Problems of the Rural Poor in India - Future Perspective


By

N. Kavitha
MBA, M.Phil, (Ph.D)
(Research Scholar in Mother Teresa Women's University, Kodaikkanal)
Lecturer-MBA Department
SSM College of Engineering
Komarapalayam. Namakkal-Dist.

Dr. A.Ramachandran
M.Com, M.Phil, Grad.CWA, Ph.D
Reader in Commerce
SNR Sons College (Autonomous)
Coimbatore
 


Abstract

The burden of indebtedness in rural India is great, and falls mainly on the households of rural working people. The exploitation of this group in the credit market is one of the most pervasive and persistent features of rural life in India, and despite major structural changes in credit institutions and forms of rural credit in the post-Independence period, Darling's statement (1925), that "the Indian peasant is born in debt, lives in debt and bequeaths debt," still remains true for the great majority of working households in the countryside. Rural households need credit for a variety of reasons. They need it to meet short-term requirements for working capital and for long-term investment in agriculture and other income-bearing activities. Agricultural and non-agricultural activity in rural areas are typically seasonal, and households need credit to smooth out seasonal fluctuations in earnings and expenditure. Rural households, particularly those vulnerable to what appear to others to be minor shocks with respect to income and expenditure, need credit as an insurance against risk. In a society that has no free, compulsory and universal education or health care, and very few general social security programmes, rural households need credit for different types of consumption. These include expenditure on food, housing, health and education. In the Indian context, another important purpose of borrowing is to meet expenses for a variety of social obligations and rituals.

Introduction

About 75% of the Indian population lives in rural areas and about 80% of this population is dependent on agriculture for its livelihood. Agriculture accounts for about 37% of the national income. The development of the rural areas and of agriculture and its allied activities thus becomes vital for the rapid development of the economy as a whole.In this regard, India has succeeded in developing one of the largest rural banking systems in the world. Various regulatory measures have been taken enabling the banking system to play an important role in the economic development of the rural areas. The two most prominent measures are rural commercial bank branch expansion, thus moving from class banking to mass banking and secondly, priority sector lending and the formulation of specific development programmes and action plans to facilitate credit flow to the rural sectors. Despite these measures, as per the Debt and Investment Survey, Govt. of India (1992) about 36% of the rural households are found to be outside the fold of institutional credit.

Agricultural Productivity

Even though India occupies the first or second position in the world in several crops in terms of area and production, it's rank in terms of productivity per hectare in the world is 52 for rice, 38 for wheat and much low in several other crops. The productivity of some crops is not only low but also remained stagnant over the years. The yield gap needs to be bridged through an integrated package of technology and agricultural policies to reap the untapped production potential, particularly, in rain-fed and other low productivity areas.

Causes for Backwardness in Villages

1. Zamindari System, the legacy of the British Rule
India was under British rule for 200 years. British policies were aimed in revenue collection and not rural development. They introduced the zamindari system. The zamindars were deemed the owners of all land and they collected as much revenue as they could from the peasants. The system left the peasants very poor and the zamindars did very little to improve the conditions of the villages. After the country attained independence this system was abolished, but the conditions of the peasants is yet to transform completely.

2. The Bonded Labour System
It is equivalent to near slavery. Bonded labour is an indebted agricultural worker, who had borrowed from the money lender at usurious rate of interest and had to work in his farm for low wages. The system was used to permanently enslave the worker, as the worker was only able to repay a part of interest and the loan with compounded residual interest went on swelling. The agricultural labour can free himself eventually only by giving his son in bondage as a substitute. Under the 20-point economic programme, the Government India under Prime Minister Mrs.Indira Gandhi abolished bonded labour system and brought legislation to this effect in 1975. Despite the legislation the system is known to persist here and there in select areas.

3. Other contributory reasons are the total lack of agricultural development under foreign rule, poor communication, roads and other infrastructure development in villages, lack of education and health facilities, and the destruction of the thriving Indian cottage industries on account of competition from the cheap machine made goods imported under British rule

Progress made after the Country attained Independence

1. After Independence the Country adopted planned development. The very first five year plan laid stress on agricultural development. It took a number of measures to bring more land under irrigation. Major irrigation Dams like Bakra Nangal, Hirakud, Nagarjunasagar, Tungabhadra were constructed which generated power for industrialisation of the country and water for irrigation. A number canals were build to distribute stored water over an extensive area. The Indian farmer, as a result, is now not exclusive depending on the monsoon.

2. Intensive cultivation of land is made possible through farm mechanisation. Tractors are being produced in the country and these are available to the farmers everywhere. Farmers are also using threshing machines, deep boring and irrigation pumps. They get supplies of high yielding improved seeds, fertilisers and other inputs. To enable them to purchase such inputs the rural credit system has been invigorated with Cooperatives, Regional Rural Banks, and Rural Branches of Commercial Banks. The recent boon to the poor Indian peasant is the micro finance system and Self Help Groups that have rendered financial support within the easy reach of all.

3. Land Reform legislation introduced in the country after independence include the abolition of the zamindari system, the abolition of bonded labour system, land ceiling legislation etc.. Legislation was also introduced to relieve rural indebtedness and the money lender could no longer legally collect more than reasonable interest. Untouchability was abolished and special legislation for the upliftment of scheduled cases and scheduled tribes were enacted.

4. Community Development Programmes, Integrated Rural Development Programme, bringing local self-government to the roots of the village through introduction of panchayat raj system ushered a new era of rural development. Development of public health care system, schemes undertaken for promoting literacy and adult education in the country, programmes for development of rural industries are other development programmes that have received the thrust of the Government's development approach.

Future Perspectives

Agriculture, with its large dependent population has to thrive and flourish, in order to secure rural prosperity. To ensure orderly and vigorous growth of agriculture policy and structural issues need to be addressed quickly. Some of the important issues that need to be addressed are -

1. Improving profitability of agriculture, through yield improvements, diversification and reform of agricultural marketing.

2. Strengthening backward linkages and expanding irrigation coverage.

3. Providing forward linkages especially for post harvest management, processing, transport, storage and market infrastructure.

4. Securing a stable long term policy on agricultural commodities trade, including the role of private sector.

5. Encouraging emergence of a market mechanism for agricultural commodities such as a commodities exchange.

6. Streamlining the cooperative credit structure for facilitating hassle free flow of credit.

7. Implementing watershed development projects in the rain-fed and dry-land areas.

Rural banking faces twin challenges

Banking in rural India is faced with the twin challenges of regulation and distribution. Regulation with respect to banking has been designed for delivery in urban India and distribution required more manpower to be deployed in rural areas. Initiatives like cheque transaction where the electronic image and not the actual cheque is sent have in mind the urban customer, he said. "About 500-600 million people in India still do not have bank accounts. For the rural segment, one needs to design no-frills products and deliver hard core value".The other handicap was that while Rs 1-crore business in microfinance required 30 people in terms of manpower, the same volume of business in other portfolios required only one person. Also, contract farming and supply chain integration has not gone the way they should have. Power, telecommunications, banking and transportation had reduced the urban-rural divide, he said. Besides traditional banking services, people in the rural and semi-urban areas are expressing interest in liability and investment products. He said, "Rural India is fast transforming a nation of savers into a nation of investors".

Conclusion

No doubt, villages are in a state of neglect and under-development, with impoverished people, as result of past legacies and defects in our planning process and investment pattern. But the potential in rural India is immense. What if every village in the country is provided with basic amenities, like drinking water, electricity, health care, educational transport, communication and other facilities, with only a smaller population of the village engaged in agriculture and the remaining in other gainful occupations? When this happens India will turn into mighty country. The purchasing power of the rural population throwing enormous demand for goods and services will boost the national economy tremendously. The day will see the reverse migration of people from the urban slums back to the villages. Rural Development is the subject to come to the forefront after the economic reforms and rural banking will serve the backbone of this development.

Reference

http://www.thehindubusinessline.com/2007/05/07/stories/2007050700770800.htm

http://www.livinghistoryfarm.org/

http://www.geocities.com/kstability/learning/banking2/index.html

www.cababstractsplus.org/google/ abstract.asp?AcNo=20053122991

Source: From Article titled "Does Informal Credit Provide Security? Rural Banking Policy in India

www.answers.com
 


N. Kavitha
MBA, M.Phil, (Ph.D)
(Research Scholar in Mother Teresa Women's University, Kodaikkanal)
Lecturer-MBA Department
SSM College of Engineering
Komarapalayam. Namakkal-Dist.

Dr. A.Ramachandran
M.Com, M.Phil, Grad.CWA, Ph.D
Reader in Commerce
SNR Sons College (Autonomous)
Coimbatore
 

Source: E-mail May 23, 2007

       

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