Introduction to production

Last Updated : 01-03-2024 11:01:24
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In villages across India, farming is the main production activity. The other production activities, referred to as nonfarm activities include small manufacturing, transport, shop-keeping, etc.

Organisation of Production

The aim of production is to produce the goods and services that we want.

There are four requirements for production of goods and services.

  1. land, and other natural resources such as water, forests, minerals.
  2. labour, i.e. people who will do the work. Some production activities require highly educated workers to perform the necessary tasks. Other activities require workers who can do manual work. Each worker is providing the labour necessary for production.
  3. physical capital, i.e. the variety of inputs required at every stage during production. What are the items that come under physical capital?  (a)Tools, machines, buildings: Tools and machines range from very simple tools such as a farmer’s plough to sophisticated machines such as generators, turbines, computers, etc. Tools, machines, buildings can be used in production over many years, and are called fixed capital. (b) Raw materials and money in hand: Production requires a variety of raw materials such as the yarn used by the weaver and the clay used by the potter. Also, some money is always required during production to make payments and buy other necessary items. Raw materials and money in hand are called working capital. Unlike tools, machines and buildings, these are used up in production.
  4. Human Capital ,You will need knowledge and enterprise to be able to put together land, labour and physical capital and produce an output either to use yourself or to sell in the market. This these days is called human capital.

Every production is organised by combining land, labour, physical capital and human capital, which are known as factors of production. As we read through the story of Palampur, we will learn more about the first three factors of production. For convenience, we will refer to the physical capital as the capital in this chapter.

Note :

  1. The standard unit of measuring land is hectare, though in the villages you may find land area being discussed in local units such as bigha, guintha etc. One hectare equals the area of a square with one side measuring 100 metres.
  2. Not all villages in India have high levels of irrigation. Apart from the riverine plains, coastal regions in our country are well-irrigated. In contrast, plateau regions such as the Deccan plateau have low levels of irrigation. Of the total cultivated area in the country a little less than 40 per cent is irrigated even today. In the remaining areas, farming is largely dependent on rainfall.
  3. To grow more than one crop on a piece of land during the year is known as multiple cropping. It is the most common way of increasing production on a given piece of land.

Green Revolution 

You have seen that one way of increasing production from the same land is by multiple cropping. The other way is to use modern farming methods for higher yield. Yield is measured as crop produced on a given piece of land during a single season.

  • Till the mid1960s, the seeds used in cultivation were traditional ones with relatively low yields. Traditional seeds needed less irrigation. Farmers used cow-dung and other natural manure as fertilizers. All these were readily available with the farmers who did not have to buy them.
  • The Green Revolution in the late 1960s introduced the Indian farmer to cultivation of wheat and rice using high yielding varieties (HYVs) of seeds. Compared to the traditional seeds, the HYV seeds promised to produce much greater amounts of grain on a single plant. As a result, the same piece of land would now produce far larger quantities of food grains than was possible earlier. HYV seeds, however, needed plenty of water and also chemical fertilizers and pesticides to produce best results.

Higher yields were possible only from a combination of HYV seeds, irrigation, chemical fertilisers, pesticides etc. Farmers of Punjab, Haryana and Western Uttar Pradesh were the first to try out the modern farming method in India. The farmers in these regions set up tubewells for irrigation, and made use of HYV seeds, chemical fertilizers and pesticides in farming. Some of them bought farm machinery like tractors and threshers, which made ploughing and harvesting faster. They were rewarded with high yields of wheat.

Green Revolution Profit/loss

  • Land being a natural resource, it is necessary to be very careful in its use. Scientific reports indicate that the modern farming methods have overused the natural resources.
  • In many areas, Green Revolution is associated with the loss of soil fertility due to increased use of chemical fertilizers. Also, continuous use of groundwater for tubewell irrigation has reduced the water-table below the ground. Environmental resources like soil fertility and groundwater are built up over many years. Once destroyed it is very difficult to restore them. We must take care of the environment to ensure future development of agriculture.
  • Chemical fertilizers provide minerals which dissolve in water and are immediately available to plants. But these may not be retained in the soil for long. They may escape from the soil and pollute groundwater, rivers and lakes. Chemical fertilizers can also kill bacteria and other microorganisms in the soil. This means some time after their use, the soil will be less fertile than ever before.
  • The consumption of chemical fertilizers in Punjab is highest in the country. The continuous use of chemical fertilizers has led to degradation of soil health. Punjab farmers are now forced to use more and more chemical fertilizers and other inputs to achieve the same production level. This means cost of cultivation is rising very fast

land labours

After land, labour is the next necessary factor for production. Farming requires a great deal of hard work. Small farmers along with their families cultivate their own fields. Thus, they provide the labour required for farming themselves. Medium and large farmers hire farm labourers to work on their fields.

  • Farm labourers come either from landless families or families cultivating small plots of land. Unlike farmers, farm labourers do not have a right over the crops grown on the land. Instead they are paid wages by the farmer for whom they work. Wages can be in cash or in kind e.g. crop. Sometimes labourers get meals also. Wages vary widely from region to region, from crop to crop, from one farm activity to another (like sowing and harvesting).
  • There is also a wide variation in the duration of employment. A farm labourer might be employed on a daily basis, or for one particular farm activity like harvesting, or for the whole year.
  • The minimum wages for a farm labourer set by the government is Rs 60 per day

The capital needed in farming

You have already seen that the modern farming methods require a great deal of capital, so that the farmer now needs more money than before.

  • Most small farmers have to borrow money to arrange for the capital. They borrow from large farmers or the village moneylenders or the traders who supply various inputs for cultivation. The rate of interest on such loans is very high. They are put to great distress to repay the loan.
  • In contrast to the small farmers, the medium and large farmers have their own savings from farming. They are thus able to arrange for the capital needed.


  • Farming is the main production activity in the village. Over the years there have been many important changes in the way farming is practiced. These have allowed the farmers to produce more crops from the same amount of land. This is an important achievement, since land is fixed and scarce.
  • But in raising production a great deal of pressure has been put on land and other natural resources. The new ways of farming need less land, but much more of capital.
  • The medium and large farmers are able to use their own savings from production to arrange for capital during the next season. On the other hand, the small farmers who constitute about 80 per cent of total farmers in India, find it difficult to obtain capital. Because of the small size of their plots, their production is not enough. The lack of surplus means that they are unable to obtain capital from their own savings, and have to borrow. Besides the debt, many of the small farmers have to do additional work as farm labourers to feed themselves and their families.
  • Labour being the most abundant factor of production, it would be ideal if new ways of farming used much more labour. Unfortunately, such a thing has not happened. The use of labour on farms is limited. The labour, looking for opportunities is thus migrating to neighbouring villages, towns and cities. Some labour has entered the non-farm sector in the village.
  • At present, the non-farm sector in the village is not very large. Out of every 100 workers in the rural areas in India, only 24 are engaged in non-farm activities. Though there is a variety of non-farm activities in the villages (we have only seen a few examples), the number of people employed in each is quite small.
  • In the future, one would like to see more non-farm production activities in the village.
  • Unlike farming, non-farm activities require little land. People with some amount of capital can set up non-farm activities. How does one obtain this capital? One can either use his own savings, but more often has to take a loan.
  • It is important that loan be available at low rate of interest so that even people without savings can start some non-farm activity.
  • Another thing which is essential for expansion of non-farm activities is to have markets where the goods and services produced can be sold.
  • As more villages get connected to towns and cities through good roads, transport and telephone, it is possible that the opportunities for non-farm activities production in the village would increase in the coming years.

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