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:

1. 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
2. Almost stagnant Agriculture growth
3. No substantial productivity improvement in last four decades after green revolution in 70s
4. 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
5. Lower Rate of Urbanization . This is a key differentiator with China and substantially explains lower per capita income of India vis a vis China
6. Low quality of Education : Government over time focused on literacy , but not on skills .

Short term Plan :

1.  MNREGA with clear goal of Productivity improvement , otherwise Inflation will eat into all the benefits
2. Move towards Horticulture and Dairy
3.  Value added Farming like Organic Farming
4. Contract Farming
5. Focused and targeted subsidies

Long Term Plan:

1. Encourage Movement of people from rural to urban areas
2. Skill Development towards Services
3. Development of Big Urban conglomerates spread all over India
4. Development of Modern Retail and supply chains
5. Use of Technology for substantially improving quality of education in Rural areas
6. Substantial increase in cultivable land by river interlinking , building micro and small dams

The Game Changer:

1. 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 .
2. GST can plug the tax leak and hopefully provides this revenue in future
3. Its very Powerful tool: All above initiatives can only support , but BMI can radically improve the situation in a short period of time
4. I expect BMI to be in place in near future
5. Technology is currently available to implement the plan , but not revenue