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Capital Required for Farming and the sale of the Produce

In the previous page we saw the first to things that are required for farming activities, that is, land and labour.

Now we will see the other two things that are required for farming-capital and Sale of the product.


  • Farmers need a large capital to do farming activities.
  • They need money to buy seeds, fertilizers, pesticides and farming equipment.
  • Farmers also need money for irrigating their land.
  • Medium and large-scale farmers have their own capital (money) to invest in farming activities.
  • Small scale farmers have to borrow money from others to indulge in farming activities in their small piece of land.
  • Small farmers sometimes work in larger farms besides cultivating their own land.
  • They utilize the wages they earn as farm labourers to buy seeds and other things required to cultivate their own farm.
    Modern Farm Equipments

    Ancient Farm Equipments

    So, capital is as important as land and labour in farming activities.

    Now let us look at Savita, a small farmer and Tejpal Singh, a large farmer, in the imaginary village of Palampur

    • Savita is a small farmer.
    • She wants to cultivate wheat on her 1 hectare of land.
    • Savita needs money to buy seeds, fertilizers and pesticides.
    • She also needs money to buy water and repair her farm equipment.
    • Savita, approximately, needs Rs. 3000/- to start cultivating her land.
    • As she does not have the capital to start cultivation she borrows money from Tejpal Singh, a large farmer.
    • Tejpal Singh lends Savita the money at an interest rate of 24 per cent for four months, which is a very high interest rate.
    • Savita also has to promise to work on his field as a farm labourer during the harvest season at Rs 35 per day.
    • As Savita is indebted to Tejpal Singh, he exploits the situation and offers Savita a very low wage.
    • Now Savita has to work hard, both in her field and in Tejpal Singh’s field.
    • Unlike Savita who is a small farmer, medium and large farmers have an advantage as they have enough capital on their own to cultivate their land.

    Sale of the product

    We have seen how land, labour and capital are necessary for farming. Once the fields are harvested, it is equally important to sell the grain at a profitable price, so as to earn a living and have the required capital for the next rotation of cultivation.

  • Once the grain is harvested, production is complete.
  • Now the product has to be marketed.
  • The Product has to be transported to the local market.
  • Usually the entire load of grains in not sold. A portion of it is stored for the family’s consumption.
  • The product is transported to the local market on bullock carts.
  • In the local market, traders buy the grains and sell it to shop-keepers in the towns.
  • Farmers who have to repay loans do so, while large farmers with surplus profit invest the money in the Banks.
  • Soon, it is time to buy seeds for the next round of cultivation.
  • Now let us again look at Savita and Gobind’s sons who are small farmers and Tejpal Singh, a large farmer, in the imaginary village of Palampur

    • After the harvest Savita and Gobind’s sons, who are small farmers, have very little extra wheat.
    • As they are small farmers their total production is very little and after they store sufficient grains for the family’s consumption, very little is left for sale.
    • Medium and large farmers like Tejpal Singh are the ones who sell large quantities of wheat in the market.
    • Tejpal Singh has approximately 350 quintals of surplus wheat from his lands.
    • Tejpal Singh will use this profit to buy another tractor, which will increase his fixed capital.
    • He also uses his profit to lend money to small farmers and makes more profit from the interest he gets from the loan.
    • Some farmers who have surplus profit also invest this money in non-farming activities.

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