How economic reforms of 1991 focussed on urban centres at the cost of rural India

The foundation for liberalisation, privatisation and globalisation (LPG) was put in place 30 years ago in July 1991, and this brought in muc...

The foundation for liberalisation, privatisation and globalisation (LPG) was put in place 30 years ago in July 1991, and this brought in much-needed resilience and vibrancy in the Indian economy. It spurred not only the inflow of foreign direct investment (FDI) but also improved the ease of doing business as the cumbersome license culture was done away with. In hindsight, however, liberalisation had caused a setback to industries in rural and backward areas of the country.

Pre-liberalisation, industries used to get a lot of incentives and concessions if these were located in rural and industrially deprived areas. These enabling measures were withdrawn in the wake of the economic reforms. As a result, industries were shifted from rural to urban areas, preferably in the vicinity of developed industrial cities, which adversely impacted the industrial growth in rural or backward regions of the country in the last 30 years.

There was a time in the 1970s when leading players like JCT, Hawkins and Mahavir Spinning Mills had invested heavily in Hoshiarpur, the most backward area of Punjab, because of special incentives and concessions offered by the Central and state governments. In states like Bihar and Uttar Pradesh, where a chunk of low-income group people live, there was a wide net of cottage industries, mostly engaged in textiles and handlooms. A large number of people were gainfully engaged. In due course of time, most of them got closed as they could not withstand the competition from bigger players, which forayed into rural markets with a bang.

In the changed scenario, there are many incentives and concessions to develop industrial clusters and corridors but nothing for an industrialist if she desires to set up a unit in far-flung areas.

Era of new normal

The new normal, a significant outcome of the COVID-19 pandemic, has reinforced the need to reorient our strategies for employment generation. Migration and reverse migration have left little scope for any doubt about the fact that India as an economy must generate gainful opportunities in rural areas at a large scale to accommodate local skilled and semi-skilled workforce, marginal farmers and farm labourers.

Evenly distributed micro-level units, which can produce solopreneurs, and micro-enterprises have to be created and supported in rural areas. For instance, processing and packaging of vegetables for sale in urban malls can be a micro-enterprise that may not need high capital investment but will be labour intensive at the block and subdivision levels in rural and backward areas.

Too little to attract investment

In view of the pandemic, the Central government has introduced production-linked incentive (PLI) schemes of Rs 1.97 lakh crore. It is unlikely that big or medium players will venture into rural and backward regions with investments without long-term sustainable incentives. The Union government has codified 29 Central labour laws into four codes but none of these policies is sufficient to attract industrial investment in the hinterland.

The idea of Atmanirbhar Bharat, which is so close to Prime Minister Narendra Modi’s heart, has to be aligned with the need to industrialise rural areas for which special incentives to investors must be extended. Without empowering rural economies and local communities, sustainable self-reliance will remain an ever-elusive proposition.

Agriculture has its limitations

No doubt, Indian agriculture is the mainstay for the majority of the rural populace but farming has its own limitations. It cannot ensure optimum utilisation of human resources without supplementing agriculture with industrial opportunities. Even after 74 years of Independence, we have not been able to set food processing industries at sub-divisional and block level.

Attracting investments in rural and backward areas through special incentives will give a boost to local economies and to the earnings of small farmers and farm labourers, who can earn Rs 12,000 to Rs 15,000 per month easily by working for 8 hours in flexible shifts in nearby factories. It will also lessen the growing burden on agriculture. By generating jobs for the rural population comprising marginal farmers and farm labourers through appropriate industrial pursuits in backward areas, it will be ‘Sabka Saath, Sabka Vikas’ given that 70 percent of the country’s population still resides in rural areas.

Prolonged lopsided development a bad omen

It is not good for the nation to allow lopsided economic development. It has its own serious repercussions. If we fail to ensure holistic development, we will be accused of inefficiencies in handling human resources. Today there is a huge exodus of youth and others from Punjab, Haryana and other states to Canada, Australia and the Middle East where they do all sorts of jobs to sustain themselves. Farming is no longer holding them back because they know well that they cannot be dependent on limited income from agriculture.

Younger generations are too disenchanted to adopt farming. They have some opportunities in urban areas but they do not earn to save much. Earnings and expenses go side by side. If a village youth earns Rs 12,000 in a nearby factory, it will amount to earning not less than Rs 20,000 to Rs 22,000 in a city where he will have to spend a fair share of his earnings on food, lodging and travel.

The way forward

There is a pressing need to revisit our strategies at various levels—right from the ease of doing business at the district level to restructuring the credit and legal framework to recognise, create, and enable rural entrepreneurs. Our land usage laws are still structured around recognising enterprises in industrial or commercial areas, and not in rural and backward areas. This needs to be changed. A micro-enterprise in a village or agricultural area should not be forced to go for land usage conversion. Rural entrepreneurs will create jobs in rural areas and need to be recognized by banks, non-bank financial institutions or NBFCs and National Bank for Agriculture and Rural Development (NABARD).

Creating job opportunities in rural neighbourhoods for locals will not only check unnecessary migration but will also make rural life resilient as dreamt by Father of the Nation Mahatma Gandhi. The prevention of migration from rural to urban areas will remain wishful thinking if job opportunities are not provided to small, marginal farmers and farm labourers in areas close to their native places. Time is running out for a positive policy and framework approach to promote industrial investments in rural and backward areas to create sustainable, gainful jobs for 70 percent of the country’s population.

The views expressed in this article are those of the author and do not represent the stand of this publication.

The author is Vice-Chairman, Punjab State Planning Board; Vice-Chairman, Sonalika Group; Chairman-ASSOCHAM (Northern Council).

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India World News: How economic reforms of 1991 focussed on urban centres at the cost of rural India
How economic reforms of 1991 focussed on urban centres at the cost of rural India
India World News
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