The Hindu Business Line : Inclusive without being altruistic

Unlike SEZs that are overloaded with capital and commercial experts but short on local content, PURA includes social development — mass transport, education, healthcare and housing — and multiple classes of services to cater to both rich and poor. This is where it has the edge, says P. V. INDIRESAN.

The previous article, which espoused the principle of Gandhigiri in economic development, has drawn flak from admirers of capital-led growth. Critics object to my suggestion that high-paid employees should share a part of their wealth with poorer workers. They fear that kind of milk-sop socialism will reverse the gains we have achieved, that our growth will slow down.

My appeal for including the poor in prosperity is based on wider considerations than economics. Few people are conscious of the fact we are increasing our wealth at the expense of security. Undoubtedly, India is much richer today than it was at the time of Independence. Even the poor are much better off: They are better fed, better educated, enjoy so much better healthcare that they live more than twice as long. On the other hand, family bonds have become weaker to reduce family security. Traditional economic linkages have faded away to reduce job security.

Above all, crime has proliferated. There are parts of the country where more murders are committed in one day than were committed in one year 60 years ago. About a third of the country is virtually under the sway of Naxalites. Few of our capitalists are alive to the danger large-scale rural disaffection poses.

Rural-urban disparity

Our poor are disillusioned not because they are getting poorer but because the rich are getting richer faster, because the rich-poor disparity is increasing. There are several reasons behind this but rural-urban disparity is the main one. That is why Naxalites are most powerful, and the government least effective, in the poorest rural areas.

It is true that our shift to capitalism has engineered rapid growth of the economy. However, that rapid growth has come at the expense of political stability and personal security. Basking in luxury, many of our rich are blind to growing disaffection among the poor. If they were wise, they would set apart a part of their new wealth for ensuring better security. There is no point in accumulating wealth if we cannot enjoy it in peace. That is why we need Inclusive Growth.

In this connection, rural-urban disparity in bank credit has reached alarming proportions. On an average, urban dwellers get about Rs 70,000 worth of bank credit but villagers get less than Rs 2500 — a ratio of more than 25 to one. One can understand disparity of two or even three to one. A disparity of 25 to one is mind-boggling. No doubt, there are attempts to raise agricultural credit but however generous that raise may be, it will never approach the levels of urban credit. Rural development based on agriculture alone will never match urban development.

Wrong question

We are asking how much more bank credit agriculture can absorb. That is the wrong question to ask; we should be asking instead how villages may be empowered to absorb more credit. We are asking what the minimum rural wage should be. We should be asking instead what minimum facilities poor villagers should have.

In allocating exceptionally large levels of credit to cities, we forget that money fetches much less in such cities as Bangalore (sorry, Bengaluru) than in a village some 30 km away. What wisdom is there to invest 25 times more capital in most expensive cities and invite at the same time more Naxal trouble in the bargain? Is that not unwise use of capital?

No doubt, the government is considering ways and means for increasing investment in the rural areas. Unfortunately, it is beset by marginal thinking. It asks by what percentage it can increase rural investment. It should ask instead how well it should match rural investment with the urban. No marginal increase in the prevailing Rs 2000-2500 per capita rural investment will take our villages to urban prosperity when cities are getting Rs 70,000 per capita, and metropolitan areas are commanding even more. Rural investment requires, deserves far, far more than marginal increases; it requires a new vision altogether.

Fortunately, we have in Dr Raman Singh, Chief Minister of Chattisgarh, one leader who appreciates the importance of balancing rural-urban investment.

Recently, he launched the first state-sponsored PURA project (inaugurated by the President, Mr A. P. J. Abdul Kalam, on November 7, 2006). The project links a collection of government land by a 40-km ring road and connects 22 villages.

Unlike the case with rural roads, Dr Raman Singh plans to make the ring road a four-lane highway at an estimated cost of Rs 160 crore. He has already obtained commitments for two hospitals including a 250-bed hospital with attached training centre for nurses and paramedical staff, as well as for two modern English medium schools. Two government buses have been introduced to serve the ring road and many more will come when private operators join.

Here is a vision out of the ordinary because whoever thinks of having expensive urban quality roads to link impoverished villages?

Here is an investment jump that is 20 times what is normal in rural areas. Yet, the idea is not quixotic tilting at windmills: This large investment of Rs 160 crore on the ring road will pay for itself if no more than 500 acres of adjacent land attracts modern business and urban residents.

Businesses and residents are bound to come in because they are guaranteed access to quality hospitals and schools with commercial expansion to follow.

Dovetailing services

This model of rural development dovetails transport, education and health services, with each one of them as good as the best available in cities. This dovetailing of quality services (and not piecemeal, low quality) will attract human capital, spur demand and set up a virtuous cycle. Thus, PURA will expand on its own steam.

Special Economic Zones (SEZ) are concerned only about commercial issues such as relaxed labour laws, tax concessions and the like. They are classical instances of top-down planning.

No wonder, they are mired in controversy. In contrast, Chattisgarh's PURA has been planned after months of discussions with village leaders who have all given their consent in writing without coercion and with much enthusiasm.

In the 16th century, the Spanish Armada, composed of the largest fleet of warships ever assembled, invaded England and was routed. History books explain that the much larger Spanish Armada was defeated by the much smaller English ships because the Armada was loaded with soldiers who were of no use at sea where as the English ships were manned by skilled sailors.

Something similar is happening at the SEZs — overloaded with capital and commercial experts but short of local content. That is why they run the risk of incurring the same fate as the Spanish Armada. On the other hand, PURA is inclusive without being altruistic.

PURA is inclusive in two senses: It includes social development — mass transport, education, healthcare and housing; it organises such amenities the same way railways run passenger services: With multiple class of services to cater to both rich and poor alike. The way they have been planned, SEZs are profitable in the short term but not necessarily in the long term. But they have many supporters while PURA has only two champions - President Kalam, from the beginning, and now the Chief Minister of Chattisgarh. Such is life!

(The author is a former Director of IIT Madras. Response may be sent to: indiresan@gmail.com)

(This is 187th in the Vision 2020 series. The previous article was published on October 30.)