Comprehensive Guide: Class 12 Rural Development Q&A

Get ahead in your Class 12 Economics Chapter 5 Rural Development studies with our comprehensive guide on Important Questions Answers! Explore key concepts, demystify FAQs, and find expert answers to important questions in this essential resource. Ace your exam with confidence!

rural development class 12 important questions and answers

BoardCBSE and State Boards
Book NameIndian Economic Development
Chapter No.5
Chapter NameRural Development
TypeImportant Questions & Answers

"Success is the sum of several small efforts repeated often day in and day out."

Rural Development Class 12 Important Questions & Answers

Q. No. 1) Multiple-Choice Questions (MCQs)

i. Which of the following is the priority in terms of rural development?

a. Land reforms

b. Development of human resources

c. Infrastructural development

d. All of the above

Ans. Option (d)

ii. Read the following statements - Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): The major policy initiatives i.e. land reforms and the green revolution helped India to become self-sufficient in food grains production.

Reason (R): The proportion of people depending on agriculture did not decline as expected.


a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

c. Assertion (A) is true but Reason (R) is false.

d. Assertion (A) is false but Reason (R) is true.

Ans. Option (b)

iii. Which among the following is the major reason for the dismal performance of the agricultural sector even after the reforms?

a. Adequate infrastructure

b. Lack of alternate employment opportunities

c. Decrease in the casualization of employment

d. Decline in public investment

Ans. Option (d)

iv. National Bank for Agricultural and Rural Development (NABARD) was set up in 1982 as a/the_________body to coordinate the activities of all institutions involved in the rural financing system. (Fill in the blank with the correct alternative)

a. cooperative

b. apex

c. micro credit

d. private credit

Ans. Option (b)

v. Identify which of the following is a source of non-institutional credit in the rural areas of India.


b. Regional Rural Banks

c. Money Lenders

d. Commercial Banks

Ans. Option (c)

vi. Which among the following can be cited as a limitation of micro-credit programmes?

a. It empowers the womenfolk in rural areas

b. It encourages the habit of thrift in rural people

c. Borrowings from such programmes are done for consumption purposes

d. None of these

Ans. Option (c)

vii. Read the following statements carefully and choose the correct alternatives given below:

Statement 1 – The emergence of Self-Help Groups (SHGs) ensured the reduction in the fissures of the formal credit system.

Statement 2 – The borrowings from SHGs are mainly confined to consumption purposes by its members.


a. Both statements are true.

b. Both statements are false.

c. Statement 1 is true and Statement 2 is false.

d. Statement 2 is true and Statement 1 is false.

Ans. Option (a)

viii. Micro-credit programmes play a vital role in ensuring the overall development of the rural economy as they____________. (Choose the correct alternative to fill up the blank)

  1. provide financial support
  2. lead to women's empowerment
  3. enhance the reach of the formal credit system


a. (1) and (2)

b) (2) and (3)

c) (1) and (3)

d) (1), (2), and (3)

Ans. Option (d)

ix. Read the following statements -Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): Since the default rates of farm loans have become chronically high due to multiple reasons, the rural banks are facing a lot of cash crunch.

Reason(R): Due to lack of proper storage facilities a lot of farm produce is wasted.


a. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

b. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

c. Assertion (A) is true but Reason (R) is false.

d. Assertion (A) is false but Reason (R) is true.

Ans. Option (b)

x. Identify the incorrect statement from the following: (Choose the correct alternative)

a. Diversification in the agriculture sector provides sustainable livelihood rural population.

b. Diversification includes - a change in cropping pattern, a shift of workforce from agriculture to other allied activities, and the non-agriculture sector.

c. Objective of investment in new agricultural avenues (non-farm activities) increases financial risks for the rural population.

d. Diversification reduces the proportion of the unemployed population in rural areas to considerable limits.

Ans. Option (c)

xi. Kavitha, a farmer in rural India, is a recipient of a government scheme named __________. This scheme helps her set up a bank account and provides insurance, overdraft, and other social security benefits.

a. Sansad Adarsh Gram Yojana

b. Jan-Dhan Yojana

c. Kudumbashree


Ans. Option (b)

xii. What aims can be achieved through establishing alternate marketing channels?

a. Increase price risk

b. Reduce the markets for farm products

c. Assured procurement of agricultural products at pre-decided prices

d. Decrease the profits of farmers

Ans. Option (c)

xiii. Which of the following sectors have the potential of growth but lack infrastructural support in rural areas?

a. Leather industry

b. Tourism

c. Pottery, crafts, and handlooms

d. Steel industry

Ans. Option (c)

xiv. Which one of the following states the best reason for India following a mixed crop-livestock farming system?

a. Gives meager income

b. Provides nutrition to the family without disturbing other food-producing activities

c. Does not contribute to food security

d. Agriculture is monsoon dependent

Ans. Option (b)

xv. Study the following picture and answer the given question:

rural development class 12 important questions answers

Women in rural households take up bee-keeping as an entrepreneurial activity. Such kind of activities may be envisaged under _____ as diversification activities.

a. Animal husbandry

b. Fisheries

c. Horticulture

d. Poultry

Ans. Option (a)

xvi. What is the direct benefit of India taking up organic farming?

a. It is very popular amongst farmers

b. Costlier inputs will fetch a high price for output

c. It is labor intensive

d. There is ample awareness among people about organic products

Ans. Option (c)

xvii. Why are farmers reluctant to adopt organic farming?

a. Inputs are costly

b. Short shelf-life of products

c. Lack of proper marketing strategies

d. All of the above

Ans. Option (d)

Q. No. 2) Access to adequate and timely credit at affordable rates is critical for the rural poor to alleviate high-cost debt and invest in livelihood opportunities. Despite the Government of India's best efforts, financial inclusion of the rural poor has been beset with multiple challenges. Lack of adequate banking infrastructure and human resources in rural areas, unplanned expansion leading to unviable bank branches, and low levels of financial literacy amongst the rural populace have been some of the key challenges. The most vulnerable communities, who often had no formal credit history or ability to provide collateral, have often been the worst affected. The inability to access loans from banks meant that the poorest had to resort to moneylenders for loans at unreasonably high rates of interest which invariably led them into a toxic debt trap. In this context, the SHG-Bank Linkage programme, formalized by the National Bank for Agriculture and Rural Development (NABARD) in 1995, synthesizes 'formal financial systems' (in terms of a formal institution providing credit) with the 'informal sector' (comprising of rural poor with no formal credit history), has emerged as a preferred vehicle for providing financial services to the hitherto unbanked poor. Community-Based Repayment Mechanisms (CBRMs) have been institutionalized at branches involved in financing SHGs to monitor and ensure the timely repayment of loans by SHGs. The number of SHGs with outstanding bank loans stands at nearly 5 million today, implying that the program has brought formal banking services to over 50 million women.
Source (edited): Kumar, Shantanu; Pinto, Alreena Renita; Arora, Amit; Roy, Sourav. 2020. SHG-Bank Linkage: A Success Story. South Asia Agriculture and Rural Growth Discussion Note Series; No. 3. World Bank, Washington, DC.

i. Why is it important to ensure access to cheap formal sector credit for the rural poor?

a. to create a culture of savings and investment

b. to increase the earnings of the regional rural banks

c. to protect them from predatory lending and debt traps

d. to promote collectivization and organization among them

Ans. Option (c)

ii. Which of the following is a crucial area of improvement for rural banking?

a. risk protection for small businesses

b. profitability of non-farm activities

c. a culture of deposit mobilization

d. sustainable development

Ans. Option (c)

iii. There are two statements given below, marked as Assertion (A) and Reason (R). Read the statements and choose the correct option.

Assertion (A): Micro-credit can help empower women and make them financially independent.

Reason (R): Micro-credit involves small loans provided at reasonable interest rates that can help people start their own ventures.

a. A is true but R is false.

b. A is false but R is true.

c. A and R are true and R explains A.

d. A and R are true and R does not explain A.

Ans. Option (c)

iv. This programme would be successful if it can support a large number of people. What would the number of beneficiaries depend on?

a. community support among them

b. their level of average income

c. their level of financial literacy

d. a culture of saving money

Ans. Option (b)

v. What could be the main reason for the institutionalization of Community-Based Repayment Mechanisms (CBRMs)?

a. Rural people should play an active role in the bank's day-to-day functions.

b. If the repayment rate is low, banks would be reluctant to sanction fresh loans.

c. High number of default loans is a burden on the government budget.

d. Rural people deliberately refuse to pay back loans to banks.

Ans. Option (b)

vi. Which of the following is likely to be the MAIN objective of this programme?

a. providing livelihood to women

b. financial literacy for rural people

c. building community-bank partnerships

d. enabling credit access for the rural poor

Ans. Option (d)

Q. No. 3) Read, the following hypothetical Case Study, carefully and answer the questions on the basis of the same.

For ages, farmers in India have taken recourse to debt. In earlier times, the same was from informal sources. Since independence with the efforts of the government, the formal sector has actively come into picture. Farmers borrow not only to meet their investment needs but also to satisfy their personal needs. Uncertainty of income caused by factors like crop failure caused by irregular rainfall, reduction in the groundwater table, locust/other pest attacks, etc. These reasons push them into the clutches of private money lenders, who charge exorbitant rates of interest which add to their miseries.

Various governments in India, at different times for different reasons, introduced debt relief/waiver schemes. These schemes are used by governments as a quick means to extricate farmers from their indebtedness, helping to restore their capacity to invest and produce, in short, to lessen the miseries of the farmers across India. The costs and benefits of such debt relief schemes are, however, a widely debated topic among economists. Some economists argue that such schemes are extremely beneficial to the poor and marginalized farmers while others argue that these schemes add to the fiscal burden of the government, others believe that these schemes may develop the expectation of repeated bailouts among farmers which may spoil the credit culture among farmers.

i. Uncertainty of income for farmers in India is majorly caused by …………….. (irregular rainfall/unavailability of loans).

ii. Some economists argue that debt waiver schemes are extremely beneficial to the poor and marginalized farmers, as these schemes reduce the burden of ……………….(indebtedness/personal expenditures)

iii. The rural banking structure in India consists of a set of multi-agency institutions. ……………………… (Regional Rural Banks / Small Industries Development Bank of India) is expected to dispense credit at cheaper rates for agricultural purposes to farmers.

iv.……………………. (Regional Rural Banks/ Land Development Banks) is the most prominent body responsible for providing loans for long-term land development.

Ans. i. irregular rainfall

ii. Indebtedness

iii. Regional Rural Banks

iv. Land Development Banks.

Q. No. 4) “Rural Economic development is essential for Indian Economic development”. Do you agree with the given statement? Support your answer with valid reasons.


  • Mahatma Gandhi had always maintained that the real growth of India lies in the growth of villages. The
  • importance of rural development in India lies in the fact that 2/3rd of the population still (directly or indirectly) depends on agriculture.
  • Around 1/3rd of the rural population still lives in abject poverty.

Q. No. 5) What do you mean by rural development? Bring out the key issues in rural development.

Ans. Rural development is quite a comprehensive term but it essentially means a plan of action for the development of rural areas which are lagging behind in socio-economic development.

Some of the prime areas for the development of rural India may be quoted as follows:

  • Development of Human Capital – Rural human capital must be developed by taking sincere steps in the direction of education and health.
  • Land reforms
  • Development of the productive resources of each locality
  • Infrastructure development – is the key to any development process. Basic infrastructure requirements like electricity, irrigation, credit availability, transport facilities, construction of village roads and feeder roads to nearby highways, etc. are the area that still needs the attention of the government so as to gain commanding heights.
  • Alleviation of poverty - poverty in rural India is an area that should be taken up as a mission for improvement in the living conditions of particularly those living at the bottom of the pyramid. This problem may be tackled by emphasizing greater access to productive employment opportunities.

Q. No. 6) Two-thirds of the Indian population is dependent on agriculture, yet its contribution to GDP is low. Why?

Ans. After the reforms in 1991, the contribution of agriculture to GDP was low because of:

  • A decline in public investment since 1991.
  • Inadequate infrastructure
  • Lack of alternate employment opportunities in the secondary or tertiary sector
  • Increasing casualization of employment.

Q. No. 7) Discuss briefly the importance of micro-credit programmes in rural development.

Ans. Self-help groups (SHGs) have emerged to fill the gap in the formal credit system in India as its delivery mechanism has not only proven inadequate but has also not been fully integrated into the overall rural social and community development. It came up as the microfinance program. The focus of SHGs is on those rural people, small and marginal farmers, and agricultural and non-agricultural laborers who do not have sustainable access to a formal banking system.


  • Provide financial support
  • lead to women's empowerment
  • enhance the reach of the formal credit system

Q. No. 8) Kudumbashree' is a woman-oriented community-based poverty reduction programme being implemented in Kerala. In 1995, a thrift and credit society was started as a small savings bank for poor women with the objective to encouraging savings. The thrift and credit society mobilized ₹1 crore as thrift savings. These societies have been acclaimed as the largest informal banks in Asia in terms of participation and savings mobilized.
Source:, NCERT

Based on this passage,

a) Discuss the role of Self-Help Groups (SHGs) in meeting the credit requirements of the poor.

b) List some of the drawbacks of such micro-credit programmes.

Ans. a.

  • Poor women or women who do not have any collateral, were excluded from formal institutions of credit.
  • With Self-Help Groups, women are able to avail credit, with reasonable repayment plans.
  • Further, SHGs also receive funds as Community Investment Support Funds, to create self-employment
  • SHGs not only make credit accessible to poor women but also provide them with opportunities to generate their own income and make decisions.
  • SHGs foster a sense of community since the credit is disbursed from a pool of money contributed by all. This also holds them accountable to the group.
  • SHGs allow rural women to be financially empowered.


  • Borrowings from such programmes are done for consumption purposes.
  • Lack of financial literacy: Many borrowers who take out microcredit loans do not have a good understanding of financial literacy, such as how to manage their finances and how to make sound financial decisions. This can make it difficult for them to repay their loans and can increase their risk of over-indebtedness.
  • Lack of regulation: The microfinance sector in India is not as well-regulated as the banking sector. This can make it difficult for borrowers to get the protection they need if they have problems with their loans.

Q. No. 9) Critically evaluate the role of the rural banking system in the process of rural development in India.

Ans. Rapid expansion of the banking system had a positive effect on rural farm and non-farm output, income, and employment. In spite of this, the following problems have been faced in rural banking such as-

  • The volume of rural credit in the country is still insufficient in comparison to its demand and institutional sources have failed to cover the entire rural farmers of the country.
  • With the possible exception of commercial banks, other formal institutions have failed to develop a culture of deposit mobilization — lending to worthwhile borrowers and effective loan recovery.
  • Agriculture loan default rates have been chronically high.

Q. No. 10) “Jan-Dhan-Yojna helps in the rural development.” Do you agree with this statement? Explain.

Ans. All adults are encouraged to open bank accounts as a part of a scheme known as Jan-Dhan Yojana. Those bank account holders can get Rs. 1-2 lakh accidental insurance coverage and overdraft facilities for Rs. 10,000 and get their wages if they get any government-related jobs and works under MNREGA; old age pension and other social security payments of the government are transferred to bank accounts.

This has led to more than 40 crore people opening bank accounts; indirectly it has promoted thrift habit and efficient allocation of financial resources particularly in rural areas.

Q. No. 11) Define agricultural marketing.

Ans. Agriculture marketing is a process that involves the assembling, storage, processing, transportation, packaging grading, and distribution of different agricultural commodities across the country.

Q. No. 12) State and elaborate whether the following statements are true or false, with valid arguments:

i. Agricultural marketing is a process that ensures the transportation of various agricultural commodities only.

ii. Jan-Dhan Yojana has been a crucial step for financial resource mobilization in the Indian economy.

Ans. i. False. Agricultural marketing is a process that involves the assembling, storage, processing, transportation, packaging, grading, and distribution of different agricultural commodities across the country.

ii. True. Jan-Dhan Yojana has promoted thrift habits and efficient allocation of financial resources, particularly in rural areas. The formal banking system has mobilized a substantial amount under this yojana.

Q. No. 13) What is the need for diversification in rural areas?


  • Reduces the risk of depending on farming for livelihood.
  • To provide productive sustainable livelihood options to rural people.
  • To provide supplementary employment during rabi season.
  • To remove surplus labor from the agricultural sector to non-farm sectors.

Q. No. 14) Mention some obstacles that hinder the mechanism of agricultural marketing.


  • Farmers, while selling their produce to traders, suffer from faulty weighing and manipulation of accounts.
  • Farmers who do not have the required information on prices prevailing in markets are often forced to sell at low prices.
  • They also do not have proper storage facilities to keep their produce for selling later at a better price.

Q. No. 15) Explain the steps taken by the government in developing rural markets.

Ans. The steps taken by the government in developing rural markets are:

  • Regulation of markets to create orderly and transparent marketing conditions.
  • provision of physical infrastructure facilities like roads, railways, warehouses, godowns, cold storage, and processing units.
  • Cooperative marketing, in realizing fair prices for farmers’ products, is the third aspect of government initiative.
  • The fourth element is the policy instruments like
    • assurance of minimum support prices (MSP) for agricultural products
    • maintenance of buffer stocks of wheat and rice by the Food Corporation of India and
    • distribution of food grains and sugar through PDS.

Q. No. 16) What are the alternative channels available for agricultural marketing? Give some examples.


  • It has been realized that if farmers directly sell their produce to consumers, it increases their incomes. Some examples of these channels are
    • Apni Mandi
    • Hadaspar Mandi
    • Rythu Bazars
    • Uzhavar Sandies.
  • Further, several national and multinational fast food chains are increasingly entering into contracts/alliances with farmers to encourage them to cultivate farm products (vegetables, fruits, etc.) of the desired quality by providing them with not only seeds and other inputs but also assured procurement of the produce at pre-decided prices.

Q. No. 17) With fishing as an important allied activity, highlight the problems faced by this sector.


  • Low per capita earnings
  • Underemployment and rampant poverty among fishermen
  • High illiteracy and indebtedness
  • Absence of mobility to other sectors.

Q. No. 18) Identify the benefits of organic farming.


  • Organic agriculture offers a means to substitute costlier agricultural inputs (such as HYV seeds, chemical fertilizers, pesticides, etc.) with locally produced organic inputs that are cheaper and thereby generate good returns on investment.
  • Organic agriculture also generates income through exports as the demand for organically grown crops is on the rise.
  • Organically grown food has more nutritional value than chemical farming thus providing us with healthy foods.
  • Since organic farming requires more labor input than conventional farming, it generates employment opportunities.
  • Finally, the produce is pesticide-free and produced in an environmentally sustainable way.

Q. No. 19) Enlist any two problems faced by farmers in the initial years of organic farming.


Despite being an eco-friendly method of farming, organic farming is not very popular in India. Why?


  • Needs to be popularized.
  • Inadequate marketing
  • Less output as compared to traditional farming
  • Shorter shelf life of products
  • Limited choice of produce.
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