Some of the salient characteristics of the rural sector are presented in Box 2.1 and Tables 2.3–2.7, and briefl y described in the following sections.
Box 2.1 Some Salient Characteristics of India’s Rural Sector 1. Excessive dependence on nature
2. Preponderance of small uneconomic land and livestock holdings 3. Low capital–labour ratio
4. Low factor productivity
5. Long gestation and low rate of turnover 6. High incidence of poverty
7. Preponderance of illiterate and unskilled workforce 8. Lack of basic infrastructure
Excessive Dependence on Nature
Agricultural production, being biological in nature, depends more on weather and other climatic factors than non-agricultural production. For example, in India about 60 per cent of the net area sown in 2004–04 was rainfed, where crop production wholly depends on the quantum and distribution of rainfall over the growing season. Given the wide fl uctuations in rainfall in India from year to year and area to area, crop production—and, hence, farm incomes—vary widely. In a nutshell, Indian agriculture is vulnerable to natural calamities, such as droughts, fl oods, hailstorms and cyclones. For example, nearly 60 per cent of the Indian landmass is vulnerable to earthquakes, about 68 per cent of the area is susceptible to droughts, over 40 mha of land is prone to fl oods and about 8 per cent of the total area is prone to cyclones (Singh and Shishodia 2007: 359). This means that the degree of nature-induced risk and uncertainty in agriculture is higher than in the
non-agricultural sector and so also the need for insurance against such risks. But sadly, the coverage of crop insurance is very limited and, therefore, most farmers have to bear the burden of risk and uncertainty themselves and become broke in the process.
Preponderance of Small Uneconomic Land and Livestock Holdings
In 1995–96, the number of operational landholdings in India was 11.56 crore, which increased to over 12 crore by 2000–01. Of the total land holdings in 2000–01, nearly 63 per cent were operated by marginal farmers having less than 1 ha of land and 19 per cent by small farmers having 1 to 2 ha of land (Table 2.3). Similarly, it is estimated that most of some seven crore households in India owning milch animals are small hold ers having one or two animals. The average size of operational landhold ings in India was 1.32 ha in 2000–01 and it has been declining over time. It declined from 2.69 ha in 1960–61 to 1.82 ha in 1980–81, to 1.57 in 1990–91 and to 1.41 in 1995–96. The land and livestock holdings are not only small in size but also widely scattered all over the countryside.
Landholdings are also fragmented, particularly in those states where consolidation of landhold ings has not yet been done. The process of subdivision and fragmentation of landholdings continues unabated generation after generation under the existing land inheritance laws. The small and fragmented landholdings are a great obstacle to economical use of farm labour and machinery. The subdivision and fragmentation of landholdings needs to be stopped through appropriate legislative measures.
Almost all the marginal and small farmers are poor, producing very little marketable surplus. It is estimated that farmers having less than 4 ha of land are not fi nancially viable, if they depend wholly on income from the land. Thus, over 90 per cent of farmers in India are not fi nancially viable. Besides, nearly 49 per cent of the farmers in India
Table 2.3 Distribution of Operational Landholdings in India, 1995 and 2001–02 Category of
landholding (ha)
No of holdings (‘000) Area operated (‘000 ha) Average size of holding (ha)
1995–96 2001–02 1995–96 2001–02 1995–96 2001–02
Marginal (Less
than 1 ha) 71,179 (61.6)∗ 76,122 (63.0) 28,121 (17.2) 30,088 (18.82) 0.40 0.40 Small
(1.0–2.0 ha) 21,643 (18.7) 22,814 (18.9) 30,722 (18.8) 32,260 (20.18) 1.42 1.41 Semi-medium
(2.0–4.0 ha) 14,261 (12.3) 14,087 (11.7) 38,953 (23.8) 38,305 (23.96) 2.73 2.72 Medium
(4.0–10.0 ha) 7,092 (6.1) 6,568 (5.4) 41,398 (25.3) 38,125 (23.84) 5.84 5.80 Large (10.0 ha
and above) 1,404 (1.6) 1,230 (1.0) 24,163 (14.8) 21,124 (13.21) 17.21 17.18 All 1,15,580 (100.0) 1,20,822 (100.0) 1,63,357 (100.0) 1,59,903 (100.00) 1.41 1.32 Source: GoI (2007a).6
Note: ∗Figures in brackets indicate the percentage of respective columns to totals.
were in debt in 2005. Development of this huge number of farmers is quite a big challenge for policy makers and planners.
Low Capital–Labour Ratio
India’s rural sector is starved of capital and overcrowded with human labour. Con- sequently, the amount of capital available per worker, that is, the capital–labour ratio is low and this is one of the main reasons of low productivity in the sector. To improve this ratio, it is necessary to step up both public and private investment in the sector, and to facilitate through appropriate policies the absorption of surplus workers in the non-agricultural sector. After a declining trend for a few years, now both public and private investments in agricul ture have been increasing at both 1999–2000 and current prices. For example, public investment in agriculture and allied activities increased from Rs 8,733 crore at 1999–2000 prices in 2002–03 to Rs 14,144 crore in 2005–06 and private investment from Rs 46,935 crore to Rs 49,987 crore over the same period of time (GoI 2007a).7 This buoyancy needs to be maintained to achieve the target growth rate of 4 per cent per annum in the agricultural sector in the Eleventh Five Year Plan.
Low Factor Productivity
Low crop yields have been the bane of India’s rural sector since long (Table 2.4). As mentioned in the preceding section, the low factor pro ductivity is mainly due to inadequate capital in the form of production inputs, raw materials, and improved machinery and equipment available per worker/unit of enterprise. For example, the low average crop yields in India as compared to those in developed countries like the USA, Egypt and China are due to low inputs of fertilisers and plant protection chem icals. Similarly, the low average milk yield per milch animal in India is due mainly to the low quantity of concentrated feed and the poor quality of fodder fed to the animals. What is required to improve the resource productivity in India’s rural sector is to close the technology gap and reduce the redundant labour force.
Table 2.4 Average Yield Rates in kg/ha of Principal Crops in India and Selected Countries, 2004–05
Country Paddy Wheat Maize Sugarcane Major oilseeds
India 2,900 2,710 1,180 77,515 860
World 3,960 2,870 3,380 62,859 1,860
China 3,837 4,250 4,900 65,293 2,050
Egypt 9,800 3,907 4,854 69,556 NA
Pakistan 3,055 2,370 2,114 62,859 NA
USA 7,830 2,381 9,150 47,934 2,610
Source: GoI (2008).8
Long Gestation and Low Rate of Turnover
It takes a relatively longer period of time for investment in agricultural enterprises to yield benefi ts than in many non-agricultural enterprises. For example, it takes three to four months for most crops to mature, four to six years to raise a young buffalo calf to a stage when she starts yielding milk and fi ve to 10 years before fruit saplings start bearing fruits. Besides, the annual fl ow of net returns from investment in most agricultural enterprises is also low. This results in a low rate of turnover or, alternatively, it takes longer to recover the investment made.
High Incidence of Poverty
The incidence of poverty is higher in the rural sector than in the urban sector. For example, in 2004–05, about 28 per cent of the rural population was below the poverty line, as compared to about 26 per cent in urban areas. In absolute terms, of the total popu- lation of 30.2 crore in the country, living below the poverty line in 2004–05, 22.1 crore (73 per cent) were in the rural areas. Data from National Sample Surveys (NSS) show that the ratio of urban to rural per capita consumption increased from 1.62 in 1993–94 to 1.76 in 1999–2000 and further to 1.91 in 2004–05, which suggests that the urban–rural divide is widening, especially since the NSS probably does not fully capture consump- tion by the rich, particularly in urban areas. If the comparison is extended to gaps in the availability of other essential services, the chasm is much deeper. But the employment scenario has recently improved in rural areas. According to the sixty-fi rst round of the NSS, in 2004–05, the unemployment rates were lower in rural areas than in urban areas for both males and females. Within the rural areas, unemployment rates for males were higher than those for women. But in the urban areas, the opposite was true (see ‘Rural Employment Scenario’ in Chapter 10 for details).
It is, then, no surprise that the average annual per worker income in rural areas is also markedly lower than in the urban areas. For example, over the period 1998–99 to 2003–04, it was Rs 11,496 at 1993–94 prices as against Rs 59,961 in the non-agricultural sector (Radhakrishna 2008: 45). According to the sixty-fi rst round of NSS (2004–05), the average per capita consumption expenditure (a proxy for per capita income) in rural areas was about Rs 559 as compared to Rs 1,052 in urban areas (GoI 2007a).9
Preponderance of Illiterate and Unskilled Workforce
Although the average literacy rate in the country as a whole is low, in rural areas it is lower.
In 2001, it was about 60 per cent as compared to about 80 per cent for urban population (Table 2.5). The higher level of illiteracy and the lack of skills among the majority of rural people are serious constraints on their socio-economic development. It is a pity
that while, at one extreme, we have in India world-class scientists, engineers, managers and academicians, at the other extreme, we have hundreds of millions of illiterates amongst us. As regards gender difference, the growth of literacy has been higher in the case of females (14.87 per cent) than for males (11.72 per cent) over the period 1999 to 2001 (GoI 2002a: 250).
Lack of Basic Infrastructure
Indian villages miserably lack in such basic infrastructure as schools, health care centres (leave aside hospitals), all-weather roads, means of transport and communication, drinking water facilities, and electricity for domes tic and agricultural purposes. It has been established through empirical studies that basic infrastructure is an important determinant of develop ment. As a matter of fact, the ‘growth centre’ theory of development is based on this premise. Although in many states, good progress has been made recently under the Minimum Needs Programme (MNP), Bharat Nirman Programme (BNP), Sarva Shiksha Abhiyan (SSA), National Rural Health Mission (NRHM) and other programmes to provide the bare minimum infrastructure, there are crores of people living in remote tribal and hilly areas where not much has been done.