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Columns - Vision 2020


PURA: Emulating the Silicon Valley

P. V. Indiresan

Silicon Valley entrepreneurs did not locate their businesses in cities but in villages. They used the higher purchasing power of money in the rural areas as a form of capital. Indian entrepreneurs do not locate their businesses in the rural areas the way their American counterparts did. So far, they may have been justified. But a change in their mindset is necessary to make them realise that PURA gives then an option to emulate the Americans, says P. V. Indiresan.

PURA (Providing Urban-services in Rural Areas), which has been given pride of place by the President, Mr A. P. J. Abdul Kalam, in his Vision 2020, has got a new accolade: It has entered the seminar circuit. Serious professionals have also started writing about it in journals. We may now expect a cross-fertilisation of minds, and hopefully a more rounded and a better formulation of the scheme.

PURA is based on concepts that differ radically from the conventional wisdom on rural development, concepts so very different that they require a radical change in the mindset. Hence, we should be prepared for hostility too — not necessarily out of pique but because of sincere differences of opinion. Some likely points of contention are:

  • Replacing agriculture by connectivity as the Driving Force of rural development: The share of agriculture in the India's GNP has already dwindled to 25 per cent and if current trends continue, it will be 10 per cent or less by 2020.

    A dwindling element of the economy cannot create enough employment to absorb the expanding workforce; it cannot be the Driving Force for future prosperity. Hence, in the place of agriculture, PURA opts for five different types of connectivity, physical (roads and transport), commercial (markets, banks, storage), societal (municipal, recreation, healthcare), knowledge (education, vocation training) and electronic (Internet, computers, telecommunications).

    There is some acceptance that connectivity is important but many would be unhappy to see connectivity replace agriculture as the prime Driving Force of rural development.

  • Job creation should be concentrated in industry and services and farm employment should decrease: There are frequent reports of farmers committing suicide. By Indian standards, most of those who are driven to such desperate measures are not poor; they have substantial land holdings. Even then they are unable to cope with crop failure or collapse of prices due to bumper harvests.

    Because the business of agriculture is so vulnerable, it cannot sustain existing employment even. As a rule, employment in agriculture decreases in inverse proportion to per capita income. Hence, as is the case in developed countries, as much as 80-90 per cent of rural employment will have to be in non-agricultural activities. Accepting the fact that ownership of land is no guarantor of economic security (let alone prosperity), that the concept "land-to-the-tiller is outdated, and that rural employment should concentrate on non-farm activity, requires a radical change in mindset that is not easy to come by.

  • Villages deserve high-cost advanced technology: Conventional wisdom states that because rural areas are poor in money, rural technology should be cheap. It is also the belief that technology should also be simple to match the low skill levels of the rural population. That is like saying villagers should be given flutes to play with because they are cheap and simple to make and only city dwellers should have CDs because they cost a lot. There is confusion here between devices that are simple to make and those that are simple to use.

    Flutes are simple to make but difficult to play; CDs are difficult to make but simple to use. Hence, the simple flute should be reserved for the highly skilled and the expensive CD for ordinary people. That is, should we not give rural folk a technology that compensates their absence of skill rather than one that parallels their poverty?

    PURA asks that villagers be given the best possible technology and not be palmed off with substandard ones. The criterion is not how cheap the technology is but how profitable it will be. The acceptance that rural areas should not be palmed off by sub-standard technology just because it is cheap requires a change in mindset, which too is difficult to find.

  • Rural areas deserve the same per capita investment as cities do: The Centre has sanctioned Rs 12,690 crore to implement PURA in 4,230 village clusters located in the most backward districts of the country. It would appear that the Centre has been generous. Such admirers forget that the sum budgeted is no more than what Delhi (with 50 times smaller population) is spending on its Metro alone.

    PURA suggests that, at least as an experiment, select rural areas be funded at the same per capita rate as the rest of the country. Then only we can check whether or not PURA will offer as good returns on investment as cities do. Experts justify paltry allocations for rural development on the ground the fiscal deficit is already excessive and hence, the government cannot subsidise any more.

    PURA does not ask for extra grants; it seeks for-profit investment. It postulates that rural development can be made a profitable commercial proposition. Here is the fourth change in the mindset: Neither government officials, nor NGOs, let alone private investors, buy the idea that rural development can be made commercially profitable.

  • Rural funds are for investment not for consumption: Politicians treat funds granted for rural development as chicken to be eaten, not to be nurtured to become hens that lay eggs. It is not uncommon for rural funds to be siphoned off to such an extent that next to no permanent development results. PURA suggests a different way for the local MLA to get rich: MLAs could use their constituency development funds to support bus services on the ring road, and derive as dividend the increases that occur in real estate values that will result on either side of the ring road.

    That is, the choice is between siphoning off the development fund immediately, or to invest the same to make substantial profits later on. PURA will succeed when MLAs agree to change the way they exploit the funds at their disposal.

  • Rural development should be privatised: As usual, the Centre has made PURA a grant-in-aid scheme to be operated by local officials. PURA should be operated differently: The Centre should provide matching grants only, matching the funds generated locally and provided by private investors.

    In that case, local investors accept substantial financial risk. In return, they may be entrusted with the responsibility of managing the project, or PURA may be operated as an autonomous mission under a full-time official. Unfortunately, local government officials will not easily give up the hegemony they have been enjoying all these years. Until, administrators agree to changes in management style, PURA may not take-off.

  • Rural development is Corporate Social Responsibility: MNCs outsource their business tens of thousands miles away in remote countries. Many of our businessmen are beneficiaries of that policy of outsourcing. Yet, they do not practice outsourcing themselves; they will not move any of their own operations even 30-40 km to rural areas. "Progressive" firms accept that they bear Corporate Social Responsibility (CSR) but few are willing to consider that choice of a healthy location too is a form of CSR. They prefer to pay extortionate rents in crowded cities and force their employees suffocate in slums rather than shift to rural areas and exploit the higher purchasing power of money that villages offer.

    This is the choice: Pay high rents (in money, in pollution, in social and psychological costs) in congested cities; waste time every day getting stuck in traffic. Alternatively, pay low rents and invest resultant savings in a better habitat for themselves and for employees. Silicon Valley entrepreneurs did not locate their businesses in such cities as Bangalore and Hyderabad but in villages.

    They used the higher purchasing power of money in the rural areas as a form of capital. Our businessmen do not locate their businesses in the rural areas the way their American counterparts did. So far, they may have had valid reasons to be different. Yet, only a change in their mindset will make them realise that PURA gives then an option to emulate the Americans.

    PURA can succeed only with the help of NGOs. Most NGOs believe that it is the duty of the rich to buy rural handicrafts. On the other hand, it should be the duty of villagers to produce what customers want: NGOs too should change in their mindset — work for the market, not demand goodwill.

    The essence of PURA is change, a change from the prevailing cynicism that rural development can be sustained only by charity. In parallel, urban attitudes too, that urban slums are inevitable, rural-urban migration is unstoppable, should also be given up. PURA needs a vision to realise that urban amenities do not need congested, dirty cities.

    (The author is former Director, IIT Madras. Response may be sent to indresan@vsnl.com)

    (This is 122nd in the Vision 2020 series. The previous article was published on April 19.)

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