Chapter Notes

Overview

The story of Palampur, a hypothetical village, is used to understand the basic concepts of production. While farming is the main activity, other non-farm activities like small-scale manufacturing, dairy, and transport also exist. The story helps us see how different resources—natural resources, man-made items, human effort, and money—are combined to produce goods and services.

Introduction

Palampur is a well-connected village, located 3 kms from Raiganj, a large village, and is also connected to the small town of Shahpur. This connectivity is made possible by an all-weather road that supports various forms of transport, from traditional bullock carts to modern motor vehicles.

The village has a diverse population and good infrastructure:

• Population: About 450 families from different castes. 80 upper-caste families own the majority of the land, while the SCs (dalits) make up one-third of the population and live in smaller houses.
• Infrastructure: Most houses have electricity, which powers tubewells for irrigation and supports small businesses. Palampur also has two primary schools, one high school, a government-run primary health centre, and a private dispensary.

These facilities show that Palampur is a fairly well-developed village, where farming is the main production activity, and other activities like manufacturing and transport are called non-farm activities.

Organisation of Production

The main goal of production is to create the goods and services we need. This requires combining four essential elements, known as the factors of production.

Land

This is the first requirement and includes not just the physical land but all other natural resources like water, forests, and minerals.

Labour

This is the human effort needed for production. Labour can be manual work or tasks requiring highly educated workers.

Physical Capital

This includes all the inputs required during production. Physical capital is divided into two types:

• Fixed Capital: These are long-lasting items that can be used in production for many years. [!example] A farmer's plough, a tractor, a generator, or a factory building are all examples of fixed capital because they aren't used up in one production cycle.
• Working Capital: These are items that are used up during the production process. This includes raw materials and money in hand. [!example] The yarn used by a weaver or the clay used by a potter is working capital. The money needed to buy these materials and pay for other immediate expenses is also part of working capital.

Human Capital

This is the fourth requirement, which involves the knowledge and enterprise needed to bring together land, labour, and physical capital to produce an output. This factor is what turns the other three factors into a productive enterprise.

Farming in Palampur

Land is fixed

In Palampur, farming is the main source of livelihood for 75% of the working population. However, there is a major constraint: the amount of land available for cultivation is fixed. Since 1960, there has been no expansion in the land area used for farming in the village. This means that to increase farm production, farmers must find ways to grow more from the same amount of land.

Is there a way one can grow more from the same land?

Yes, farmers in Palampur use two main methods to increase production from their fixed land.

Multiple Cropping

This method involves growing more than one crop on a piece of land during the year. Palampur's farmers are able to do this because of their well-developed irrigation system, which was transformed by the early arrival of electricity. Electric-run tubewells replaced traditional Persian wheels and could irrigate much larger areas of land effectively. By the mid-1970s, the entire cultivated area of 200 hectares was irrigated.

This allows them to follow a three-crop cycle:

1. Kharif Season (Rainy Season): Farmers grow jowar and bajra, which are mainly used as cattle feed.
2. Between October and December: They cultivate potato.
3. Rabi Season (Winter Season): They sow wheat. The surplus wheat is sold at the market in Raiganj.

A part of the land is also used to grow sugarcane, which is harvested once a year.

Modern Farming Methods

The second way to increase output is by using modern farming methods to get a higher yield (crop produced on a given piece of land in a single season).

• Traditional Farming: Until the mid-1960s, farmers used traditional seeds with low yields. These seeds required less irrigation, and farmers used natural manure like cow dung, which was readily available.
• The Green Revolution: In the late 1960s, the Green Revolution introduced Indian farmers to High Yielding Varieties (HYVs) of seeds, especially for wheat and rice.
  • Requirements: HYV seeds promised much higher yields but required a combination of inputs: plenty of water, chemical fertilizers, and pesticides.
  • Impact in Palampur: The yield of wheat increased dramatically from 1,300 kg per hectare with traditional seeds to 3,200 kg per hectare with HYV seeds. This allowed farmers to produce a much larger surplus to sell in the market.

Farmers in Punjab, Haryana, and Western Uttar Pradesh were the first to adopt these modern methods, using tubewells, HYV seeds, chemical inputs, and farm machinery like tractors and threshers.

Will the land sustain?

Modern farming methods, while increasing production, have overused the natural resource base.

• Loss of Soil Fertility: The increased use of chemical fertilizers has led to the degradation of soil health. Over time, the soil becomes less fertile, forcing farmers to use even more fertilizers to get the same level of production, which raises the cost of cultivation.
• Depletion of Water Table: The continuous use of groundwater for tubewell irrigation has caused the water table to fall.

How is land distributed between the farmers of Palampur?

Land, a crucial resource for farming, is not distributed equally among the 450 families in Palampur.

• Landless Families: About 150 families (one-third of the total) are landless, most of whom are dalits.
• Small Farmers: 240 families cultivate small plots of land that are less than 2 hectares in size. This small amount of land does not provide an adequate income for their families.
• Medium and Large Farmers: There are 60 families of medium and large farmers who cultivate more than 2 hectares of land. A few of these large farmers own land extending over 10 hectares or more.

The story of Gobind, a farmer with 2.25 hectares, illustrates the problem. After his death, his land was divided among his three sons, leaving each with only 0.75 hectares. Even with modern farming methods, they are unable to make a living from such small plots and must seek additional work.

Who will provide the labour?

After land, labour is the next essential factor of production.

• Small farmers provide their own labour, working on their fields with their families.
• Medium and large farmers hire farm labourers to work on their fields.

These farm labourers come from landless families or families with very small plots. They do not have any right over the crops they help grow; instead, they are paid wages in cash or kind (like a share of the crop). Wages and the duration of employment vary greatly.

The story of Dala, a landless farm labourer, highlights the difficulties they face. The government's minimum wage for a farm labourer was Rs 300 per day (March 2019), but Dala only gets Rs 160. Because there is heavy competition for work among labourers in Palampur, people are forced to accept lower wages.

The capital needed in farming

Modern farming methods require a significant amount of capital (money).

1. Small Farmers: Most small farmers have to borrow money to buy inputs like seeds, fertilizers, and pesticides. They often borrow from large farmers or moneylenders at very high interest rates, putting them in great distress. [!example] Savita, a small farmer, needs Rs 3,000 for her working capital. She borrows from Tejpal Singh, a large farmer, at an interest rate of 24% for four months. She also has to promise to work on his field for a low wage of Rs 100 per day during the harvest season.
2. Medium and Large Farmers: In contrast, these farmers usually have their own savings from farming. They are able to use these savings to arrange for the capital needed for the next season.

Sale of Surplus Farm Products

After harvesting, farmers keep a portion of the wheat for their family's consumption and sell the surplus wheat.

• Small farmers, like Savita and Gobind's sons, have very little surplus because their total production is small.
• Medium and large farmers are the main suppliers of wheat to the market.

Tejpal Singh, the large farmer, has a surplus of 350 quintals of wheat. He sells it at the Raiganj market for a good profit. He uses his earnings to save, lend money to small farmers like Savita, and buy more fixed capital, such as a new tractor. This cycle allows large farmers to continuously increase their capital.

Non-Farm Activities in Palampur

Only 25% of the people working in Palampur are engaged in activities other than agriculture. These activities are done on a small scale.

Dairy - the other common activity

Many families in Palampur are involved in dairy farming. They feed their buffalos grass, jowar, and bajra, and sell the milk in the nearby village of Raiganj. Traders from Shahpur have set up collection and chilling centers in Raiganj to transport the milk to towns and cities.

An example of small-scale manufacturing in Palampur

Less than fifty people are engaged in manufacturing in Palampur, which involves simple, small-scale production methods, often done at home with family labour.

• Mishrilal has a mechanical sugarcane crushing machine. He makes jaggery and sells it to traders in Shahpur.
• Kareem has opened a computer class center in the village, employing two women with computer application degrees. He caters to high school students who previously had to travel to the town for classes.

Transport: a fast developing sector

A variety of vehicles operate on the road connecting Palampur to Raiganj, providing transport services for people and goods. The number of people in this sector has grown over the years. [!example] Kishora, a farm labourer, took a loan from a bank under a government program to buy a buffalo. He now sells milk and uses a wooden cart attached to his buffalo to transport items like clay for the potter or jaggery to Shahpur. This has allowed him to earn more than he did as just a labourer.

Summary

Farming is Palampur's main production activity. Modern farming methods have allowed farmers to produce more from the same amount of land, but this has put pressure on natural resources like land and water.

• Land and Capital: Land is fixed and scarce, while modern farming requires a lot of capital. Large farmers can use their savings, but small farmers (who make up 80% of farmers in India) struggle to obtain capital and often fall into debt.
• Labour: Labour is the most abundant factor of production. However, farm work is limited, leading many labourers to migrate to cities in search of opportunities.
• Non-Farm Sector: The non-farm sector in villages is currently small but has the potential for growth. Activities like dairy, manufacturing, and transport require little land and can be started with some capital, which could be made available through loans at low interest rates. Better connectivity to markets in towns and cities will also help this sector grow.