increase as the size of land
holdings increase. The problem of fragmentation of land is not prominent due to
peculiar pattern of land ownership, tenure and its uses. The number of landless
farmers and landless agricultural labourers is negligible. There are also not
unduly large individual holdings and hardly any intermediary rights. The need of
any legislation or other measures to put any ceiling on land holdings does not
arise in this system.
 Agriculture is the Main Occupation: Agriculture is the fundamental occupation
of the rural people and forms the basis of rural economy. A farmer has to
perform various agricultural activities for which he needs the cooperation of
other members. Usually, these members are from his family. Thus, the members
of the entire family share agricultural activities. That is the reason why Lowry
Nelson has mentioned that farming is a family enterprise.
 Close Contact with Nature: The rural people are in close contact with nature as
most of their daily activities revolve around the natural environment. This is the
reason why a ruralite is more influenced by nature than an urbanite. The
villagers consider land as their real mother as they depend on it for their food,
clothing and shelter.
 Homogeneity of Population: The village communities are homogenous in
nature. Most of their inhabitants are connected with agriculture and its allied
occupations, though there are people belonging to different castes, religions and
classes.
 Social Stratification: In rural society, social stratification is a traditional
characteristic, based on caste. The rural society is divided into various strata on
the basis of caste.
 Social Interaction: The frequency of social interaction in rural areas is com-
paratively lower than in urban areas. However, the interaction level possesses
more stability and continuity. The relationships and interactions in the primary
groups are intimate. The family fulfills the needs of the members and exercises
control over them.
It is the family, which introduces the members to the customs, traditions
and culture of the society. Due to limited contacts, they do not develop
individuality and their viewpoint towards the outside world is very narrow,
which makes them oppose any kind of violent change.
 Social Mobility: In rural areas, mobility is rigid as all the occupations are based
on caste. Shifting from one occupation to another is difficult as caste is
determined by birth. Thus, caste hierarchy determines the social status of the
rural people.

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 Social Solidarity: The degree of social solidarity is greater in villages as com-

pared to urban areas. Common experience, purposes, customs and traditions
form the basis of unity in the villages.

Problems of the Rural Sector in India:

 Public Health Insurance Plans: Dependence and Need: Nearly a third more
rural people are covered by public health insurance plans compared to urban
residents. Public plans in health care reform are important to rural people for
two reasons strengthening the current plans for those already a part of them and
providing a public health insurance plan option for those who do not qualify for
current programs and who are unable to obtain affordable, comprehensive and
continuous health insurance through their work or through the private market.
Private and public health insurance plans is not an either-or proposition. Rather,
both are necessary and compatible for a high-functioning, cost-effective system.
 Low Income: One of the reasons for lower income of the people in rural areas
are the low prices of agricultural products. Thanks to market forces demand for
basic goods grows up more slowly than that of luxury goods and services.
Sometimes purchase prices are maintained intentionally low, when there is only
one buyer (or group of purchasers) in agricultural production. To solve this
problem at least partially, many farmers are trying to increase their income by
processing the raw material and production of finished products, i.e. closing the
production cycle. In many regions is not developed cooperation of farmers.
 Poor Infrastructure Facilities and Public Services: In the state of
infrastructure - roads, water supply and sewerage, electrical and
communications networks, is more than poor. This situation, together with the
low quality of health and education, is the main reason for migration and
depopulation of rural areas. Solving these problems is possible through close
cooperation with local government authorities which make efficient the use of
opportunities provided by central authority for regional development.
 Economic Insecurity: Another problem is economic insecurity generated by the
realization of agricultural production. The market economy mechanisms
increase the role of supply and demand as factors that dictate the prices of
agricultural production. The adverse natural conditions are also a factor for
inconsistency in people's incomes.
 Low Employment: Typical feature of the rural areas is the surplus of labour
force due to fewer jobs that are opened. Most new jobs are for unskilled workers,
so the wages and nature of the work are unattractive. Workers with higher
qualification migrate to the cities. In rural areas remain peoples mostly in
retirement age. These problems can be solved by creating more employment
opportunities and extra income for the people of these regions.
 Unskilled Labour Force: Problems of the labour force are the most serious and
difficult to solve because they affects people with their skills, initiatives and
opportunities. Besides unemployment, another problem is the depopulation of
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the rural areas and strong aging. In rural areas there is also low labor
productivity, which may be increased by introducing more modern technology,
upgrading skills of workers, providing better working conditions.
 Inadequate Financial Services: in spite of the today’s technical advancement
and innovations the state of rural productive population remains unproductive
as the venture of financial services remains limited, as the agricultural
productions are not been completely covered with the crop insurance and the
tenure taken to pay back the claim due to the failure of monsoon or due the
natural calamities is too long doesn’t encourage the marginal and small size
farmers.
 Instant access to healthcare: One of the most critical needs today is access to
good healthcare. Billions around the world, particularly people in the Indian
subcontinent, struggle because they do not get proper access to healthcare.
 Public transportation: In India, the pains of a city’s chaotic public transport
system, public trains and metros operating well beyond their capacity, and a
limited taxi service, are some of the roadblocks to an efficient public transport
system. State-sponsored mass transit systems are unable to keep pace with
people, private enterprises haven’t been able to do enough, and dated
regulations have not allowed them to do enough to try to fill the breach.
 Sanitation: Lack of sanitation is a major problem in developing countries like
India. Much deliberation has given way to the fact that the private sector is
needed to tackle sanitation service problems. It is imperative to invest in
solutions by offering different sanitation products and services at appropriate
prices. Improved sanitation is considered to be a huge market for private
businesses, since 2.6 billion people or 41 percent of the world’s population until
now does not have access to basic sanitation. An increased focus on sanitation
and hygiene is something that can be a motivating idea for startups.

Measures to uplift the Rural Sector in India:

 Technological Measures: Initiation of measures to increase agricultural
production substantially to meet the growing needs of the population and also to
provide a base for industrial development included steps to increase both
extensive cultivation and intensive cultivation. For the former, irrigation
facilities were provided to a large area on an increasing basis and area hitherto
unfit for cultivation was made fit for cultivation. For the latter, new agricultural
strategy was introduced in the form of a package programme in selected regions
of the country in 1966. To sustain and extend this programme to larger and
larger areas of the country, steps were initiated to increase the production of
high-yielding varieties of seeds, fertilizers and pesticides within the economy
and supplement domestic production by imports whenever necessary. This has
made the country self-reliant, we have turned from large importer of food grains
to net exporter of food grains.

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 Land Reforms: Land reform measures to abolish intermediary interests in land

and transfer of land to actual tiller of the soil were expected to be taken up on a
priority basis. Measures taken under this head included:
 Abolition of intermediaries.
 Tenancy reforms to:
o Regulate rents paid by tenants to landlords;
o Provide security of tenure to tenants; and
o Confer ownership rights on tenants.
 Imposition of ceilings on holdings in a bid to procure land for distribution
among landless labourers and marginal farmers.
 Institutional Credit: After nationalization of banks in 1969, nationalized banks
have paid increasing attention to the needs of agriculture. Regional Rural Banks
were also set up to deal specially with the needs of agricultural credit. A National
Bank for Agriculture and Rural Development (NAB ARD) was also set up. As a
result of the expansion of institutional credit facilities to farmers, the importance
of moneylenders has declined steeply and so has the exploitation of farmers at
the hands of moneylenders.
 Procurement and Support Prices: Another policy measure of significant
importance is the announcement of procurement and support prices to ensure
fair returns to the farmers so that even in years of surplus, the prices do not
tumble down and farmers do not suffer losses This is necessary to ensure that
farmers are not ‘penalized’ for producing more. In fact, the policy of the
Commission for Agricultural Costs and Prices has been adopted to announce
fairly high prices in a bid to provide incentive to the farmers to expand
production.
 Input Subsidies to Agriculture: The objective of input subsidization is to increase
agricultural production and productivity by encouraging the use of modern
inputs in agriculture. Under the government policy, various inputs to the farmers
are supplied at prices which are below the level that would have prevailed in the
open market.
 Food Security System: In a bid to provide food grains and other essential goods
to consumers at cheap and subsidized rates, the Government of India has built up
an elaborate food security system in the form of Public Distribution System
(PDS) during the planning period. PDS not only ensures availability of food
grains at cheap prices to the consumers but also operates as a ‘safety net’ by
maintaining larger stocks of food grains in order to combat any shortages and
shortfalls that might occur in some years and/or in certain areas of the country.
 Targeted Public Distribution System (TPDS): The Government has streamlined
the PDS by issuing special cards to people below poverty line (BPL) and selling
essential articles under PDS to them at specially subsidized prices with better
monitoring of the delivery system. Under the new system the states are required
to formulate and implement foolproof arrangements for identification of the

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poor, for delivery of food grains to fair-price shops and for its distribution in a
transparent and accountable manner at the FPS level. Under TPDS each poor
family is entitled to 10 kg of food grains per month at specially subsidized prices.
With effect from April 2002, the BPL allocation of food grains was increased from
20 kg (in April 2000) to 35 kg per family per month. According to Economic
Survey 2007-08, 73% of the poor and very poor families were benefited from
TPDS.
 Rural Employment Programmes: PDS alone cannot serve as an effective safety
net. This is due to the reason that unless the poor have adequate purchasing
power they cannot buy their requirements from the PDS. Therefore, large-scale
poverty alleviation programmes in the form of rural employment programmes
are required to provide purchasing power to the poor. On account of this reason
the government introduced various poverty alleviation programmes particularly
from Fourth Plan onwards like Small Farmers Development Agency (SFDA),
Marginal Farmers and Agricultural Labour Development Agency (MFAL),
National Rural Employment Programme (NREP), Rural Landless Employment
Guarantee Programme (RLEGP), Integrated Rural Development Programme
(IRDP), Jawahar Rozgar Yojana (JRY), Employment Assurance Scheme (EAS), etc.
 Moral Solutions for up liftment rural population:
o Mass education should be spread by establishing more primary and
secondary schools. It must be made both compulsory and free.
o Night schools should be set up for the illiterate adults to teach them to
read and write.
o Roads and other means of communication in the village should be
improved.
o Cottage industries should be revived and agriculture should be
modernized.
o Villages should be electrified to remove the depressing darkness of rural
night.
o Villagers should be educated regarding elementary hygiene and scientific
method of cultivation.
o Every Block should have a hospital or a primary health centre to provide
medical aids to the villagers.
o Rural banking should be set up for financial assistance to the village
people.

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