India Urbanising: A different Perspective (Part III)

Continued from Part II
Having said that India needs to extend the reach of urban amenities like roads, electricity, cooking gas, safe drinking water (and education and internet) to the countryside, there is one major cog missing in the wheel – the pull for the above amenities in rural India. The need for high quality infrastructure in cities gets created by higher productivity and resultant income levels, the same applies to villages as well.

In most western nations where villages too have a much better standard of living are those where people in villages have earnings comparable to their city counterparts. In the west the low population density necessitated high productivity in rural activities such as farming or animal husbandry. Thus as an outcome farms were mechanized and villages developed.

However, this is not true of a high population density country like India – even today employing 10 labourers in the farm is cheaper than buying a mere tractor. Farmland in India is extremely fragmented with the average farm size in India 3.3 acres [2] which makes mechanization even more difficult for the already poor farmer. Add to it the poor credit policies followed by Banks in rural India - upgrading one's farm is a nightmare for a common farmer in India.

Without improvements such a mechanization of agriculture the productivity of the average Indian rural household will not increase substantially, resulting in lower income for the community at large and thus creating a huge funding crunch for improving the rural infrastructure of rural India. Further, with years of experience with numerous “Gram Vikas Yojana” programs, we know that deliberate government funding cannot go a long way in improving this cycle unless the underlying need for such services is created in the rural sector.

There are many solutions to break this vicious cycle – most stemming from removing the underlying reasons for low productivity of rural India.

1. Corporatization of Agricultural sector: Experience in countries like Brazil has demonstrated that integrating fragmented farmland into large tracts of organized farming “mills” paves way for higher productivity. In the short run, such a move will definitely create political unease (or unrest) among the masses, but this will be an inevitable first step in unleashing ‘liberalization’ on the agricultural sector.
2. Forced Increase in wage levels: A recent study by The Economist revealed that Indian manufacturing sector was forced to automate itself because while labour was fundamentally cheap, tough inflexible labour laws in India made it an expensive proposition to maintain. Thus SME’s kept their labour requirements limited to bare minimum and grabbed every chance to automate and modernize (those who did not , like the textile mills of Bombay, perished with time). The same may happen to Indian agriculture – if labour becomes expensive, it may force the farmer to adopt modern agricultural practices of mechanized farming. This is happening in some parts of the country already where, thanks to programs like MG-NREGA, labour is becoming more expensive than can be afforded by cheap ‘manual farming’ methods.
3. Cash Crops: A silent revolution has swept several parts of the country already where specialized crops like soybean, sunflower and sugarcane have increased the rupee yield per hectare of the farm land. Surgarcane is a classic example because it has lead to unprecedented increase in standard of living in villages of Marathwada (Pune-Nasik- Aurangabad- Solapur belt) region on Maharashtra.
4. Food Processing: A dream of Dr. APJ Abdul Kalam, rural India needs more establishments like Sula Wines or Mapro factory (Mahabaleshwar) wherein food processing units absorb the local produce, enrich it and ready it to be sold at a price much higher than that of the raw food product. This would also serve the purpose of increasing the wage levels (point 2 above) without the government’s intervention. Labourers employed in food processing plants would also become a source of ‘regular income’ earners in rural households improving the local savings giving incentive for the banking sector to provide more services in rural hinterland (without requiring the RBI or MoF to push them into financial inclusion projects).

I find point 4 above the most suitable to (more than the current govts favourite baby NREGA) as it would induce all the other 3 gradually – increase in wage, incentive to move to cash crops which can be absorbed by the food processing industry, and highly productive farms (which can only result from organized large scale farming).

However, the biggest obstacle to setting up food processing industry is the archaic land ownership records in India and our land transfer laws. Land reforms – which would make establishing ownership of land and also sale of land for setting up food processing units – are the most urgent need for rural India to develop.

.Concluded. Read the whole series.