The Hindu Business Line : Unleashing Little India’s natural enterprise

We need to liberate Little India by empowering the people and promoting more local governance. That is the only way to spread prosperity to larger sections of our population, says R. GOPALAKRISHNAN.

Rural folk are crying out for vocational training in business.

The pick-up of GDP growth in our country during the last 15 years has been truly remarkable; it has lifted about 250 million people from abject poverty. The renaissance of our economy has been driven by the deregulation of the organised sector and the liberation of the people in 1,200 larger cities (population over 50,000).

“Little India”, a term I will use to refer to the over 600,000 small towns and villages with a population less than 50,000, has not experienced the highs implied in campaigns such as ‘India Shining’ or ‘Incredible India@60’. The 800 million people of Little India are still in the clutches of a centralised and bureaucratic system.

I wish to emphasise three points:

Enterprise and decentralisation are two sides of the same coin. Whether in a company or a country, enterprise and innovation are promoted by decentralising authority and empowering people

The natural enterprise of large-town India was released by the liberalisation of the 1990s. However, Little India has benefited less.

Society in the small towns and villages has been self governing for a large part of history. The centralised form of governance adopted after independence has shackled the natural enterprise of the people in Little India.

Over 60 years, the nation has experimented with many approaches to spreading prosperity. We need better results. It is time to try a different intuitive and natural approach. We need to liberate Little India by empowering the people and promoting more local governance. That is the only way to spread prosperity to larger sections of our population because it will unleash the natural enterprise of people out there. We need an economic movement that starts in villages, not one that bypasses them.

GOVERNMENT-LESS CIVILISATION

The statesman, C. Rajagopalachari, wrote, “India had probably the largest number and very big time-lengths of intervals between one effective government and another. There have been a great many periods during which the people had neither central nor regional governments exercising effective authority. All these periods of what may be called a no-government condition could not possibly have been tided over but for the self-restraints imposed by our culture.” This gene of enterprise prospered for centuries under a government-less system in which small communities managed their interests locally. In terms of governance, India has for the large part been a multiplicity of village communities. Excluding five of the 25 centuries of recorded history, a centralised bureaucratic state in India was a rarity.

STUDIES BY TATA

Very recently, the Department of Economics and Statistics in Tata Services (DES) undertook a study on entrepreneurship in Little India. The findings are yet to be published, but I can quote a few salient features.

The aim was to understand the nature of entrepreneurship, and the barriers and triggers to enterprise in small places. Approximately, 1,200 small entrepreneurs were interviewed in and around 12 village clusters in the four regions of India.

The study suggests a model for sparking enterprise in small towns and villages. It has four drivers: Infrastructure (roads, electricity, water), Finance and Facilitation (loans, helpful officials), ‘Rural MBA’ (training on markets and basic commerce) and Social Capital (health, education, hope).

Two activities were found to dominate the enterprise — about 50 per cent are engaged in commercial farming and 20 per cent in Rural Non Farm Services (RNFS), a fast growing rural job generator that holds much promise.

The findings are interesting in five respects:

Panchayat leaders and local politicians, whom urban folks tend to trash, are seen as quite helpful in promoting enterprise.

Bank officials are also perceived as helpful. Admittedly this is a partial view because the banking system has rather limited reach. As per NSSO data, half the farming households do not access any credit, whether from institutional or non-institutional sources. Even among farmer borrowers, there is more recourse to non-institutional sources than the banking sector.

The people there are crying out for vocational training in business — a sort of ‘rural MBA’.

The perception is that the environment for enterprise has hardly changed! A plausible explanation for this paradox is that perhaps those funds and schemes do not quite reach those they are intended for.

There seems to be a robust self-confidence and common-sense about what it takes to be successful in enterprise.

Perhaps the folks in Little India will surprise the nation through their enterprise just as they have done in matters of voting and politics.

Rallis India conducted a survey among 1,200 villagers in 20 villages, each in six different states. To a question about the kind of activities already being undertaken by the panchayat, the top three responses were: Village infrastructure, resolution of disputes, help with water issues. This too suggests the desire and willingness on the part of Little India to do more things locally.

The Head of Community Services in the Tata Chemicals Rural Development Society (TCRDS) has documented her experiences in a paper.

One lesson is that the government can become a threat to entrepreneurs when they become successful — as in the case of a woman entrepreneur, who attracted the attention of the sales tax department. Another lesson is the role of society. In Gujarat, enterprise is perceived positively, but not so in Babrala, UP, where caste determines what can be done and by whom. A third lesson is the need for a facilitating information cell.

Tata BP Solar in Bangalore makes and markets solar panels. Apart from its green credentials, solar power in villages has three benefits — improve access to electricity, provide direct employment to install and maintain the panels, and to collect the electricity charges at a periodic frequency; last to generate indirect employment through small fabrication shops, outlets to sell solar powered household devices, storage, transport etc. Tata BP Solar estimates that the direct plus indirect employment potential could be about 700 per megawatt of solar power.

Of the over 200,000 MW needed in the country, even if only 5,000 MW were to come from solar power, the direct and indirect employment potential in Little India could be 3.5 million! This employment level is impressive when compared with the 13 million jobs (direct plus indirect) generated by the auto industry or the two million direct jobs by the IT and ITeS industry.

The people in the over 600,000 towns and villages of Little India need both the electricity and the jobs.

The reality is that markets for land, credit and agro-produce have to be encouraged to develop. Otherwise, as Hernando de Soto has written engagingly, people will never be empowered. That is why India must decentralise more and faster.

A thought-provoking paper has been written to explain why people elect the same leader despite his known proclivity to extract rent from the system. Especially where communities are divided by caste and religion, the fear that a new leader may come from a different cohort group restrains people from voting out ‘our own man.’

The Bombay Chamber has mooted a good idea. They have identified a completely new source of revenue, the raising of which they propose can be mandated to the panchayats, who are also well qualified to do so. In this way, there will not be any interference with any ongoing revenue raising or usage scheme.

The paper points out that the total land revenue of all states currently is Rs 2,295 crores. Bengal alone accounts for 32 per cent of this. If other states can raise revenue in line with Bengal, then the panchayat bodies could raise Rs 25,000 crore.

This money can be used for developing village level infrastructure and promoting enterprise in small places. The solution lies in releasing the enterprise of the people in Little India and empowering them. Whatever is to be done must be different and done with a sense of urgency.

AD Shroff was so frenetic a worker that his doctor once told him, “You are like a woman who wants to have a baby but cannot wait nine months!” That is the spirit of urgency we need.

Excerpts from the A. D. Shroff Memorial Lecture delivered recently in Mumbai.

(The author is Executive Director, Tata Sons Ltd.)

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