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We Need A Push For ‘Make In Rural India’, But There Are Massive Hurdles

It is important to understand the factors that hinder investment in manufacturing in rural areas.

03/10/2017 8:38 AM IST | Updated 03/10/2017 8:38 AM IST
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Can India’s villages be home to increased industrial activity?

By Sanjiv Phansalkar*

Three years ago, Prime Minister Narendra Modi launched the Make in India campaign. The idea behind this was to make India a major manufacturing hub. It would achieve at least three things—cause a flow of investment into the country, lead to significant boost in exports, and absorb at least some of the skilled and educated people into the workforce. With fairly significant and consistent efforts in this direction, the Make in India strategy is yielding some results. Whether they are satisfactory or not is for the government to figure out.

To a large extent, the three objectives of Make in India are applicable with even a greater force to "Make in Rural India" as well. While formal definitions by puritanical economists will suggest that many of the newly set up Exclusive Economic Zones or even the older style industrial estates were indeed in rural India, clearly they are of little direct help to the rural poor. Such industrial locales and investments therein are more like extensions of nearby urban centres and do not directly lead to benefits to rural folk.

A significant portion of the Make in India initiative can be realised in rural areas through enterprises that have potential to benefit and provide employment to a large number of people.

Much of rural India suffers from a want of economic diversification and income increase. Agriculture is experiencing an onslaught of mechanisation and hence expansion of labour absorption in agriculture without significant change in product mix is unlikely. Even if it were likely, the demand for employment in agriculture is falling as survey after survey reveals that young people simply do not wish to join the workforce in agriculture.

With the unabated vagaries of weather, risks in agriculture do not seem to be reducing. Income risks too are huge, as indicated by wild variations in the prices of pulses and fortunes of pulse growers in recent years. Finally, if Make in Rural India fetches more income in rural areas, the money multiplier effect will trickle down the benefits for many more persons in that society. Thus a strong movement for Make in Rural India is needed.

Manufacturing in rural areas

It is important to understand the factors that hinder investment in manufacturing in rural areas. The advantages of locating any sort of manufacturing activity in rural India are in terms of reduced cost of land and perhaps cheaper labour. The other "advantages"—in reality enjoyed by the industry though its captains will hotly deny it—relate to unchecked effluent release and much laxity in enforcement of any other regulation.

The disadvantages can be in terms of particularly unreliable power supply, distance from centres where frequently needed services (cargo movement, repair teams, supply of parts and stores, etc.) are concentrated and the staff's reluctance to face the daily drudgery of travelling to and from the facility to their homes.

Hardcore industrial activities are unlikely to be initiated by urban entrepreneurs in rural areas to any significant extent unless some significant mediation introduces compatibility between rural lifestyles and urban industrial work demands. At the same time, it would appear that a fair range of industrial activities, particularly pertaining to supplying products and stores for agricultural operations on one hand and post-harvest processing of farm produce on the other can be conveniently located in rural areas. This may cover manufacture of feeds, sorting, grading and packing of seeds, primary and even secondary processing of horticultural produce, etc.

Primary products

A similar possibility can be envisaged for primary products. In fact there is nothing new in this—most sugar mills, a fair number of oil mills, marble-cutting units, brick kilns, etc., are located in rural areas since this makes sense both for the farmers and suppliers of other inputs as well as for the processors.

The lower order bureaucracy... tends to be stubborn, corrupt and often pliable at the hands of those who feel threatened by emergence of new enterprises.

When one begins exploring the extent of expansion of such industry and what new lines can be considered as relevant, one suddenly encounters a difficulty hitherto not encountered. This is in the nature of stranglehold of the local rural power structures and their unrepentant and rapacious rent-seeking behaviour. When one goes to understand the ownership of stone quarries or oil mills, cold storages or fertiliser mixing units, one often encounters the reality that they are established and run by well-entrenched local economic powers. The people involved enjoy all the celebrated advantages of caste, class and political power and hence experience little difficulty in ensuring that their fiat runs unchallenged.

But when farmer-producer companies of poor or, worse, Dalit, members try to start industrial activity of this nature, snags emerge and become life threatening for the nascent units. The local overlords and their minions swing into action, fearing that the new enterprises will lead to liberation of the oppressed from the shackles they impose.

Calculus of economic gain

I actually witnessed a situation when the local feudal lord in Mahakaushal's Wainganga command had tried his best to sabotage a canal bringing water because the irrigation would have set all his serfs free of his domination. This was despite the fact that his own farms would have received water as well! How the calculus of economic gain competes with raw social power is truly unfathomable to an outsider!

The lower order bureaucracy, which is really the cutting edge in regulating the units or supplying essential inputs like electricity to them, tends to be stubborn, corrupt and often pliable at the hands of those who feel threatened by emergence of new enterprises. It is possible that uninitiated urban entrepreneurs venturing into enterprises for which Make in Rural India is a sensible proposition may not be prepared to deal with these threats, or may not even understand their gravity.

If urban entrepreneurs not already aligned to the local power structures and farmer-producer companies face difficulties in starting enterprises in rural India, what would seem to be the choices then? Either the enterprises have got to be owned by the local overlords or they must as a first step learn how to manage them.

Does that seem fair or promising? Or, is it possible to trigger sufficiently strong economic incentives, which persuade the local power structures in their own interest to facilitate the new enterprises? This question needs further exploration and thought.

Sanjiv Phansalkar is associated closely with Transform Rural India Foundation. He was earlier a faculty member at the Institute of Rural Management Anand (IRMA). Phansalkar is a fellow of the Indian Institute of Management (IIM) Ahmedabad. Views are personal.

This article was first published on VillageSquare.in, a public-interest communications platform focused on rural India.

The opinions expressed in this post are the personal views of the author. They do not necessarily reflect the views of HuffPost India. Any omissions or errors are the author's and HuffPost India does not assume any liability or responsibility for them.

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