Paper IV (B) agricultural econjomics



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PAPER IV (B)

AGRICULTURAL ECONJOMICS

BLOCK 2-ECONOMICS OF RURAL INFRASTRUCTURE AND RURAL LABOUR MARKET

Unit 1 Rural infrastructure of India
Unit 2 Rural labour market in India

BLOCK 2 ECONOMICS OF RURAL INFRASTRUCTURE AND RURAL LABOUR MARKET
This block comprises of two units. Unit 1 deals with the rural infrastructure of India. An overview to rural infrastructure in India was discussed followed by use of resources – land, water and energy. Rural transportation and communication will remain the other important area of concern. Rural banking in India; Rural electrification; Rural social infrastructure; Land tenures and farming systems; Land reforms in India and status of marginal and small farmers in India are some other areas of discussion of this unit.
Unit 2 highlights the rural labor market in India. An overview to rural labor in India will be given and labour supply in India will be discussed in detail. Agricultural wages and gender differences will be revealed and non agricultural rural employment will finally be discussed with the help of suitable examples.

UNIT 1

RURAL INFRASTRUCTURE OF INDIA


Objectives

After studying this unit you should be able to:

  • Know the rural infrastructure of India

  • Understand the use of resources in rural areas

  • Analyze the rural transportation, communication, rural electrification and rural banking systems and initiatives

  • Have the knowledge social infrastructure in rural areas

  • Discuss the land tenures and farming systems in India

  • Explain the land reforms and status of marginal and small farmers in India


Structure
1.1 Introduction

1.2 Rural infrastructure in India – an overview

1.3 Use of resources – land, water and energy

1.4 Rural transportation and communication

1.5 Rural banking in India

1.6 Rural electrification

1.7 Rural social infrastructure

1.8 Land tenures and farming systems

1.9 Land reforms in India

1.10 Status of marginal and small farmers in India

1.11 Summary

1.12 Further readings


1.1 Introduction
Unlike in urban areas, the rural scene is characterized by scattered populations, making conventional networks too expensive and inefficient to be practical. In addition, the slower growth of the agricultural sector in recent times is in part due to inadequate infrastructure. Rising income of rural and urban areas would result in diversified diet patterns and hence a diversified agricultural production pattern as well. This diversification would generate demand for ancillary activities and for completing the supply chain from farm to markets. This natural progression leading to acceleration in economic growth is bound to be constrained unless there is adequate investment in rural infrastructure.
It is however a matter of great concern that despite the critical role of rural infrastructure in development and poverty reduction, the progress in the provision of rural infrastructure in the country has been generally tardy, although in certain sectors some significant progress has been observed. Also considerable rural-urban differentials in the levels of infrastructure are indicated with rural infrastructure way behind the urban. Some idea about it can be gained from the Census data, which provides details about access to water supply and sanitation, electricity, and roads in rural and urban areas. It may however be pointed out that data for various Censuses are not always comparable. Sometimes the unit is a household at another time it is village/habitation.
1.2 RURAL INFRASTRUCTURE IN INDIA – AN OVERVIEW
According to the 2001 Census, while nearly 69 percent of urban households had access to tap water, this percentage for the rural households was a trivial 24 percent. The 1991 Census data reveals that only 18 percent of the villages had access to tap water. As far as access to sanitation facilities is concerned, while over the period 1991-2001, access to some kind of toilet to rural households improved from around 10 percent to nearly 20 percent, the rural-urban differentials remained large. Almost 75 percent of the urban households had some access to toilets in 2001 compared to 21 percent for the rural. In regard to drainage facilities, while nearly 66 percent of urban households had either open or closed drainage in 2001, this percentage for the rural households was only 22 percent. As far as road connectivity is concerned, as per 2001 Census 39.2 percent of the habitations had remained unconnected compared to nearly 37 percent villages having an approach road in 1991. Also, as many as 62.5 percent of the smaller villages with population less than 1000 were unconnected by approach roads, indicating size bias.
The situation is no better even today and we must also point out that the mere access does not reveal the quality of infrastructure or services emanating from such infrastructure. This is true even for such services as drinking water supply, where quality of water that is supplied is often not taken into account when we review access to drinking water. Almost nine-tenths of households are without their own telephones, although 85 per cent of villages have at least one village public telephone. A good half do not have domestic power connections, and even the connected households are without power because of outages for almost 17 hours a day in monsoon and 13 hours a day in other months. Half of all people living in habitations away from a main village do not have access to all-weather roads.
The quality and quantity of drinking water actually available is often low because of poor maintenance. It is this point about operation and maintenance of rural infrastructure that needs to be stressed in the context of developing sustainable infrastructure. This dismal state of rural infrastructure has hardly shown any improvement despite economic reforms initiated in 1991, thus depriving the rural communities of opportunities that a well-developed infrastructure could offer. Most efforts to extend rural infrastructure have been severely restricted by a shortage of funds. According to the estimates made in the Rural Infrastructure Report of NCAER, it would require a total investment of over Rs 158,313 crore (at 2002-03 prices) for new asset creation which, in fact, represents a small proportion of the total investment needed. In the telecom and power sectors, the investments required for full coverage are estimated at Rs 92,690 crore and Rs 55,243 crore, respectively. The corresponding expected investment requirements for roads and transport, and water and sanitation sectors are Rs 5,892crore and Rs 4,488 crore. The Union government provides capital for the initial investment, and the States are responsible for operations and maintenance of these assets.
There is need for finding new methods, attracting new players to provide services, and adopting new policies to support privatization and decentralisation of infrastructure services. There is also a case for local financing of both investment and maintenance of rural infrastructure. Specifically, the private sector needs to play a larger role - a premise repeatedly endorsed in recent policy documents. However, it would be more appropriate to achieve a limited and gradual entry of private players to begin with. There is also a need to strengthen local governments, institutionally as well as financially. In this context attracting multiple service providers in rural infrastructure could widen the revenue base of local government institutions and strengthen them financially.
On the regulatory front, there is a need for light-handed regulation of rural infrastructure: namely, promote regulation that is in close proximity to users as well as service providers. A single multi-utility regulator at the district level is a preferred option for dispute resolution through the legal system. A scrutiny of the type of entry barriers facing

the small infrastructure service providers is necessary. Price regulation in practice has been found to benefit only users of services from regulated providers. And when the prices are set below the cost of supply to remote locations, incentive to service providers is destroyed. It is logical to permit service providers to recover costs through user fees not only from the Power and Telecommunication sectors as at present, but also from the other infrastructure sectors — except perhaps where a strong case is made for some infrastructure services to be treated as a public good. In this context, a new approach would be to limit access to the infrastructure sector to only those (largely the non-poor) who are willing to pay for such services, the user fees clearly needs to be determined on the basis of costs. As far as the subsidies are concerned, targeting of subsidies would be necessary to meet the needs of the poorest. The supply of infrastructure services by small, private informal providers is more advantageous in rural areas.


In the context of rural infrastructure, the issue of use of appropriate technology is critical. New technologies should be used to produce various infrastructure services economically on a decentralized basis. Poor maintenance, not only caused by the shortage of funds, but also because of the poor quality of human resource locally available for the purpose, results in speedy depletion of newly created assets. The case of hand pumps is just one example. Most hand-pumps are lying dysfunctional largely because of lack of funds and adequate, trained staff for maintenance and repair. The report, on the basis of detailed analysis, suggests building adequate local capacities for not only taking care of O&M related activities, but also for identifying and preparing the right kind of infrastructure projects. The other area that needs to be highlighted in the context of infrastructure in rural areas is the dearth of contractors to take up small works.
With regard to public-private partnership (PPP), traditional models in infrastructure are difficult to apply to rural areas where services are largely financed and delivered by the government, and where, as indicated, technology needs are different. Unlike urban infrastructure, where private sector sees robust financial returns, funding remains a major challenge as far as provisioning of rural infrastructure is concerned. It is here that some kind of synergy between the private and public sector is needed. While the private sector would seek decent financial returns; the public sector will be concerned with the robustness of economic returns. It is difficult to perceive large private players to participate in the provisioning of rural infrastructure services given low tariffs except in select rural infrastructure projects where financial returns are adequate.
However, if an acceptable risk sharing arrangement between the public and private sectors can be worked out, it may be possible to evolve a more viable PPP model for the provision of infrastructure in rural areas. The other factors that would need attention in the context of promoting a PPP initiative for rural infrastructure are intimately related to political commitment, commercial viability, and capacity of line organisations.
1.3 USE OF RESOURCES – land, water and energy
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