NCERT Class 9 Economics Chapter 1: Story of Village Palampur Economy Completes Notes Part 3

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Story of Village Palanpur

Physical Capital

  • Small farmers - Borrow money from large farmers/ moneylenders/ traders – High rate of interest – 80% of total farmers

  • Medium & Large farmers – Have savings

  • Sell surplus produce – Either repay loan or add saving (buy equipment's for farm/cattle/non-farm activity - fixed capital)

The physical capital as we said physical capital is either fixed or working capital.

Fixed capital is one time investment so a medium or a large farmer can definitely afford that one time investment because they have savings by self however a small farmer has to borrow so the small farmer take loans or borrows from either the money lender or big farmer or the trader and all these charge very high rate of interest. 80% of the total farmer in India work as small farmer and they have to borrow money in one form or another and that is done in lieu of very high rate of interest.

Government is undertaking measures to reduce the rate of interest and the government itself is opening the centers so where you have the less kind of interest rate as compared to the market interest rate. Once you have the crop that comes up, you sell that crop so when you are selling the crop. Small farmer what he will do is he will repay the loan that he has taken but a medium and larger farmer would save once they save they would invest it further. So this saving would be invested either again as a working capital in a farm or as a fixed capital in the farm or they can invested it in nonfarm activity. They cannot open small shop or trading center as a result what would happen is ultimately the medium and the large farmers would have higher fixed capital or they would increase their fixed capital because they own saving and now there are nonfarm activities.

Non-Farm Activity – Only 24% in Villages

  • Dairy – feed buffalo with grass, jowar or bajra

  • Small Scale manufacturing – Simple equipments – at home, family labour, rarely hire labourers

  • Trade – Shopkeepers

  • Transport Services

Nonfarm activities that are popular in village however accounts only for 24% of the total activities in the villages. It is mainly either dairy so you feed the buffaloes with grass, jowar or bajra, then you have a small scale manufacturing with very simple equipment like khadi gramudhyog so you have home based or family based businesses. You need not to have laborers for those. Then there can be small shops or trading centers and people can also be involved in transport services. Finally you have the human capital which is kind of skilled capital that requires knowledge and enterprise to work around.