As already mentioned, rural development is infl uenced by a multitude of factors, such as natural resources, human resources (labour), capital, technology, and institutions and organisations. Although the Classical and neoclassical economists emphasised the role of natural resources, labour, technology, and investment in economic development, they did not assign any signifi cant role to institutions and organisations in the process of development. They assumed the institutional setup of the economy as a given (exogenous) and, hence, beyond scientifi c analysis. As a matter of fact, they even argued for minimising the role of the government in the process of development and advocated a policy of laissez- faire. It was the institutional economists and Karl Marx who recognised the signifi cant role that institutions and organisations play in the process of economic development.
The terms ‘organisation’ and ‘institution’ are often used inter changeably. We consider organisations as a subset of the broader set of institutional structures or arrangements.
An organisation connotes coordinated acts or endeavours of two or more individuals. It is created to give effect to a certain institutional arrangement. The main function of an economic organisation is to provide signals that will guide the self-interested economic agents/entities to act in the interest of the larger community. The main task of any nation-state is to create institutional arrangements that provide the needed signals to
individual economic entities. Markets provide such signals effi ciently, so long as they operate with low transaction costs. Non-market mechanisms, such as government agencies and non-governmental organisations (NGOs), including cooperatives, can also provide such signals.
Institutions and organisations are important aids to development. They may affect agricultural and rural development in many different ways, including the provision of production inputs and services, reduction of transaction costs, enhancement of the bargaining power of rural producers vis-à-vis those to whom they sell their produce and from whom they buy production inputs and services, infl uencing investments and savings and bringing the two together, and so on. The economic life of any com munity takes place in a milieu of organisations and institutions. They largely determine the economic structure of the community, and set the rules in which the economic game is played. Changes in these organisa tions and institutions over time will probably have a pronounced effect on the economic output and development. Often these effects are diffi cult to isolate and measure because of the interdependence between changes in organisations and institutions, and between other instrument variables of agricultural development.
There are many forms of organisations, such as public (government), sole proprietorship, partnership, company, cooperative and charitable trust, that can serve—and are, in fact, serving—the needs of the farmers in India. The form of organisation suitable for promoting agricultural development should fully identify with the interests of the farmers, and should be fully oriented to meeting their needs, both organisatio nally and operationally.
The government has been—still is and will continue in the near future to be—an important organisation in the fi eld of agricultural and rural development in India.
Development is seen as the specifi c responsibi lity of the government. This has far reaching implications for the role of public bureaucracy, which is the arm of the state responsible for carrying out the wishes of the political leaders. Efforts to bring about improve ment in the quality of life of the rural people depend heavily on government administration and bureaucrats.
At the institutional level, laws of property and contract have a pro found impact on economic growth. The essential questions here are as follows:
1. What may a man do with his property?
2. What may others do to his property?
3. In what kinds of economic activity may he engage?
Some societies, like Japan, are fairly liberal in permitting pri vate fi rms and individuals to operate without restrictions, while oth ers impose many restrictions that curtail private profi ts in the name of protecting the broad public interest. Other questions relate to what kinds of agreements private individuals may make; what kinds of claims and contracts can be enforced and to what extent, and so on.
All these questions relate to the infl uence of government regulation of business activity and its impact on economic growth. How tightly are spe cifi c kinds of business
activities regulated by the government? How are the taxes, tariffs, subsidies and other fees utilised to discourage certain activ ities and encourage others? How are the taxes and laws of inheritance used to control the distribution of income at the expense of economic growth? All these forces and factors determine the incentives for economic produc tion, and must not be neglected in the search for a favourable institutional and organisational climate for economic development.
The only organisation that conceptually satisfi es all the criteria of a good rural organisation is a cooperative. The cooperative form of organisation is solely designed for promoting the mutual interests of its user patrons on the basis of equality and equity.
It is controlled by them on a democratic basis. It also resolves the confl ict of interests between the lender and the borrower, or between the seller and the buyer, for, in it, the lender and the borrower, or the seller and buyer are the same person. The objec tive is not to do business for the sake of profi ts only, but for meeting the members’ needs. It is a local organisation, and provides for local participation. It is responsive to local needs, as its policy is decided democratically by the local members/users. It serves as a training ground for the rural people in business and in democracy.
In India, the Anand pattern dairy cooperatives have demonstrated what appropriate institutions and organisations can do to initiate and foster agricultural and rural de- velopment. Similarly, sugar cooperatives also have contributed signifi cantly to rural development.
Besides cooperatives, there are many other forms of formal and non-formal associ- ations which could do a good job of promoting agricultural and rural development.
For example, Sadguru Water and Development Foundation, a Dahod (Gujarat) based NGO; SEWA, an Ahmedabad (Gujarat) based NGO; and PRADAN, a Delhi-based NGO, promote people’s organisations at the grassroots level to take up agricultural and rural development projects.
The role of the NGOs is to organise people and help them with technical information, training and, to some extent, with funds. Besides, they also help grassroots organisations to secure fi nancial assistance from various governmental and non-governmental sources.
In most cases, the performance of the programmes taken up under the auspices of the NGOs has been better than that of government programmes. However, this state- ment cannot be generalised, as there are many NGOs which do not have the necessary technical and managerial expertise, and fi nancial discipline to initiate and support agricultural and rural development programmes. Indian corporations and companies could play a pivotal role in promot ing agricultural development. In fact, many blue chip companies such as the Tatas, Mafatlals, Larsen and Toubro, and Hindustan Unilever, and associations of industrialists such the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI), have already won laurels for their exemplary work in the fi eld of agricultural and rural development, not only from Indian NGOs, and government organisations, but also from international donors and development agencies. Corporates can bring the benefits of modern science and technology, management and world markets to the agri cultural sector, and thereby promote agricultural development, partic ularly now in the era of liberalisation, deregulation, privatisation and globalisation.