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P. V. Indiresan

Rural transformation needs a trigger in the form of investment by organised business to create high paid employment. Influx of families with large disposable incomes induces a major shift in consumer demand that, given favourable conditions, induces rapid development of the village. P. V. Indiresan on how private industry can transform villages, and at the same time, become richer the way Neville Shute's heroine Jean becomes in A Town Like Alice?

THE previous article postulated that rural development reaches its pinnacle when the professional middle-class returns to the village and, thereby, reverses rural-urban migration. It also commended a story of rural development described by Neville Shute in his novel A Town Like Alice. In that story, the heroine, Jean, goes to a remote Australian village, and uses her contacts to manufacture and export high-quality, world-class shoes to London. That was her first step.

At that stage, Jean finds that her employees, to whom she is able to pay substantially high wages, have money to spend, but nowhere to do so, unless they go to the nearest town called Alice — a hundred miles away! Therefore, as a second step, she sets up a shop for her girls to buy locally what they need. That secondary business expands from one activity to another until she organises a large variety of services from bakers to hairdressers to waitresses. That way, she hauls back virtually all of the wages she had paid her employees. She also multiplies employment.

With so many new jobs created within the village, young persons who were earlier migrating to the town Alice in search of jobs (and excitement) started to return. Her village becomes even more attractive than the once much admired town, Alice. Why should we not try for a similar transformation and induce our urban migrants too to return to their roots?

We should be able to do so if we draw one important lesson from the story — that rural transformation needs two steps: One, production of world-class goods for the export market to create high-paid jobs with wages no less than in the organised sector of the cities; two, establishment of a variety of local services that absorbs as much of the increased wages as possible. This roadmap for rural transformation is entirely different from the current rural development policy in several crucial features: One, the rural development schemes add low-paid jobs with marginal wages only, not high-paid ones. Two, the products are meant mainly for local consumption, not for the more lucrative world market. Three, there is no attempt to expand the service sector, nor follow up the initial inputs with employment multiplying schemes.

Then, we can postulate a Rural Development Index (RDI) on the lines of the Human Development Index that the UNDP uses to scale national economies. The first factor in RDI should be the proportion of per capita export income of the village to the national average. That will indicate the economic quality of the village. The proportion of non-farm employment to the total could be used as a second factor. That will measure the level of economic development. As our villages are often as congested as slums, we need a measure to indicate physical quality too. Hence, as a third measure, we may consider the proportion of open space within the built-up area of the village. The average of these three proportions would be the RDI, and a useful indicator of how well the rural area is developed. These three components of RDI show also a roadmap for rural transformation.

How can private industry transform villages, and at the same time, become richer the way the heroine Jean becomes in A Town Like Alice? Drawing lessons from that story, we may expect rural transformation to become a gold mine when entrepreneurs organise

(a) rural transformation as a business and not as a charity, and

(b) induct high-paid jobs (and, hence, high technology) the same way they do in cities. In addition, entrepreneurs should take the precaution of creating a high quality physical ambience, which it is impossible to do in cities, and which is rarely present in Indian villages.

This roadmap leads to a dilemma: Which should come first — return of high-paid specialists who can support wide-ranging services, or a wide range of amenities that will attract well-paid specialists? In the story, the heroine Jean was the expert who broke the ice. She did so because she was in love with a farmer in the village. She moved in first, and the rest followed.

Pilani town too was transformed in a like manner for sentimental reasons from an inhospitable village in the Rajasthan desert to a national intellectual centre. G. D. Birla introduced a couple of world-class scientific institutions in that remote desert village merely because it was his birthplace. Even though Birla would not allow Pilani full scope to expand (he would not allow any industry for fear of despoiling the habitat, and the nearest railway station is 25 km away), Pilani has now become a prosperous town. That is quite an achievement because Pilani has no natural advantages whatever. If Pilani could be transformed the way it has been, any other village can be. All that is required is a seed in the form of a world-class institution.

However, in its formative years lasting a couple of decades, Pilani was sustained by the Birlas who had deep pockets and deeper sentiments for the village. Few entrepreneurs would be prepared to emulate them, and nurture a village for long years. That is why the Pilani experiment has not been repeated although quite a few other rich business families originate for remote villages. We need a more practical, and a less sentimental model from rural transformation.

The Pilani (and A Town Like Alice) process of development follows the "Unbalanced Growth" model of Development Economists. In this case, development is first triggered by an exogenous supply-push in one sector (the induction of high quality experts like the heroine Jean, or world-class academics and researchers in Pilani). Further development follows through a demand-pull created by the large incomes that the new jobs created, and the services the high-income group demanded. This two-step system is like serial processing in computers. Serial processing is inherently slower (though simpler) than parallel processing. "Balanced Growth" is the equivalent of parallel processing in Development Economics. Balanced Growth requires that all sectors come up in a synchronised manner. It is fast but requires careful orchestration.

In Balanced Growth, along with the induction of world-class business or institutions, world-class amenities too are established simultaneously. Bungalows, round-the-clock water supply, telecommunications, stable power, schools, medical services, recreation facilities, transport links, waste disposal, shopping malls and the like that experts demand are all introduced in parallel with a new export business.

Few entrepreneurs would care to try this method either, mainly because these extra amenities lie outside the "core competence" of exporters. Hence, the requirement of such extensive amenities as a precursor of development is normally considered an impediment. On the other hand, demands for so many amenities can also be seen as a development opportunity for further growth and employment multiplication. It is all in the mind whether the bottle is half-full or -empty, whether the door is half-closed, or -open. Balanced Development needs more than a sentimental patron; it needs in addition a good organiser who will coordinate and orchestrate entrepreneurs, government agencies, and the local population too. Normally, such coordination is the task of the government. Earlier, for ideological reasons, the socialist politicians refused to make use of the talents of entrepreneurs. These days, the Government has flipped over, and wants to leave everything to the discretion of financial adventurers. Neither extreme works. Rural transformation needs thrust from both. Further, no progress can be expected without the cooperation of the local population.

As a rule, rural transformation needs a trigger in the form of investment by organised business to create high paid employment. (In the West, inflow of the upper middle-class disaffected with the congestion in large cities was the trigger.) Influx of such families with large disposable incomes induces a major shift in consumer demand that, given favourable conditions, induces rapid development of the village. Minor inputs, the type the Indian Government favours, have never transformed any village in the past 50 years in the sense they have reversed rural-urban migration. Only large industrial or commercial investments can do so.

A trigger alone is not enough for rapid transformation. A systematic programme of employment multiplication that meets the new demands so created is equally necessary. In other words, as much of the disposable income as possible should be spent within the rural area; every care should be taken to prevent leakage of that extra disposable income to cities.

Few people will disagree with the idea of reversal of rural-urban migration. However, fewer people care to work through the issue or make any effort to engineer such a reversal. For instance, it is not logical to expect rural-urban migration to reverse so long as villages are starved of investment. Yet, few people will agree to invest in rural areas as much as they do in cities. That is the rub. Mental transformation has to precede rural transformation.

Assuming some businessmen and some officials will agree to change their attitudes, and agree to invest in villages the same way they do in cities, how best can they transform villages?

(To be continued)

(The author is former Director, IIT Madras. Response may be sent to indiresan@bol.net.in)

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