Rural folk driving own economy

Mumbai: Indian villages are powering their own economy, but contrary to conventional belief, it's not government largesses which are the drivers, but their own self-sustaining models. Growth at the bottom of the pyramid is at unprecedented level, and the transformation is stark. 

    The factors driving this transformation are dramatic improvements in rural roads, electrification, cell phones and water supply which are raising wages and increasing job opportunities for thousands living in villages. This, in turn, is fuelling demand for consumer goods, and for those companies which have a strong rural push. 
    Case studies from fieldtrips and research undertaken by Credit Suisse show that the growth in productivity is becoming sustainable as jobs in manufacturing drive services jobs in transportation and trade, enabled by mobile phones and roads. 
    Research over the last couple of years by independent sources has confirmed that use of cell phones benefited a diverse set of people—from fishermen to sari weavers. Most of the studies focused on price discovery in agriculture or on skilled artisans improving customer service or price realizations. 
    D K Joshi, chief economist at Crisil, says, "Overall, there has been a definite improvement in the rural economy. Villages have become self sustaining, providing a big push in manufacturing jobs. Roads are increasing demand for vehicles, while cell phones trigger more goods and services. However, a lot more is required; the success stories need to be replicated in a number of areas." 
CHANGING FACE OF INDIAN VILLAGES 
    Village textile stores now stock pre-stitched branded clothing 
    The second hottest-selling item in a rural grocery store is packaged 
gulab jamun instant mix 
    Rural areas have a higher penetration of direct-to-home 
devices for receiving TV content Two in every five mobile subscribers are now rural 
40% of demand for cement comes from rural housing 
Most surprisingly, poultry farming created more days of work per person than the jobs guarantee programme (between 2005 and 2010) Rising wages, land prices spur rural purchasing power 
Mumbai: The face of the rural Indian economy is changing for the better. Access to roads is helping landless people raise poultry (chicken) within limited floor space and sell their produce in nearby towns. In fact, poultry farming created 3.8 million jobs between 2005 and 2010: the 950 million person days of work thus created every year is the same as that by the government's NREGA in the same period. 
    Road access significantly improves land prices, labour mobility, wages and alternative employment avenues, says a study by Credit Suisse. 
    For example, production of mannequins has moved from Ulhasnagar outside Mumbai to villages in Rajasthan, while other examples like pottery (Orissa), saris (West Bengal), furniture (Himachal Pradesh), are all potential jobs difficult to carry out in remote villages previously, but are now made easy by road connectivity. 
    The study found a strong correlation between per-capita output and road networks (represented by vehicle penetration) both within and across states. 
    Since about 80% of the country's rural households own less than two acres of land, they are therefore wage dependent. Analysts point out that this wage growth is largely productivity-driven (and therefore sustainable to a large extent), providing a floor to India's cratering economic growth, and even in the absence of major infrastructure projects taking off, there are substantial changes in basic infrastructure that are taking place in areas other than big cities. 
    Over the last five years, rural wages have increased at an unprecedented 20% CAGR, with land prices appreciating sharply as well. Both have ended up putting more money in the hands of people, and generating purchasing power, experts say. Fast-moving consumer goods companies are enthused with the strong rural demand as it augments their sales. 
    In some cases like Emami with products, offered in 30 lakh rural outlets, including Navratna Oil, Fair and Handsome cream, Zandu Balm, BoroPlus cream, has nearly 50% of sales in some categories coming from rural markets.
    Says N Krishna Mohan, CEO, sales, supply chain & human capital, "We are going to focus on specific brands/stock keeping units and increased outlet coverage in villages/ towns in certain states where we have a strong direct coverage. In other markets, we would be working on ensuring that at least 80% of the villages with a population of 10,000 and above are put under the coverage map by the end of the next fiscal". 
    Another company, ITC, which offers Sunfeast biscuits, Vivel soaps, Superia soaps and shampoos, has been able to tap the rural segment through its e-choupal network. Says an ITC executive: "The divide between urban and rural markets has narrowed down and hence we have expanded our basket of offerings in rural India. Given the vast reach and penetration, ITC has devised mobility solutions for monitoring progress and instant information dissemination". 
    Sales of white goods like refrigerators, and consumer durables like LCD televisions have surged in villages. 
    Private banks have also realized that villages can be the next engine of growth. This is because the share of saving deposit for non-urban branches is high (42-50%) as against the 15-30% in metro/urban branches.

TIME FOR AN UPGRADE As India moves towards greater urbanisation, it is vital to ensure holistic planning and good governance, says

Mahatma Gandhi may have once pointed out that India lives in its villages, but much has changed in the 64 years since Independence, and new cities continue to grow in the country. This growth is haphazard and unplanned, as residents of Mumbai will agree, but there is no denying that metropolitan regions remain attractive to millions of migrants who make their way, even if it is to the city footpaths, to find their fortunes. Experts point out that there will be a doubling of Indian urban population from 280 million to 560 million from 2001 to 2025; they also observe that cities contribute more than 70% of GDP, and are crucial for economic development. However, they suffer from deficiencies in urban infrastructure, citizen services, and governance mechanisms. 

    Much has been spoken on the issue in recent times, both in Delhi, where policies are made, and in Mumbai, which is in great need of good governance. On March 13, over 700 delegates from 100 Indian cities, met in the capital for Municipalika 2013, the 11th International Conference & Exhibition on Good Urban Governance for Safe, Healthy, Green, Inclusive and Smart Cities. In his Presidential address, Arun Kumar Misra, Secretary, Ministry of Housing & Urban Poverty Alleviation, spoke of the mammoth needs for urban housing for economically weaker sections and low income groups, and of the need for a multipronged approach to make affordable housing a reality. Highlighted were problems of slum housing for sheltering nearly 90 million. Some positive initiatives for urban housing through interest differential, cost-effective technologies and innovative use of land were alsoanalysed. Rick Fedrizzi, Chairman, World Green Building Council, spoke of sustainable urban development in the context of climate change and stressed the need for optimum, efficient use of resources – water, land, energy and renewable energies – and support national, provincial and local city governments can give to sustainable green built environment. 
    Earlier in Mumbai, at an international workshop on the governance of megacity regions on February 4, experts pointed out much the same thing. The symposium, organised by Centre for Policy Research (CPR) and Confederation of Indian Industry (CII) was focused on a draft report for the Ministry of Urban Development, Government of India, titled 'How to Govern India's Mega Cities: Towards Needed Transformation'. On the occasion, K Sivaramakrishnan, Chairman, CPR observed that megacities are a demographic, economic and political reality, playing a major role in GDP growth – as much as 14 to 36 per cent - and with a global presence and international obligations. The five metros covered – Mumbai, Kolkata, Chennai, Hyderabad and Bengaluru - account for 68.5 million people, which is about 18 per cent of the country's urban population. 
    It was at this event that Ajay Maken, Union Minister for Housing and Poverty Alleviation made his widely quoted comment about how megacities like Mumbai must review Floor Space Index (FSI) policy to encourage affordable housing. The minister stated that the policy for providing infrastructure status to affordable housing schemes was on the cards. 
    CPR spoke of how governance of these big city regions required participation of multiple stakeholders, including national and provincial governments, city governments, business and industry, political representatives, civil society and others. They underlined the need for a single strong entity, such as a Chief Executive Officer, to take holistic decisions. In Mumbai, for instance, as Narinder Nayar, Chairman of Bombay First pointed out, 17 agencies run the city – "some responsible to the State, some to the Centre, and all with narrow agendas. "We have an able orchestra for Mumbai," he observed, "but no conductor. We need a CEO for Mumbai." 
    Infrastructure was one of the core issues discussed at both events. At the Mumbai symposium, Adi Godrej, President, CII, said, "India would need $800 billion in the coming years towards urban development and out of which $350 billion would go towards building urban roads. Administrative reforms, urban service delivery reforms and many more such initiatives are the need of the hour." 
    If megacities are to achieve their potential, there is no denying that the real estate sector must play a large role. Lalit Kumar Jain, National President, CREDAI and CMD, Kumar Urban Development says: "Any city is livable or otherwise based on the quality of physical and social infrastructure as well as ease and cost of living. Mumbai needs to upgrade its physical infrastructure first. Networked public transport is a necessity. The introduction of metro - monorail across the city is definitely a good step; however, it's neither enough nor well integrated." Jain points out that making Mumbai a livable city is everybody's responsibility, right from citizens, government and the real estate sector. "Government and real estate should work hand in hand," he explains. "Mass rental housing, affordable housing for low income groups and economically weaker sections with enhanced FSI limits and special housing zones on the outskirts like Navi Mumbai and Thane and Mira-Bhayander are some of the suggested solutions. "Real estate and infrastructure development need to be looked at as a single phenomenon while planning a city, rather than in isolation," he says. "A sealink is not the answer, what Mumbai needs is homes at lower cost, a better public transport system and better connectivity." 
    Lalit Kumar Jain and other developers have repeatedly stressed the need for policy changes. Sukhraj Nahar, Chairman and Managing Director, Nahar Group, for instance, says: "Mumbai has now emerged as a global financial hub. The city has witnessed unprecedented growth in the last decade. Considering the huge inflow of population across the country in Mumbai, it requires a massive overhaul as far as governance is concerned." 
    Nahar echoes what CREDAI has been highlighting for years – that there is a need to create a single window clearance system for projects, be they of private real estate developers or governmentowned agencies like CIDCO, MHADA and HUDCO. "Currently various authorities are involved in planning and implementation of various ongoing projects in Mumbai, I think, there should be only one system that can take care of planning and implementation of projects in the metro city to avoid any confrontation." He also suggests that a full-fledged cabinet post be created to focus on policy issues and development of Mumbai. 
    Dhaval Ajmera, Director, Ajmera Realty and Infra India Ltd adds: "Infrastructure and real estate are the two vital engines of a city that provide the basis for economic growth…. The biggest bugbear is that there is a paucity of consent on the projects by the concerned authorities." 
    Ajmera also speaks of the need for single window clearance, and more infrastructure projects in Mumbai. A separate monitoring cell should be instituted to ensure projects are completed on time, he adds, and greater public-private partnership (PPP) to encourage better and speedy implementation of infra projects. "Besides an authoritative consent on industry status to the real estate sector would ensure speedy approvals which would in turn bestow the city with the indispensable face-lift," he observes. 
    Everyone in government seems to have the solutions. Municipalika 2013 also had a range of solutions on offer. The deliberations stressed the need for incremental sustenance and the role of the private sector and communities to bring in resources, technology, management and improved innovations for housing and infrastructure development. The new mantra for development has to be Public-Private-People's Partnership (PPPP) as against PPP, they said. Speakers also spoke of the immense potential of decentralisation and involving stakeholders at the local/micro level and monitoring and execution of projects in the decentralised mode with intense community participation. 
    The opportunities are huge. As Dr Prem C Jain, Chairman, Indian Green Building Council (IGBC) pointed out at Municipalika, "Since 60% of the buildings that would exist in 2030 are yet to be built, we have a big opportunity to develop environment-friendly cities in the country." 
    The real estate sector will certainly play a huge role in this development, but only if the right policies are in place. As Niranjan Hiranandani, MD, Hiranandani Group, had pointed out at another seminar in the city last month, there is a difference between talking the talk and walking the walk. Everyone knows what to do, but no one actually does it. The recent Union Budget was only one more example of how the real estate sector is neglected, time and again. 
    INPUTS NISHA SWAMI

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    EXPERTS POINT OUT THAT THERE WILL BE A DOUBLING OF INDIAN URBAN POPULATION FROM 280 MILLION TO 560 MILLION FROM 2001 TO 2025 
    DEVELOPERS WILL PLAY A LARGE PART IN MEETING THE CHALLENGES OF THIS GROWTH, BUT THE RIGHT POLICIES MUST BE IN PLACE