rural development in India

rural development in India, range of strategies and policies targeted at improving the lives of the most socially and economically vulnerable sections of India’s rural population. Following India’s independence from the British, rural development became a major focus at a policy level starting in 1952, as the Community Development Program (CDP) sought to involve local rural communities in boosting rural welfare, health, education, agricultural production, and industry. India’s green revolution, which began in the mid-1960s, improved farming methods and crop yields, supported by the nationalization of commercial banks and wider credit availability. Toward the end of the ’70s the alleviation of rural poverty took center stage. A constitutional amendment in 1992 legitimized panchayati raj institutions—elected village bodies entrusted with local governance, including rural development and welfare schemes. In subsequent decades, employment, infrastructure, rural housing, and amenities became increasingly central to policy frameworks.

While India has shown a marked decrease in extreme rural poverty between 2011 and 2023, about 28 percent of its rural population still experienced broad-based poverty, according to a 2025 World Bank report. As a large part of the rural population continues to rely on agriculture for its livelihood to some degree, policymaking in the area has generally focused on farming methods, productivity, irrigation, marketing of agricultural produce, and access to credit.

Agricultural marketing

As much as 70 percent of rural households in India depended on agriculture and related activities for their livelihood in the first half of the 2020s, even though the sector’s contribution to gross domestic product (GDP) declined from almost 50 percent in the 1960s to about 16 percent in the mid-2020s. Much of the organized marketing of agricultural products in the country is regulated through agricultural produce market committees (APMCs)—overseen by state governments—designed to help farmers obtain a fair price for their harvest and protect them from unfair trade practices. These marketing boards run mandis (market yards) where produce is sold only to licensed buyers through a transparent auction process. Government agencies, such as the Food Corporation of India (FCI), also procure food grains from these mandis at government-assured floor rates, termed minimum support price (MSP).

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While APMC markets have protected farmers from gross exploitation since their widespread adoption in the 1960s and ’70s, governmental and academic studies have regularly highlighted systemic issues that plague these regulatory bodies. These include the disproportionate influence of traders and intermediaries over prices, often as a result of monopsony (a market with only one major buyer); cartelization; conflicts of interest; rent-seeking; and limited price discovery mechanisms. Many mandis also lack storage and other infrastructure, which leads to waste and depressed prices for farmers.

Calls for reform have generally sought a shift toward deregulation and private investment. Policymakers have leaned in that direction since the 2000s as well, though success has been limited. Perhaps the most significant of these attempts was made in 2020, when three farm laws were passed in the Indian Parliament that allowed farmers to sell outside the mandis, engage with private players and in contract farming with large organizations, and operate under loosened restrictions on stockholding intended to encourage private investment in storage. However, the laws were ultimately repealed after being met with massive agitations from farmers and farmer unions, especially from Punjab, Haryana, and western Uttar Pradesh. They argued that the new laws would weaken the protection MSP offers against a sudden collapse in prices and make it difficult to negotiate fair prices at APMCs, possibly affecting small and marginal farmers. Based on evidence from previous attempts at deregulation, they remained unconvinced that the laws would reduce the dominance of intermediaries or that they would have the bargaining power to get fair prices from private players.

Rural credit

Farmers in rural India, most of whom have small landholdings and not much capital, require credit to finance the purchase of inputs such as seeds, machinery, and fertilizers. Credit increases the amount of risk farmers can take and helps them cope with unforeseen losses. It also enables farmers to tide over the period between their initial investment and income from their produce. Credit can also help farmers deploy new technologies and methods that ultimately lead to higher yields and productivity.

Historically, rural credit in India was fragmented and informal, with farmers depending on relatives, traders, landlords, and local moneylenders for financing, which often came with high interest rates. Starting in the early 20th century, cooperative credit societies were created to address the lack of formal credit, but their success was limited by governance and sociological issues. In 1969, amid the green revolution, the government nationalized major commercial banks to expand institutional credit and promote rural development. Banks were directed to open more branches in underbanked rural areas and extend credit at reasonable rates to priority sectors, which included agriculture and allied activities. This was followed by the establishment of regional rural banks starting in 1975, with the aim of lending to financially weaker rural groups, including marginal farmers, agricultural laborers, and small entrepreneurs.

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In 1982 the National Bank for Agriculture and Rural Development (NABARD) was set up as the apex supervisory body to coordinate the activities of institutions involved in rural financing. With a mandate to improve financial services in India’s villages and agriculture through credit and development projects, the regulatory body oversees institutional lending activities in rural sectors and has formulated initiatives to aid in the deeper penetration of credit. These include the Self Help Group–Bank Linkage Programme (SHG–BLP), a microfinance initiative that promotes savings and provides small loans through self-managed groups (typically rural women); the Kisan Credit Card (KCC) scheme, a revolving credit facility for farmers; and the Rural Infrastructure Development Fund (RIDF), which finances everything from roads and irrigation to drinking water projects.

As a result of these initiatives, the number of rural branches also shot up from about 1,400 in 1969 to about 35,000 in the early 1990s. Where rural credit accounted for a mere 3.3 percent of all lending in 1969, its share had risen to about 15 percent by the late 1980s, according to a 2011 paper. The share of institutional debt taken on by rural households also jumped from 15.8 percent in 1961 to 66.3 percent in 1991, and non-institutional debt declined commensurately.

When India’s economy was liberalized in 1991, the emphasis on expanding the country’s network of rural bank branches—often despite heavy financial costs—was scaled back as banks were reoriented to focus on profits, minimizing non-performing assets (loans on which no interest or principal payments have been received for 90 days), and maintaining capital ratios. This led to a moderation in the growth of rural branches and credit until the mid-2000s. A recovery in agricultural credit was seen later in the decade, though there is evidence that credit may have flowed toward agribusinesses and away from small individual farmers.

In the 21st century several policy decisions have reshaped the rural credit landscape. For instance, a debt waiver scheme for nearly 37 million farmers was announced in 2008, though it faced scrutiny for alleged lapses in implementation and corruption. The Deendayal Antyodaya Yojana—National Rural Livelihood Mission (DAY-NRLM), launched in 2010, aims to foster self-employment and help the rural poor to organize themselves into self-help groups. The Pradhan Mantri Jan Dhan Yojna, instituted in 2014, gave the poor affordable access to basic banking services and government credit schemes. The credit ceiling under the KCC scheme has also been increased from time to time.

While significant progress has been made in formalizing rural credit, major challenges remain. Although about 70 percent of rural credit came from institutional sources by the early 2020s, a sizable chunk of the rural population borrows from informal sources. Moreover, a 2023 study showed that only one-third of farmers have access to credit facilities, and poorer farmers with fewer assets or collateral find it harder to get loans. Broadly, growth in rural credit from scheduled commercial banks has lagged overall credit growth since 2000, and its share in total credit has fallen to about 9.5 percent. In surveys conducted in 2019, the National Statistical Office found that 35 percent of rural households were indebted, compared to 22.4 percent of urban households; the figure for agricultural households, surveyed across 2019, was higher at 50.2 percent. The average outstanding debt per agricultural household also went up 57.7 percent to 74,121 rupees from the last survey five years earlier. While the reasonable use of debt for consumption is often necessary, some scholars have flagged that a relatively high proportion of rural debt fueling consumption rather than activities that generate income—especially among poorer households—may stress future repayments. Agriculture’s relative share in non-performing assets (NPAs) has been on a steady incline for at least a decade—often exacerbated when poor monsoons affect crop yields. The lack of access to institutional credit and chronic indebtedness is also seen by some researchers as a contributing factor to the phenomenon of farmer suicides in rural India. At the same time sweeping farm loan waivers have been criticized for impairing credit discipline, draining the public exchequer, and discouraging lending. Critics advocate instead for improving and supplementing farmer incomes.

Diversification of rural income

A majority of rural households engage in agriculture to a meaningful extent, but income from agriculture is generally low and at the mercy of monsoon rains. Of the 13,661 rupees the average rural agricultural household earned per month, according to a 2021–22 NABARD survey, only one-third came from cultivation. Cultivation is an even smaller proportion of household earnings for small and marginal farmers, who produce very little surplus and face other issues such as poor access to credit and markets. Most agricultural households can and do engage in other activities beyond cultivation to supplement their incomes.

Research shows that incorporating horticulture and expanding into cash crops raises farmers’ earnings, as does the rearing of livestock. Dairy farming has been a particularly notable addition to rural output and incomes. Egg production, poultry farming, and fisheries have also played a part in boosting farm incomes. Wage labor and salaried work make up some of the most dominant components of agricultural household income. Non-farm activities, which include work in sectors such as manufacturing, services, and construction, have also grown in prominence in the rural economy. Industries such as agro-processing, geared toward value addition for produce, have been championed by policymakers as an avenue for diversifying and improving farm incomes and employment. Farmer producer organizations—collectives of small and marginal farmers—also have the potential to bolster farmers’ bargaining power, access alternative markets, and aid agricultural earnings.