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Rural Economy
The village described in this chapter is somewhat big in size. It is well connected by all-weather road from the nearest town. The village has a primary health centre, school, irrigation facilities and electricity supply.
The percentage of such villages is minuscule in India. Most of the villages do not have proper connectivity with the nearest town. They may not be having hospital and schools. Electricity supply can be quite erratic in many villages.
In a typical village; like Palampur; people of different castes and communities live. A village can have 50 to 500 families. Most of the land is usually owned by upper caste people. Rest of the land is owned by the Other Backward Classes and minorities. The dalits usually comprise the landless labour. They normally live on the outskirts of the village.
Organisation of Production: There are four main requirements for organization of production and they are as follows:

Land: Land is fixed and scarce. There is not method by which the land can be increased. The growth of population has increased pressure on land. Division of property through subsequent generations has resulted in agricultural plots becoming much smaller. This has also affected the scale economies in farming.

Labour: Labour is available in plenty because of a huge army of unemployed. Many people from the poor section are illiterate and hence have to work as unskilled labour. The government provides guidelines on minimum wages from time to time. But because of less demand and huge supply of labour, there are many cases where the farm workers may not be getting even the minimum wages.

Physical capital: Tools, machines and buildings comprise the fixed capital in farming. Money is needed as working capital to buy seeds and fertilisers and also to pay the cost of irrigation.

Knowledge and enterprise: 


A farmer also needs the knowledge and enterprise to effectively manage production. In most of the cases, certain knowledge is passed down through generations. Government has also taken initiative in improving the knowledge of farmers.

Improving Farm Productivity: Since land cannot be increase so one needs to find some other methods to improve farm productivity. Use of modern farming techniques, machineries and high yield varieties of seeds can help in improving farm productivity.
Government has made good networks of canals in many parts of the country. This has helped in improving the irrigation facilities. Seeds and fertilisers are made available at subsidized rates for the benefit of farmers.
If proper irrigation facilities are in place, then farmers of a village can grow up to three crops in a year. By doing mixed cropping, they can also improve the productivity substantially.

Disadvantages of Overuse of Land:
After the Green Revolution, foodgrain production has increased manifold in India. But the Green Revolution has also brought many problems. There excess exploitation of groundwater at many places which has resulted in water table going down at many places. Water shortage is becoming a recurring problem in most of the villages.
Overuse of chemical fertilisers has reduced soil fertility and there is a danger of many farmlands turning barren. Before the advent of the Green Revolution, farmers normally used manure and compost to improve yield. Such a practice was eco-friendly and could be sustained for a longer period.
Excess use of chemical fertilisers also contaminates drinking water.

Uneven Distribution of Land:
In most of the villages, there is uneven distribution of land. A major portion of the land is owned by a handful of farmers, while most of the other farmers have to depend on small patches of land. Small plot of land means that the farmer may not be in a position to even meet his family needs. The landless farmers are the worst lot because they have to work on other’s land to earn a livelihood.

Problem of Migration:
Farming is a seasonal occupation. For landless labourers; this means that they do not get work in certain months of the year. They often migrate to cities in search of livelihood. Many landless labourers from Bihar and Uttar Pradesh migrate to Punjab to work as farm workers. The Government had introduced the employment guarantee programme called MNREGA (Mahatma Gandhi National Rural Employment Guarantee). Under this programme, one member of each rural family is given 100 days employment in a year. This programme has helped in reducing the migration from many villages.

Problem of capital:
While the big farmers usually have surplus cash, the small farmers may need to borrow to buy seeds, fertilisers and farm equipments. They may go to a bank or cooperative to borrow money. But most of the time, the local merchant or moneylender comes to their rescue. Taking a loan from the local merchant and moneylender is more risky as it carries a higher rate of interest compared to what is prevalent in the banks. There are many cases, when a small farmer is unable to repay the debt on time. Such farmers often get caught in the debt trap.

Sale of Surplus Farm Produce:
After the harvest, the big farmers are able to produce surplus than what they need for their family. The surplus farm produce is sold in the nearby mandi. The government also procures farm produce at an MSP (Minimum Support Price). The merchants from cities and towns purchase the farm produce from mandis in big villages. The farm produce bought by the government is stored in FCI (Food Corporation of India) godowns and used through Public Distribution System (PDS).

Non-farm Activities in Villages:

Dairy: Many farmers rear cows and buffaloes so that they can have an extra source of income. They earn money by selling milk. Now-a-days, milk is often collected by the milk cooperatives.

Small scale manufacturing: Some people are engaged in small scale manufacturing; like making jaggery. Primitive machines are used in such activities and family members contribute in the work.
Shops: Some small shops can also be seen in bigger villages, e.g. grocery stores, cloth stores, medicine shop, etc.

Other Activities: Many people are engaged in various economic activities, like repairing shops, tuition classes, barber shop, mobile repairing shop, etc.

Transportation: Some people are also engaged in transportation. Some of them ply cyclerickshaws, while some of them may be driving autorickshaws or minibuses.

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