Discuss the importance of credit in rural development.
Credit plays a vital role in rural development as the growth of rural economy depends primarily on infusion of capital from time to time. This capital helps realise higher productivity in both agriculture and non-agriculture sectors.
Since the gestation period between crop sowing and realisation of income after production is quite long, farmers need to borrow to meet their initial investment on seeds, fertilisers, implements and other family expenses. The banking system has had a positive effect on rural farm and non-farm output, income and employment, helping farmers avail credit facilities for meeting production needs.
Explanation
The answer draws directly from the textbook discussion on credit in rural areas. Key points covered include: (1) capital infusion as primary requirement for rural economy growth, (2) long gestation period necessitating borrowing, (3) specific needs like seeds, fertilisers and family expenses, and (4) positive impact on output, income and employment. The answer stays within the 80-120 word limit appropriate for a 3-mark short answer question.