Chapter - 1 The Story of Village Palampur

Overview

This chapter provides following concepts by using a story of a hypothetical village called Palampur:

About Palampur:: Palampur is a small village having around 450 families. It is 3 km away from Raiganj, a bigger village. Nearest town to the village is Shahpur.

Four factors of Production: Four factors or basically the requirements to produce anu goods or services.

1. Land

In its simplest form, land is the physical place where any economic activity takes place. However, land also includes all the natural resources found on it. Resources can include timber, water, oil, livestock, and so forth.

2. Labor

It seems obvious, but things can't be produced unless someone makes them. Therefore, another important factor of production is labor. Labor represents all of the people that are available to transform resources into goods or services that can be purchased.

3. Capital

Capital is short for capital goods.These are man-made objects like machinery, equipment, and chemicals that are used in production.

4. Entrepreneurship

Specialized Knowledge and Expertise to produce a product. It is the drive to develop an idea into a business. An entrepreneur combines the other three factors of production to create a product or service.

Main Production Activities:

• Farming

is the main production activity in the village Palampur. Most of the people are dependent on farming for their livelihood.

• Non-farming activities

such as dairy, small-scale manufacturing (e.g. activities of weavers and potters, etc.), transport, etc., are carried out on a limited scale.

Important Changes in Farm Activities:

Though farm land area availability is limited, barren land can be developed into farm land by proper irrigation and agricultural practices after 1960.

Over the years, there have been important changes in the way of farming, which have allowed the farmers to produce more crops from the same amount of land.

These changes include:

• Multiple cropping farming
is a technique of growing more than one crop on a land within an year.
Yield is measured as crop produced in a single season on a given area of land. More yield from same are of land can be achieved by Multiple Cropping.
• Use of modern farming methods

Due to these changes (in the late 1960s) productivity of land has increased substantially which is known as Green Revolution. HYV (High Yielding Varieties) of Wheat and Rice were introduced. It also promoted the use of fertilizers, pesticides and improved irrigation techniques. Farmers of Punjab, Haryana and western Uttar Pradesh were the first to try out the modern farming methods in India.

Capital and Interest in Indian Agriculture: Many small farmers borrow money at high interest rate to invest as capital in farming activities. They face distress due to less yield, reduced prices of grains and increased cost of labor and raw materials. Rich farmers have their own savings from previous farming seasons to invest in this current season.

Sale of Surplus Farm Products: Farmers produce crops on their lands by using the three factors of production, viz. land, labour and capital. They retain a part of produce for selfconsumption and sell the surplus in the nearby market. That part of farm produce which is sold in the market is called marketable surplus. Small farmers have little surplus output. It is the medium and large farmers only who have substantial surplus produce for selling in the market.

Non-Farming economic activities in Indian villages: Non farm economic activities provide employment to only 24 percent of Indian village population. All other 76% are dependent on agricultural employment.

• Cattle and Dairy farming
• Small scale manufacturing
• Shopkeepers
• Transport services