India’s Rural Distress
Though it sounds off repeated , but India’s rural distress is a serious challenge and if nor addresses is a ticking time bomb for any government . Urban elite are not aware about the extent of the issue , though elections over time are a good reminder of the seriousness of it .
This is certainly not an overnight development. It has developed over time turned into a serious issue
Reason primarily are as follow:
- High Population growth and lower per capita land holding due to family expansion over decades. Thus agricultural land available per capita reportedly now is less than 0.2 acres for farming
- Almost stagnant Agriculture growth
- No substantial productivity improvement in last four decades after green revolution in 70s
- Lower contribution of Agriculture to GDP – currently stands at 13% compared to 50% at the time of Independence . It's going down every year .For developed countries this ratio stands at 5-6% and even lower. This movement cannot be reversed , but can be slowed
- Lower Rate of Urbanization . This is a key differentiator with China and substantially explains lower per capita income of India vis a vis China
- Low quality of Education : Government over time focused on literacy , but not on skills .
Short term Plan :
- MNREGA with clear goal of Productivity improvement , otherwise Inflation will eat into all the benefits
- Move towards Horticulture and Dairy
- Value added Farming like Organic Farming
- Contract Farming
- Focused and targeted subsidies
Long Term Plan:
- Encourage Movement of people from rural to urban areas
- Skill Development towards Services
- Development of Big Urban conglomerates spread all over India
- Development of Modern Retail and supply chains
- Use of Technology for substantially improving quality of education in Rural areas
- Substantial increase in cultivable land by river interlinking , building micro and small dams
The Game Changer:
- Transfer of Basic Minimum Income ( BMI) to all - Needs higher tax to GDP ratio at least 25% from current around 17% . Current revenue is simply not enough to pay for BMI .
- GST can plug the tax leak and hopefully provides this revenue in future
- Its very Powerful tool: All above initiatives can only support , but BMI can radically improve the situation in a short period of time
- I expect BMI to be in place in near future
- Technology is currently available to implement the plan , but not revenue