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Atanu Dey is not always right

I have previously pointed a lot of links [1][2][3]to Atanu Dey's blog, also praising his RISC model for development of Indian rural/semi-urban areas. However, this comment on his blog (by someone with an alias Human Blasphemy) sets out some very pertinent doubts on this model - reproducing it here:
Dear Atanu,
I heard you during your session on RISC at XIMB. One of the members asked you a question whether Rural Infrastructure can be developed through people’s participation and through microfinance. Which according to you is not possible, because large infrastructure projects have to be completed at one go. But the problem is that why will any private company invest in rural infrastructure? You only said that i dont know how it will be possible.

I believe you will agree that in future Microfinance will not remain microfinance it will become SM-finance [Small and medium finance. We have already seen the examples of increased limits of credit in Andhra Pradesh, where Mf loans have reached upto Rs5lakhs. Through Microfinance, we can go for rural infrastructure development through following 4 measures:

1. Framework for expanding contours of MFI roles and financial limits
2. Modification of Regulatory Framework
3. Integrating Private Institutions with MFI’s and Community [venture cap n equity]
[SKS Microfinance is attracting VC, which can also be applied to RID]

=======================================
According to the theory of economic developement you suggested, the innovation has to be done at top level, then later on when competition will grow, it will be affordable to the masses. You also gave the example of Mobile phones.

I believe that this theory is successful for the technology sectors.When we talk about growth, we are also concerned with people’s development. YouR example can be negated by the fact that if we allow big companies to grow and capture the markets, the small and medium enterprises will never be able to grow. Big companies will not ALLOW them to grow once they see them as a threat. In that case the open markets will not become open markets, they will actually be the oligopolistic or monopolistic. And in the developing countries where large chunk of industries consist of small industries, the top down approach will not be helpful.

We have to allow small companies to grow and them many of them will become large companies. So the bottom up approach is successful if implemented properly. The reason of failure of this approach is not that it is flawed, but because it is not supported by those who are able to invest in it.

The example of Orissa can be given, where government is encouraging industrilization at large pace, but not able to develop people at the same pace. The result is the improper usage of resources [Economics deals with optimal usage of resources] and there are no rules or regulations in the state. If people are not ready and they are not able to use the resources the industries are generating, what is the use of industrialization. At the later stage the economy will be in a chaos and government will not be able to implement any regulations. People are already opposing such practices. Because they are not ready, or you can say they dont know that it will be beneficial. In such case first Bottom should be developed and not the top.
If you read Nandan Nilekani's Imagining India, one gets a feeling that most changes in India today were brought about by common people from the masses rather than a top down reform from the top. (While top-down reform was done, it usually followed some courageous and pathbreaking demands from the masses). I guess the commenter on Atanu's blog is hence quite right in his theory.

Comments

  1. Nikhil, your reproduction of this comment is very useful and worth loking. It makes a paradigm shift to look between two approach of top to bottom and bottom to top. I personally believe that Any change is best when organic—rising from the bottom rather than imposed from the top—the odds of assimilation improve dramatically. There is mass sell of public property, land and companies to private enterprise in the name of development. This type of developmental policy is antithesis of real human advance. It is promoted both internally and externally as a way to help the poor. In reality social and monetary capital flows only in one direction. Large companies stake claim to people’s lands and resources, profiteering themselves, offering in return only a fraction of what they take and destroying carefully nurtured and ancient environment. The self less and visionary can only drive through top- bottom approach otherwise corporates don't see rural population as individuals but only as potential consumers.

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