misconception about rural development

There has been widespread support for government measures for growth in rural economy so as to usher India into a broad inclusive growth rather than a narrow growth led by manufacturing and service sector. The problem becomes acute since even now we have 60% of the population living in rural part of our country.

The solution brandished by government agency and intellectual elite is creating/improving the rural infrastructure in terms of credit availability, roads etc so as to unlock the rural industry and steps towards reducing vulnerabilities under poverty. Both these argument are valid but we can see that they are basically inadequate in long term. The poverty alleviation program which is an attempt to reduce vulnerability does help the rural people in short term. These programs are rightly funded from taxes from affluent people under principles of just and fair in a civilized society. The investment in rural infrastructure are supposed to unlock the economy and get them on a steady growth path. On the face of it, infrastructure are facilitators of growth. And certainly we can accept externalities from more enterprenurial activities and better price discovery for agriculture products. But if the rural economy primarily dominated by agriculture and associated acctivities keeps on growing at a lower rate of 3-4%, there is not much scope of growth in rural income. Infrastructure growth in many studies have been found to be a fringe factor while increase in productivity is a critical factor towards growth. Indifference of sucessive government on this front speaks volume about why rural incomes have stagnated over the years.

Not enough credit availability and building infrastructure etc will help rural economy to grow until the core issues of agriculture productivity is addressed. The alternative is to introduce other productive activity like animal husbandry, industry, services etc to rural economy. Migration can be considered a choice but with underemployment in urban areas and lack of skills/knowledge among rural population acts as a natural deterrent in this area. Stimulation of an economy is a complex task and a half hearted effort without understanding the basic shortcomings can only make the situation worse off as the over credit availability have only increased the indebtedness and not has kickstarted the agricultural growth.