Economics Chapter - 1 (The Story of Village Palampur)

NOTES
TOPICS:
1) Overview
2) Introduction
3) Organisation of Production
4) Farming in Palampur
 Land is fixed
 Is there a way one can grow more from the same land?
 Will the land sustain?
 How is land distributed between the farmers of Palampur?
 Who will provide the labour?
 The capital needed in farming
 Sale of Surplus Farm Products
5) Non-Farm Activities in Palampur
 Dairy — the other common activity
 An example of small-scale manufacturing in Palampur
 The shopkeepers of Palampur
 Transport: a fast-developing sector
6) Case-base studies

1) OVERVIEW:
 Purpose of the Story:
o The story aims to introduce basic concepts related to
production.
o It achieves this by narrating the scenario in a fictional village
called Palampur.
 Palampur’s Economy and Resources:
o Farming is the primary activity in Palampur.
o Other activities like small-scale manufacturing, dairy, and
transport also occur but on a limited scale.
o These production activities require various resources,
including natural resources, man-made items, human effort,
and money.
o The story explores how these resources combine to produce
goods and services in the village.
 The narrative is partly based on a research study by Gilbert Etienne of a village in
Bulandshahr district in Western Uttar Pradesh.

2) INTRODUCTION:
 Connectivity:
o Palampur is well – connected to neighbouring villages and
towns.
o It is 3 kilometers away from the big village of Raiganj.
o An all-weather road links Palampur to Raiganj and further to
the nearest small town, Shahpur.
 Transportation:
o Various types of transport are visible on the road connecting
Palampur:
 Bullock carts, tongas, and bogeys(wooden carts drawn by
buffaloes) loaded with jaggery and other commodities.
 Motor vehicles like motorcycles, jeeps, tractors, and
trucks.
 Population and Caste Composition:
o Palampur has approximately 450 families from different
castes.
o Upper caste families (about 80) own most of the land in the
village.
o SCs (Dalits) form one-third of the population and live in
smaller houses, some made of mud and straw.
 Housing:
o Houses in Palampur vary:
 Upper caste houses are brick structures with cement
plastering.
 SCs’ houses are smaller and made of mud and straw.
 Most houses have electric connections.
3) Organisation is Production:
 Aim of Production:
o The primary purpose of production is to create goods and
services that satisfy human needs and wants.
o Whether it is food, clothing, or technology, production
serves to fulfil our desires and improve our quality of life.
 Four Essential Requirements for Production:
o Land and Natural Resources:
 Land provides the physical space for production
activities.
 Natural resources include water, forests, minerals, and
other raw materials.
 These resources are essential for various economic
activities.
o Labour:
 Labor refers to the human effort involved in
production.
 Workers perform tasks, whether manual or
intellectual.
 Some activities require highly educated workers, while
others rely on physical labour.
o Physical Capital:
 Physical capital encompasses a variety of inputs
needed at different stages of production.
 Examples include:
 Tools and Machines:
 Ranging from simple tools like a farmer’s
plough to sophisticated machines like
generators and computers.
 These tools and machines can be used over
many years and are considered fixed capital.
 Buildings:
 Infrastructure such as factories, warehouses, and
offices.
 Also, part of fixed capital.
 Raw Materials and Money in Hand:
 Raw materials like yarn for weavers or clay for
potters.
 Money is necessary for payments and
purchasing other essential items.
 These constitute working capital and are used up
during production.
o Human Capital:
 Beyond physical resources, knowledge and enterprise
play a crucial role.
 Combining land, labour, and physical capital requires
understanding, creativity, and management skills.
 Human capital refers to the collective knowledge,
expertise, and innovation within a society.
o Factors of Production:
 Land, providing space and natural resources.
 Labor, contributing effort and skills.
 Physical capital, including tools, machines, and
buildings.
 Human capital, representing knowledge and
entrepreneurial abilities.
  These factors interact to organize every production
process.
4) FARMING IN PALAMPUR:
A. LAND IS FIXED:
a. Main Production Activity: Farming is the primary economic
activity in Palampur, with 75 percent of the population relying on it
for their livelihood.
b. Dependence on Farming: People working in Palampur are either
farmers or farm labourers, emphasizing the significance of
agriculture.
c. Well-Being Linked to Production: The well-being of these
individuals is closely tied to the farm production.
d. Land Constraint: A fundamental limitation exists in increasing
farm production. The cultivated land area is fixed and has not
expanded since 1960.
e. Wasteland Conversion: Some wastelands in Palampur were
converted into cultivable land, but there is no further scope for new
land cultivation.
B. IS THERE A WAY ONE CAN GROW MORE FROM THE SAME
LAND?
a. Palampur resembles a village in the western part of Uttar Pradesh

b. All land in Palampur is cultivated, with no land left idle

c. During the rainy season, farmers grow jowar and bajra, followed
by potato cultivation between October and December
d. In the winter season, fields are sown with wheat, which is then
sold at the market in Raiganj
e. A part of the land area is devoted to sugarcane, which is
harvested once every year
f. The well-developed system of irrigation allows farmers to grow
three different crops in a year
g. Electricity early in Palampur transformed the system of irrigation,
replacing Persian wheels with electric-run tubewells
h. By mid-1970s, the entire cultivated area of 200 hectares was
irrigated
i. Multiple cropping is the most common way of increasing
production on a given piece of land in Palampur
j. All farmers in Palampur grow at least two main crops, with many
growing potatoes as the third crop in the past fifteen to twenty
years
k. The Green Revolution in the late 1960s introduced high yielding
varieties (HYV) of seeds for wheat and rice cultivation
l. HYV seeds promised greater amounts of grain on a single plant,
requiring more water, chemical fertilizers, and pesticides
m. Farmers in Punjab, Haryana, and Western Uttar Pradesh were the
first to try out modern farming methods in India
n. The yield of wheat grown from traditional varieties in Palampur
was 1300 kg per hectare, which increased to 3200 kg per hectare
with HYV seeds
o. The modern farming methods resulted in a large increase in the
production of wheat
p. Modern farming methods require a combination of HYV seeds,
irrigation, chemical fertilizers, and pesticides
q. Some farmers in Punjab, Haryana, and Western Uttar Pradesh
bought farm machinery like tractors and threshers
r. The modern farming methods in these regions rewarded farmers
with high yields of wheat
s. The Green Revolution increased the production of wheat in
Palampur
t. Farmers in Palampur had greater amounts of surplus wheat to sell
in the markets
C. WILL THE LAND SUSTAIN?

a. Land is a natural resource that must be used carefully

b. Modern farming methods have overused the natural resource
base
c. The Green Revolution has led to the loss of soil fertility and
depletion of groundwater
d. Environmental resources like soil fertility and groundwater take
years to build up and are difficult to restore once destroyed

e. Care for the environment is necessary for the future development

of agriculture

 Chemical fertilisers provide immediately available minerals to plants

 These minerals may not be retained in the soil for long
 Chemical fertilizers can escape from the soil and pollute groundwater, rivers, and
lakes
 They can also kill bacteria and other microorganisms in the soil
 This leads to the soil becoming less fertile over time
 Punjab has the highest consumption of chemical fertilizers in the country
 Continuous use of chemical fertilizers has led to degradation of soil health in
Punjab
 Punjab farmers are forced to use more and more chemical fertilizers to achieve
the same production levels
 This has led to a fast rise in the cost of cultivation
 The use of chemical fertilizers in Punjab is contributing to environmental
pollution and soil degradation

D. HOW IS LAND DISTRIBUTED BETWEEN THE FARMERS OF
PALAMPUR?

a. In Palampur, one third of the families are landless, with 150

families, mainly Dalits, having no land for cultivation
b. 240 families own small plots of land less than 2 hectares in size,
which does not bring adequate income
c. Small farmers cultivate the small plots scattered around the village
d. More than half the area of the village is covered by large plots,
with 60 families of medium and large farmers cultivating more than
2 hectares of land
e. Some of the large farmers have land extending over 10 hectares
or more
E. WHO WILL PROVIDE THE LABOUR?
a. Labour is a necessary factor for farming production
b. Small farmers and their families provide their own labour for
farming
c. Medium and large farmers hire farm labourers
d. Farm labourers come from landless families or families with small
plots of land
e. Farm labourers do not have a right over the crops grown on the
land
f. They are paid wages in cash or kind, and sometimes get meals
g. Wages vary widely from region to region, crop to crop, and farm
activity to another
h. Farm labourers may be employed on a daily basis, for specific
activities, or for the whole year
i. Dala is a landless farm labourer in Palampur who works on daily
wages
 j. He gets lower wages than the government-mandated minimum
and competes for work with other farm labourers

F. THE CAPITAL NEEDED IN FARMING:

a. Modern farming methods require a lot of capital

b. Small farmers need to borrow money to arrange for the capital
c. They borrow from large farmers, village moneylenders, or traders
who supply inputs
d. The interest rate on these loans is very high
e. Small farmers struggle to repay the loans and are put under great
distress
f. Medium and large farmers have their own savings from farming
g. They can arrange for the capital needed without borrowing.
h. The text suggests that the next section will provide the answer to
how these farmers have their own savings.
G. SALES OF SURPLUS FARM PRODUCTS:
a. Farmers produce wheat using factors of production
b. They retain part of the wheat for family consumption and sell the
surplus
c. Small farmers have little surplus, while medium and large farmers
supply wheat to the market
d. Traders at the market buy the wheat and sell it further to
shopkeepers
e. Tejpal Singh, a large farmer, has a surplus of 350 quintals of
wheat
f. He sells the surplus at the market and has good earnings
g. Tejpal Singh puts most of the money in his bank account and uses
the savings for lending to farmers in need of a loan
h. He also uses the savings for working capital for farming in the next
season and plans to buy another tractor
i. Other large and medium farmers also sell surplus farm products
and save earnings for buying capital for the next season
j. They can arrange for farming capital from their own savings
 k. Some farmers use the savings to buy cattle, trucks, or set up
shops
l. These constitute the capital for non-farm activities
m. Medium and large farmers can arrange capital for farming from
their own savings
n. Some use the savings to buy cattle, trucks, or set up shops
o. These constitute the capital for non-farm activities

5) NON – FARM ACTIVITIES IN PALAMPUR:

Only 25% of the people working in Palampur are engaged in
activities other than agriculture
Farming is the main production activity in Palampur
Non-farm production activities will be discussed further
The text gives an example of how farmers use their earnings and
savings
It shows the importance of savings and capital in farming and non-
farm activities.

A. DAIRY — THE OTHER COMMON ACTIVITY:

a. Dairy is a common non-farm activity in Palampur
b. People feed their buffalos with various kinds of grass, jowar, and
bajra
c. Milk is sold in Raiganj, a nearby large village
d. Two traders from Shahpur town have set up collection cum chilling
centres at Raiganj
e. Milk is transported from Raiganj to far away towns and cities
f. The non-farm activities in Palampur include dairy production
B. AN EXAMPLE OF SMALL-SCALE MANUFACTURING IN
PALAMPUR:
a. Less than fifty people are engaged in manufacturing in Palampur
b. Manufacturing in Palampur involves simple production methods
and is done on a small scale
c. Manufacturing is carried out mostly at home or in the fields with
the help of family labour
d. Labourers are rarely hired for manufacturing in Palampur
 e. Manufacturing in Palampur is different from big factories in towns
and cities
C. THE SHOPKEEPERS OF PALAMPUR:
a. There are not many people involved in trade in Palampur
b. The traders in Palampur are mostly shopkeepers who buy goods
from wholesale markets in cities and sell them in the village
c. Small general stores in the village sell a wide range of items
including food, household goods, and clothing

d. Some families near the bus stand have opened small shops
selling eatables Trade in Palampur is mostly carried out by
shopkeepers and small general stores

 Manufacturing and trade in Palampur are largely based on small-scale, family-

based operations.

D. People
 involved in
TRANSPORT: A trade and transport play SECTOR:
FAST-DEVELOPING a significant role in the village
economy
a. Various vehicles are used for transportation in Palampur
b. Rickshawallahs, tongawallahs, jeep, tractor, truck drivers, bullock
cart and bogey drivers are involved in transportation
c. They ferry people and goods from one place to another
d. The number of people involved in transport has grown over the
years
e. The road connects Palampur to Raiganj
f. The transport services are essential for the movement of people
and goods

6) CASE – BASE STUDIES:


 Savita is a small farmer planning to cultivate wheat on her 1
hectare of land
 She needs cash for working capital, water, and farm instrument
repair
 She estimates the working capital to cost a minimum of Rs 3,000
 Savita decides to borrow from Tejpal Singh, a large farmer, at a
high interest rate of 24%
 She also has to promise to work on Tejpal Singh's field as a farm
labourer during the harvest season at a low wage of Rs 100 per day
 Savita knows she will have to work hard to complete harvesting on

 Mishrilal has purchased a mechanical sugarcane crushing machine

run on electricity
 He has set it up on his field
 Sugarcane crushing was earlier done with the help of bullocks
 People prefer to do it by machines these days
 Mishrilal buys sugarcane from other farmers and processes it into
jaggery
 The jaggery is sold to traders at Shahpur
 Mishrilal makes a small profit in the process

 In 1960, Gobind was a farmer with 2.25 hectares of largely

unirrigated land
 With the help of his three sons, Gobind cultivated the land
 The family managed to feed itself with a little bit of extra income
from one buffalo
 After Gobind’s death, the land was divided among his three sons
 Each son now has a plot of land that is only 0.75 hectare in size
 Even with improved irrigation and modern farming method,
Gobind’s sons are not able to make a living from their land
 Kareem has opened a computer class centre in the village
 Many village students are attending college in Shahpur town
 Some village students are also attending computer classes in the
town
 Kareem employed two women with computer application degrees
to teach at the centre
 The classes are held in the front room of the women's house
overlooking the market, and high school students are attending in
 Kishora
good is a farm labourer who struggled to meet his family's needs
numbers
with his wages
 He took a cheap loan from a government programme for poor
landless households
 With the loan, he bought a buffalo and now sells the buffalo's milk
 Kishora also uses the buffalo to transport various items with a
wooden cart
 He goes to the river Ganga to bring back clay for the potter and to
Shahpur with a load of jaggery or other commodities
 He also gets some work in transport every month
 As a result, Kishora is able to earn more than he used to do some
years back
 The loan and the buffalo have helped improve Kishora's income
and livelihood
 Kishora's story demonstrates the impact of government
programmes and access to cheap loans on poor households
 Kishora's entrepreneurial spirit and hard work have helped him
improve his financial situation

 TOTAL SUMMARY IN POINTS ALLTOGTHER:
Farming is the primary economic activity in Palampur, driving the
livelihoods of 75% of its population.
Changes in farming practices have increased crop yields, but also
strained natural resources.
Small farmers struggle to access capital due to limited production and
must often borrow.
Labor is abundant but underutilized in farming, leading to migration to
towns and cities.
Only 24 out of 100 rural workers are engaged in non-farm activities in
India.
Non-farm activities require less land and capital and could provide
economic diversification.
Capital for non-farm activities can come from savings or loans with low
interest rates.
Connectivity to markets in nearby towns and cities is crucial for non-
farm activity growth.
Palampur's economy relies on farming, with some engagement in non-
farm activities.
Palampur's land is fixed, limiting expansion of farming activities.
Modern farming methods, including multiple cropping and high-yield
seeds, have boosted production.
However, over-reliance on modern methods has led to environmental
degradation.
Land ownership is unevenly distributed among different caste groups in
Palampur.
Labor for farming is sourced from both small landowning families and
hired labourers.
Small farmers struggle to access capital and often rely on borrowing at
high interest rates.
Medium and large farmers can use savings from surplus farm products
for capital.
Dairy and small-scale manufacturing are common non-farm activities in
Palampur.
Non-farm activities are generally small-scale and family-run in
Palampur.
Trade in Palampur is mostly conducted by small shopkeepers selling
various goods.
Transportation services have developed in Palampur, facilitating
movement of people and goods.
  TOTAL SUMMARY IN PARAGRAPH ALLTOGETHER:
The primary economic activity in Palampur is farming, supporting 75% of its
population. Changes in farming practices have increased crop yields but
strained natural resources. Small farmers face challenges accessing capital
and often rely on borrowing. Non-farm activities offer economic diversification,
requiring less land and capital. Connectivity to nearby markets is crucial for
their growth. Palampur's economy relies on farming, with limited land available
for expansion. Modern farming methods have boosted production but caused
environmental degradation. Land ownership is unevenly distributed among
caste groups. Labor for farming comes from small landowning families and
hired labourers. Non-farm activities like dairy and small-scale manufacturing
are common, mostly family-run. Trade is conducted by small shopkeepers,
with transportation services facilitating movement of people and goods.