Devangshu Datta: The rural-urban gap

BEATING THE STREET

In 1950, less than 10 per cent of Indians lived in a city. Now over 27 per cent do and that's a likely underestimate. Large numbers retain "permanent addresses" in the boondocks while spending most of their time earning a living in cities.

India's total population was 35 crore in 1950 and it's over 100 crore now. So there's been a sustained drive towards urbanisation with over 25 crore people either moving into cities or living in rural communities that scaled up. Prevailing economic growth patterns also make it certain that more people will move into cities.

Not surprisingly, essential services haven't coped. Indian cities are chaotic messes with chronic shortages in water supply, public transport, roads, waste disposal systems, housing, power and all the other parts of the urban experience.

Given that, the "populist" posturing about rural development seems a little skewed. If the trend is towards urbanisation, why wouldn't the development focus be on urban centres? There are several reasons why this simplistic view doesn't hold up.

As third world trends go, Indian urbanisation has been on the low side. Over 65 per cent of the population still lives in rural or semi-rural areas.

Second, in pure electoral terms, a rural vote is worth more than an urban vote since urban constituencies have greater population pressures. Third, rural/semi-urban economic growth is higher as it's coming off a low base.

Fourth, unsatisfactory as it may be, urban development has far outsripped rural development. The rural-urban divide is stark. The Pradhan Mantri Gram Sadak Yojana road development programme will spend more (Rs 60,000 crore) on basic connections to rural communities than the National Highway Development Programme (NHDP) will on the combination of Golden Quadrilateral (Rs 27,000 crore), the NSEW corridors (Rs 27,000 crore) and the port-connectivity project (Rs 1,000 crore). That's one measure of the massive gap "" each km of NHDP costs far more than each km of the PMGSY.

In terms of telecom penetration, rural penetration is lower than two phones per 1,000 while urban penetration is around 20 per 1,000. It isn't even worth quoting statistics in terms of comparitive access to power, water, banking services "" the differences are so big.

That gap is almost certainly a major contributory factor to the innumerable Naxalite movements and insurgencies all over rural India. It's inconceivable that India will be able to maintain cohesion as a state over the next two decades without closing the rural-urban gap in essential infrastructure.

As the gap closes, rural per capita income growth will speed up sharply simply because the development is happening off a low base. A village which doesn't have power, phones and motorable roads sees exponential income growth when these basics are provided and trade opportunities open up.

India's FMCG marketers and two-wheeler manufacturers realised this a long time ago because their sales numbers had an inescapable logic. I wonder how many industries will figure this out in the next few years?

The only fly in the ointment is that the infrastructure is being largely built by government agencies or through government-awarded contracts. And governments aren't known for effective delivery.