Introduction to the Village of Palampur

Overview

This chapter introduces basic concepts of production through the story of a hypothetical village called Palampur. Farming is the main production activity, supplemented by other non-farm activities like small-scale manufacturing, dairy, and transport. These activities require various resources: natural resources, man-made items, human effort, and money.

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A Snapshot of Palampur

Palampur is an imaginary village that illustrates different types of production activities in rural India. It is well-connected to neighbouring villages and towns through an all-weather road.

Demographics and Social Structure

• The village has about 450 families belonging to several different castes.
• 80 upper-caste families own the majority of the land. Their houses are large and made of brick with cement plastering.
• The SCs (dalits) comprise one-third of the population, live in a corner of the village in smaller houses made of mud and straw.

Infrastructure

Palampur has a fairly well-developed system of infrastructure:

• Roads and Transport: An all-weather road connects Palampur to the nearby large village of Raiganj and the small town of Shahpur. Various forms of transport, from bullock carts to motor vehicles, are visible on this road.
• Electricity: Most houses have electric connections. Electricity powers all the tubewells in the fields and is used in various small businesses.
• Education: The village has two primary schools and one high school.
• Health: There is a primary health centre run by the government and one private dispensary.

This setup indicates that Palampur is more developed than a typical Indian village, providing a good basis to understand production activities.

Organisation of Production

The Aim of Production

The aim of production is to produce the goods and services that we want. The production of any good or service requires the combination of four essential components, known as the factors of production.

The Four Factors of Production

1. Land: This is the first requirement and includes not only the physical land but also all other natural resources such as water, forests, and minerals.
2. Labour: This is the second requirement, referring to the people who will do the work. It includes both manual workers and highly educated workers who perform necessary tasks.
3. Physical Capital: This is the third requirement and includes the variety of inputs required at every stage of production. Physical capital is of two types:
   • Fixed Capital: These are durable inputs that can be used in production over many years. Examples include tools, machines, buildings, generators, and computers.
   • Working Capital: These are inputs that are used up in the production process. Examples include raw materials (like yarn for a weaver or clay for a potter) and money in hand (for making payments and buying necessary items).
4. Human Capital: This is the fourth requirement. It is the knowledge and enterprise needed to put together land, labour, and physical capital to produce an output. It involves the skill and ability to organize the other factors of production.

Every production process is organized by combining these four factors. In this chapter, "physical capital" will often be referred to simply as "capital".

Farming in Palampur

Farming is the main production activity in Palampur, with 75% of the working population dependent on it for their livelihood.

1. Land is Fixed

A basic constraint in raising farm production is that the land area under cultivation is practically fixed. Since 1960, there has been no expansion in land area under cultivation in Palampur. The wastelands had already been converted to cultivable land. This means there is no further scope to increase farm production by bringing new land under cultivation.

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

Yes, it is possible to grow more from the same land. In Palampur, all land is cultivated, and farmers are able to grow three different crops in a year due to a well-developed system of irrigation and the early arrival of electricity.

Multiple Cropping

To grow more than one crop on a piece of land during the year is known as multiple cropping. This is the most common way of increasing production from a given piece of land.

• Kharif Season (Rainy Season): Farmers grow jowar and bajra (used as cattle feed).
• Between October and December: Potato is cultivated.
• Rabi Season (Winter Season): Fields are sown with wheat. Farmers keep enough for their family's consumption and sell the surplus at the market.

Modern Farming Methods and the Green Revolution

Another way to increase production is to use modern farming methods for higher yield.

• Traditional Farming: Until the mid-1960s, farmers used traditional seeds with low yields, which required less irrigation and used natural manure like cow dung.
• The Green Revolution: In the late 1960s, the Green Revolution introduced Indian farmers to the cultivation of wheat and rice using High Yielding Varieties (HYVs) of seeds.
  • HYV seeds promised much greater yields on a single plant.
  • However, they required a combination of inputs to produce the best results: plenty of water (irrigation), chemical fertilizers, and pesticides.

Farmers in Punjab, Haryana, and Western Uttar Pradesh were the first to adopt modern farming methods. In Palampur, the yield of wheat went up from 1,300 kg per hectare with traditional varieties to 3,200 kg per hectare with HYV seeds.

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3. Will the Land Sustain?

Land is a natural resource, and it is necessary to be careful in its use. Modern farming methods have overused the natural resource base.

• Loss of Soil Fertility: The increased use of chemical fertilizers has led to the loss of soil fertility. Chemical fertilizers can also kill bacteria and other microorganisms in the soil.
• Depletion of the Water-Table: Continuous use of groundwater for tubewell irrigation has led to the depletion of the water-table.

Environmental resources like soil fertility and groundwater are built up over many years. Once destroyed, they are very difficult to restore. We must take care of the environment to ensure the future development of agriculture.

Distribution of Land, Labour, and Capital in Palampur

4. How is land distributed between the farmers of Palampur?

The distribution of cultivated land in Palampur is highly unequal.

• Landless Families: About one-third of the 450 families (150 families, mostly dalits) are landless.
• Small Farmers: 240 families cultivate small plots of land less than 2 hectares in size. These plots do not bring adequate income to the farmer's family.
• Medium and Large Farmers: 60 families of medium and large farmers cultivate more than 2 hectares of land. A few of the large farmers have land extending over 10 hectares or more.

This unequal distribution of land is a common feature in rural India.

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5. Who will provide the labour?

After land, labour is the next necessary factor for production.

• Small Farmers: They, along with their families, cultivate their own fields and provide the labour required for farming themselves.
• Medium and Large Farmers: They hire farm labourers to work on their fields.

Farm labourers come from landless families or families cultivating small plots. They do not have a right over the crops but are paid wages, which can be in cash or in kind. There is heavy competition for work among farm labourers in Palampur, so they often agree to work for wages lower than the minimum wage set by the government.

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6. The capital needed in farming

Modern farming methods require a great deal of capital.

• Small Farmers: Most small farmers have to borrow money to arrange for capital. They borrow from large farmers, village moneylenders, or traders at a very high rate of interest. This puts them in great distress to repay the loan, often trapping them in a cycle of debt.
• Medium and Large Farmers: They have their own savings from farming. They are able to arrange for the capital needed from these savings.

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7. Sale of Surplus Farm Products

After harvesting, farmers retain a part of the produce for their family's consumption and sell the surplus.

• Small Farmers: They have little surplus to sell because their total production is small, and a substantial share is kept for their own family needs.
• Medium and Large Farmers: It is these farmers who supply produce to the market. They have good earnings from selling their large surplus.

Large farmers like Tejpal Singh use their earnings to save, lend to small farmers, arrange for working capital for the next season, or buy more fixed capital like tractors. This ability to generate savings allows them to arrange for their own capital, unlike small farmers.

Non-Farm Activities in Palampur

While farming is the main production activity, about 25% of the people working in Palampur are engaged in non-farm activities.

1. Dairy — The Other Common Activity

Dairy is a common activity in many families. People feed their buffaloes on various kinds of grass and sell the milk in the nearby large village, Raiganj. Traders from Shahpur town have set up collection-cum-chilling centres at Raiganj, from where the milk is transported to far-away towns and cities.

2. An Example of Small-Scale Manufacturing

Less than fifty people are engaged in manufacturing in Palampur. Unlike in big factories, manufacturing in Palampur involves very simple production methods on a small scale, mostly carried out at home or in the fields with family labour.

3. The Shopkeepers of Palampur

The traders of Palampur are shopkeepers who buy various goods from wholesale markets in the cities and sell them in the village. There are small general stores selling a wide range of items, from rice and wheat to toothpaste and batteries.

4. Transport: A Fast-Developing Sector

There are a variety of vehicles on the road connecting Palampur to its neighbouring areas, including rickshaws, jeeps, tractors, and trucks. These people ferry goods and people from one place to another and get paid for it. The number of people involved in transport has grown over the last several years.

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