CDS (I) 2022 General Knowledge · Question 41 of 120

Correct — A, Land. Land is the input that separates farming from everything else. Cultivation is tied to area: output rises broadly with the acreage sown, and a farmer who wants to grow more must either find more land or push harder on the same plot. Non-farming activities in a village — dairying, a small workshop, a grocery, transport, weaving, repair work — need very little of it. A shop occupies a room, a loom a corner, a small dairy a shed. What those activities do need, and often in larger measure than farming, is labour, capital and raw material. That asymmetry is why the rural non-farm sector is the standard answer to the problem of a fixed and already fragmented land base.

• (b)Labour — Labour is needed by non-farm activities every bit as much as by cultivation, and often more steadily, because a workshop or a shop runs through the year while field labour peaks at sowing and harvest.
• (c)Capital — Capital requirements typically rise rather than fall when a household moves into non-farm work. Buying a buffalo, a sewing machine, a small mill or a vehicle demands money up front, which is why credit is the binding constraint on rural non-farm enterprise.
• (d)Raw material — Raw material is central to most non-farm activity — yarn for the weaver, milk for the dairy, grain for the flour mill, stock for the shop. Manufacturing and processing are defined by the transformation of raw material.

The rural economy is conventionally divided into farm and non-farm activity. Farm activity is bound to a fixed area of cultivable land, which in India has not grown for decades while the number of households sharing it has, producing smaller and more fragmented holdings. Non-farm activity — dairying, small-scale manufacturing, shopkeeping, transport and services — is not bound to area, and is therefore the main route by which a village economy can absorb more workers without more land.

A question asking which input is needed in less quantity is really asking what makes the two kinds of activity different in kind. Take each option and ask whether a village shop or a small dairy could run without it. Labour, capital and raw material are all indispensable and often needed in greater amounts than on a smallholding; land is the only one that shrinks to almost nothing. The policy weight of this is considerable, because the standard prescription for rural underemployment is to expand exactly those activities that do not depend on more land, backed by credit — which is why the constraint that actually bites in practice is capital, not land. Evidence from the years after 1991 shows the rural non-farm economy expanding even as the growth of rural employment as a whole slowed.

• Farming is land-intensive; non-farm activities such as dairying, small manufacturing, shopkeeping and transport need very little land.
• Non-farm activities still require labour, capital and raw material, often in larger quantities than a small farm does.
• India's cultivated area has been broadly static while the number of operational holdings has risen, so average holdings have shrunk and fragmented.
• Because it is not bound to area, the rural non-farm sector is the main channel for absorbing additional rural workers.
• Credit is generally the binding constraint on rural non-farm enterprise, since starting one needs money up front.

• Assuming non-farm work needs less capital because it is small in scale — usually it needs more, and sooner.
• Treating labour as the distinguishing input, when both kinds of activity are labour-using.
• Forgetting that raw material is precisely what non-farm processing exists to transform.

As a which-input question contrasting farm and non-farm activity, or as a statements item on the characteristics of the rural non-farm sector.

• practice — not a real PYQ

  Which one of the following is generally the binding constraint on starting a non-farm activity in an Indian village?

  • (a)Availability of land
  • (b)Availability of capital
  • (c)Availability of labour
  • (d)Availability of rainfall

  Answer(b) Availability of capital — non-farm enterprise needs money up front for equipment or stock, which is why rural credit matters so much; land requirements are minimal.

• practice — not a real PYQ

  Which one of the following is a non-farm activity in the rural economy?

  • (a)Sowing of wheat
  • (b)Transplanting of paddy
  • (c)Running a small dairy
  • (d)Irrigating a field

  Answer(c) Running a small dairy — the other three are operations within cultivation itself.