Overview
This chapter introduces basic concepts of production through the example of the hypothetical village Palampur, focusing on farming and other activities, and how resources are used to produce goods and services.
Introduction to Palampur
- Palampur is an imaginary, well-connected village with about 450 families of various castes.
- Main facilities include schools, a health centre, electricity, and transportation.
- Farming is the primary production activity; others include dairy, small manufacturing, shopkeeping, and transport.
Organisation of Production
- Four main requirements for production: land, labour, physical capital (tools/machines/buildings and working capital), and human capital (knowledge and enterprise).
- These are collectively called factors of production.
Farming in Palampur
- 75% of working people depend on farming; land available for cultivation is fixed.
- Multiple cropping (growing more than one crop a year) and modern farming methods used to increase output.
- Main crops: jowar, bajra, potato, wheat, sugarcane.
- Irrigation developed early with electric tubewells; all land is cultivated and irrigated.
Modern Farming Methods
- Use of high-yield variety (HYV) seeds, chemical fertilizers, and pesticides increased crop yields.
- Modern methods require more capital but can harm soil fertility and lower groundwater levels over time.
Distribution of Land and Labour
- Land distribution is unequal; one-third of families are landless, and most own small plots under 2 hectares.
- Small farmers and their families do most farm work; medium and large farmers hire labourers.
- Farm labourers are often poor, paid low wages, and face irregular employment.
Capital in Farming
- Modern farming needs significant capital, especially for small farmers who often borrow at high interest rates.
- Medium and large farmers use their savings from surplus production to fund next season’s capital needs.
Sale of Surplus and Savings
- Small farmers have little surplus to sell, while medium and large farmers sell surplus crops for earnings and savings.
- Savings are used to reinvest in their farms or non-farm activities.
Non-Farm Activities in Palampur
- Non-farm activities (dairy, small manufacturing, shopkeeping, transport) employ about 25% of workers.
- Examples include dairy collection, jaggery production, opening shops, computer classes, and transport services.
Key Terms & Definitions
- Factors of Production — Land, labour, capital, and human capital needed to produce goods.
- Fixed Capital — Tools, machines, and buildings used for years in production.
- Working Capital — Raw materials and money used up in production.
- Human Capital — Knowledge and enterprise used to organize production.
- Multiple Cropping — Growing more than one crop on the same land in a year.
- HYV Seeds — High Yielding Variety seeds that increase crop output.
- Surplus — The portion of output not consumed by the family and sold in the market.
Action Items / Next Steps
- Complete the exercises at the end of the chapter for review.
- Compare facilities, cropping patterns, and production methods with your region.
- Talk to farmers and labourers in your area to relate concepts to local conditions.
- Reflect on how non-farm activities can be expanded in villages.