Poor rural India? It's a richer place

Posted in India | 19-Oct-05 | Author: Anand Giridharadas| Source: International Herald Tribune

HASANGARH, India The chasm between India's flourishing cities and bleak rural hinterland is narrowing.

Spread across 650,000 villages, with an average population of 1,100, rural villagers were long imagined by city dwellers as primitive, impoverished and irrelevant, something to drive past on the way to something else.

That is no longer the case.

A new prosperity is sprouting in rural India, with tens of millions entering the pressure-cooker-and-television-owning class and tens of thousands becoming sippers of Scotch, owners of premium tractors and drivers of multiple sedans.

The opening of this new frontier of consumer demand from 700 million people could tip India's role in the global economy from seller to buyer, from a vendor of outsourced skills to a source of consumers for the world's wares. Multinational corporations, from Coca-Cola to Nokia, appear increasingly keen to understand Indian villagers.

At the extreme of the trend are the "crorepatis," Hindi for those making the equivalent of $220,000 or more a year. Here in the northern state of Haryana, rural dwellers are now nearly twice as likely to be crorepatis as city dwellers in Bangalore, the high-technology hub, according to the National Council for Applied Economic Research, the leading collector of data on rural India.

It may be a trickle, but India's urban prosperity is flowing to the countryside. And well-to-do villages like Hasangarh are early testing grounds of whether the benefits of India's economic makeover and opening to the world will flow to its villagers, many of them living in its very poorest rural nooks.

The transformation of such villages will also add fuel to the debate over democracy's influence on economic development. India has been faulted for growing more lethargically than China, in part because of its democracy.

But the new rural prosperity suggests that the high cost of democracy also has a hidden benefit. By compelling each politician to deliver results to his own narrow constituency, democracy spreads economic change more thinly. But that in turn broadens the consensus in favor of change, perhaps making liberalization more sustainable in India than in China, said Yasheng Huang, a Chinese-born scholar at the Massachusetts Institute of Technology and an expert on the two countries.

"In China in the 1990s, you have a combination of a leadership who had an urban bias and of an authoritarian system that suppressed the voices of the poor, and the end result was the rising rural-urban disparity and the high level of social tensions," Huang said in an e-mail interview.

"If you have an urban bias, then it is better to have a democracy because then the voters can rise up to correct that bias, especially, as in India, where poor people actively vote."

In China, a widening income gap between town and country is worrying officials. But in India, the gap is narrowing. In 1990, for every $100 earned by an Indian villager, an urbanite made $82 more. Today, the difference has dropped to $56.

Yet the new rural riches are far from ending poverty. In India, 390 million people still live on $1 a day or less.

What is changing is the nature of the rich-poor divide. That divide was once synonymous with the urban-rural split. The only way to get rich was to live in town, and to reside in the country was to be bound to interminable poverty.

But increasingly, the rural economy is a microcosm of the national economy, with its own rich and poor. The rural rich are 1,000 times as likely as the rural poor to own a motorcycle, 100 times as likely to own a color television and 25 times as likely to own a pressure cooker, according to a survey of 96,000 rural households by the research council.

That distribution of wealth may or may not be equitable. But in creating the possibility of making it in rural India itself, the new rural prosperity is transforming rural India's image from economic nonentity to emerging market within the emerging market.

India's 700 million villagers now account for the majority of consumer spending in the country, more than $100 billion a year. Millions step into consumerism each year, graduating from the economics of necessity to the economics of gratification, buying themselves motorcycles, televisions, transistor radios and pressure cookers.

Diverse forces are fueling the trend. The government has invested billions of dollars in development, including road building and rural electrification, and has forced banks to lend to farmers. Hearty monsoons have fattened farmers' profits. Widening educational access has helped farmers' children to get city jobs and send money home.

With the private sector booming, industry and services have overtaken farming to account for 54 percent of rural income.

"Basically, what we are observing is the impact of liberalization, which started in 1992," said Rajesh Shukla, an economist and senior fellow at the research council. "The impact on the smaller towns and rural areas is happening now."

Hasangarh belongs to a new India: neither rural nor urban but something in between. The village, a two-hour drive from New Delhi, is one such island in a rural sea, surrounded on all sides by swaying grass, wooden buffalo carts and scrawny farmers.

But upon arriving, there is a feeling of being in a village without villagers. The roads are made of mud, and the residents still sit on their doorsteps, biding their time. But here is a village where $20,000 dowries are paid not in cattle but in televisions and sedans. Here is a village where residents one generation removed from illiteracy now belong to that worldwide class of people who watch global news events as they unfold.

Here, too, is a village where the rural riches are creating winners and losers.

Many here have been hurt by the privatization of bloated state-owned enterprises and the opening of the agricultural industry to global competition. Part-time and freelance work is ever more common, replacing respectable salaried jobs. Here, and across India, most of the workers are farmers or landless laborers. For India's riches to extend to them, economists say, will require a revolution in farm productivity; drastic improvements in infrastructure like roads, irrigation and electricity; and the proliferation of labor-intensive factories to absorb surplus labor from the farms. None seems an immediate likelihood.

But also in this village, as is increasingly true nationwide, being rural is no longer a life sentence of poverty. For rich and middling farmers alike, education is within closer reach.

Ten years ago, the area had three schools; it now has five. And ever more students travel to small towns or even Delhi to pursue higher education after high school.

That widening access to education assists what is perhaps the pivotal shift in the economics of rural households: diversification.

Farmers verging on retirement, sensing the decline of their own profession, are treating their children like stocks in a portfolio, sending them out into different vocations so as to minimize the risk of any one collapsing.

Across India, the shift is palpable. Around one-fifth of village households now generate their primary income from a salaried job or a small business like a village store, not from farming. And it is these new jobs that are driving rural demand, with that one-fifth segment accounting for 60 percent of rural purchases of refrigerators, for example.

Puran Mal Verma, 58, and his cousin Jaiprakash, 52, illustrate the crossroads at which village India stands. They both grew up here, in a small compound of modest homes, where buffaloes roam and children mix farm work and play.

Verma educated himself and now commutes to his job as a librarian at the research council. Jaiprakash, who had limited schooling, spends his time funneling long blades of grass through a cutting machine, which grinds them into tiny fragments for feeding to buffalo. He, too, would have liked to find city work, but he suffered a triple deficit.

"Shortage of knowledge, shortage of money and shortage of education," he said, smiling serenely.

The cousins' divergent paths seem likely to widen in the future.

"My wife wants my children to go to private schools and all that," Verma said in English, which his cousin does not understand.

"I can afford it," Verma said. "But it is difficult for him."

Some analysts, however, while welcoming the growing rural prosperity, say that the government still needs to do more to address the disparity between town and country.

"There is much more hope for the future than ever before" in rural India, said Pradeep Kashyap, a marketing expert in Delhi who heads MART, the country's leading rural marketing consultancy.

But he said much of the new rural wealth was the result of a trickle-down effect from the cities, rather than a bottom-up agricultural revolution, which he said was the only sustainable way to put most Indians to productive work.

"Seventy-five percent of your population in rural India has not been addressed," Kashyap said. "Unless you do that, the huge tail will be left behind. The government has to create a continuum between urban and rural."