5. Economics of Rural Development - Volunteers for Rural India

Economics of Rural DevelopmentDr. Ugra Moha Jha* & Dr. Naresh Jha***Director, Anga Institute of Research Planning and Action (AIRPA)President, Economic Association of Bihar (EAB)**Faculty Member, Development Research Institute (DRI), Jalsain, Madhubani, BiharRural development is a concept, aphenomenon, a strategy and a discipline. Theterm is of focal interest and widely acclaimedin both developed and developing countries.There is however no universally acceptabledefinition and the term is used in differentways and in vastly divergent contexts. As aconcept, it connotes overall development ofrural areas with a view to improving the qualityof life of rural people. In this sense, it is acomprehensive and multidimensional conceptand encompasses the development ofagriculture and allied activities --- village andcottage industries and crafts, socio-economicinfrastructure, community services andfacilities, and above all, human resources inrural areas. As a phenomenon, it is the resultof interactions between various physical,technological, economic, socio-cultural, andinstitutional factors. As a strategy, it isdesigned to improve the economic and socialwell-being of a specific group of people --- therural poor. As a discipline, it is multidisciplinaryin nature representing an intersection ofagricultural, social, behavioral, engineering,and management sciences. 1In the words of Robert Chambers, “RuralDevelopment is a strategy to enable a specificgroup of people, poor rural women and men,to gain for themselves and their children moreof what they want and need. It involves helpingthe poorest among those who seek alivelihood in the rural areas to demand andcontrol more of the benefits of ruraldevelopment. The group includes small scalefarmers, tenants, and the landless.” 2We shall define rural development as theprocess of developing and utilizing natural andhuman resources, technologies, infrastructuralfacilities, institutions and organizations, andgovernment policies and programmes toencourage and speed up economic growth inrural areas, to provide jobs and to improve thequality of rural life. This process typicallyinvolves changes in popular attitudes, and inmany cases even in customs and beliefs. Theprocess of rural development must representthe entire gamut of change by which a socialsystem moves away from a state of lifeperceived as ‘unsatisfactory’ towards amaterially and spiritually better condition of life.Rural development is the process ofdeveloping and utilizing two kinds ofresources, natural and human, but this is notall. There are not only natural or humanresources waiting to be exploited but equallyvital things which must be utilized. In everysociety there are technologies. They also mustbe utilized. There are facilities stemming frominfrastructure. They must be harnessed toachieve the goal. There are various institutionsand organizations. They too, must be put touse. There is an all pervasive and powerfulgovernment armed with the various policiesand programmes aimed at acceleratingeconomic growth in rural areas. Ruraldevelopment aims at creating and providingjobs. All these factors must lead to theimprovement of rural life. When attitudestowards customs and beliefs are changed andthe life of the people moves towards spiritualenrichment, the process of rural developmentencompasses the full circle and traverses theentire spectrum of rural life. The basicelements of rural development are thesatisfaction of the basic necessities of life, theinculcation of a feeling of dignity and honourand the emancipation of people from servitudeto nature and from slavery to other men.There are subsidiary meanings also attachedto rural development. It is presupposed thatvillages are suffering from poverty. If poverty isreduced or eliminated, we can assert thatthere is rural development. If there is inequalityin rural life and this inequality is removed, wehave rural development. If there isunemployment and measures have beentaken to reduce or remove it, we have ruraldevelopment. Dudley Seer says that thequestions to ask about a country’sInternational Journal of Ruralvol. 15 no. 1 April 2008Studies (IJRS)ISSN 1023–2001 www.ivcs.org.uk/IJRS Article 5 Page 1 of 6

development are: What has been happening topoverty? What has been happening tounemployment? What has been happening toinequality? If all three of these have declinedfrom high levels, then beyond doubt this hasbeen a period of development for the countryconcerned. If one or two of these centralproblems have been growing, it would bestrange to call the result “development” even ifper capita income doubled.In an agrarian country, rural development is ofprime importance. There is no nationaldevelopment without rural development andthere is no rural development withoutagricultural development.Rural development means development ofagriculture as well as development of alliedactivities such as village and cottageindustries, handicrafts, community servicesand facilities and economic infrastructure. Itmeans development and utilization of humanresources found in rural life. It stands fordevelopment and utilization of naturalresources that are available in village life. Itencompasses changes in the out look of thepeople. Existing beliefs are either displaced orconsiderably modified. Even customsprevailing in society and followed rigorouslyundergo alteration. There is a sea change inthe spiritual life of the people when there isrural development.Each factor in rural development is connectedwith every other factor. No one element leadsto a self – sufficing existence. Each influencesthe other and is influenced by that other. Mr.Katar Singh has this to say: “The process ofrural development may be compared with atrend in which each coach pushes the oneahead of it and is in turn pushed by the onebehind, but it takes a powerful engine o makethe whole train move. The secret of success indevelopment lies in identifying and, if needed,developing a suitable engine to attach to thetrain. There are no universally valid guidelinesto identify appropriate engines of growth, if atall they exist. It is a choice which is influencedby time, space and culture.” 3Some writers have given objective, clear cutcriteria to identify whether there is ruraldevelopment. One is urbanization which is anindicator of economic development. If townsincrease in number and outnumber thevillages, some economists think that there hasbeen economic development. But this conceptcompletely does away with the rural scenario.Another is industrialization. The advocates ofthis theory hold that if there is industrializationon a big scale, it can modernize agricultureand give employment to people renderedredundant by the application of machinery toagriculture. The logical conclusion of suchthinking is to establish highly capital incentiveand automatic enterprises. This is just apingthe western model and going against theinterest of one’s own country. There are manycountries which have agricultural potential butacting under the notion that industrialization isthe kernel of development, they do not exploittheir agricultural potential and hence the basicneeds of the people remain unsatisfied.Imports of food grains take place at a hugecost. Agriculture is trapped in stagnation.People become victims of malnourishment.These theories militate against the standardconcept of rural development. Agriculture mustbe developed. There are very powerful andcogent reasons to support this point of view.Industrialization cannot be sustained withoutthe timely and sufficient availability of rawmaterials to many principal industries (e.g.jute, sugar and textile). A flourishing andprosperous agriculture also produces a surpluswhich is easily utilized in augmenting capitalformation, the basis of industrialization.Sometimes agriculture supplies foreignexchange much needed by developingcountries.A large part of the population earns itslivelihood through agriculture. In India nearlytwo-thirds of the people are dependent onagriculture. In the USA it is only 2% of thepopulation that is dependent on agriculture. Infact, cases are on record where the USAgovernment has paid its farmers not tocultivate the land and not to produce anythingfrom it. In such a country, rural developmentdoes not matter at all.Industry required laborers and they came fromthe agricultural population. When industrialdevelopment started, it required labourers butthere were no labourers to be found.International Journal of Ruralvol. 15 no. 1 April 2008Studies (IJRS)ISSN 1023–2001 www.ivcs.org.uk/IJRS Article 5 Page 2 of 6

The labourers were not free. They were tied tofeudal lords. Hence laws were passed to freethem from feudal bondage and servitude. Butfreedom was not enough. The labourers mustjoin the capitalist factory. Here Governmentstepped in, passing several like the EnclosureAct, Vagrancy Act and Anti – beggary Act. Thecumulative effect of these acts was that thelabourers were compelled to join capitalistfactories. When we come to survey Indianconditions, we find that industry is not plaguedby shortage of labor but has an abundantsupply. Agriculture can not absorb the labourwhich is available in rural areas. Hence ruraldevelopment is an absolute necessity to giveemployment to the surplus agriculturalpopulation in the agricultural sector itself.Rural development is a multifaceted and multidimensionalendeavour. It has no single allembracinggoal. It has a plethora of goals anda multiplicity of measuring rods to assess it. Ifper capita real GNP increases, we canreasonably conclude that there isdevelopment. But we have to see whether thisincrease in GNP percolates to rural areas.Another measuring rod focuses its attention onexpenditure. When there is high expenditureon civic amenities and facilities, we havedevelopment. If schools, hospitals, drainage,roads, parks etc. are constructed in thevillages, then there is real development. Allthese things contribute to the well – being andwelfare of the rural populace.Models of Rural DevelopmentDifferent countries have adopted differentstrategies to meet their goals of development.The USA developed on the basis of a freetrade capitalist economy - a market economy.The erstwhile Soviet Union developed bydiametrically opposed strategies. Itchampioned the command economy. China,too, followed this path and adopted publicownership of property. Sweden adopted a thirdstrategy. She combined capitalist and socialistelements, creating a mixed or welfareeconomy.The classical, liberal view of developmentpoints out that market is central todevelopment. It is the market economy whichideally optimizes economic welfare anddevelopment. Adam Smith in “Wealth ofNations” refers to an autonomous selfregulatingeconomy and this economy is takento be civil society. He advocates thesegregation of civil society from the politicaljurisdiction of the state. This civil society hasimmense capacity for self-regulation andshould be left unhindered. It has potential forachieving maximum benefits for all membersof society who must be left free to pursue theirown interests. Civil society must be madeindependent of the state. Hence developmentbecomes synonymous with a negative state.Here development proceeds without anycentral direction. There are several features ofthis market model. The consumer is sovereign.Production is carried on in response to oranticipation of his demand.It results in efficiency of production. Inmaximizing the consumer’s welfare, thewelfare of the entire society is maximized. Thissystem automatically generates technologicalchange and development. It is also conduciveto securing equity in income distribution. Thismodel pre-supposes that there is fullemployment in the society. If there is anyunemployment, there are forces whichspontaneously bring into play conditions forthe creation of full employment. This modelcannot exist without competition. If there is anyinterference in the operation of freecompetition, the benefits and advantagesspringing from this model perish.The motivating factor behind the activities ofthe people is to secure material well being andeconomic gain. Without economic incentives,the market model breaks down.In the present economic scenario, it is the USAwhich is the ideal representative of the marketmodel. This country has been able to achieverapid economic advancement by resort to thismodel. The economy is based on privateownership in a free market. There is aninternal open market. Society is highlyurbanized. Most of the under developedcountries had this model when they wereunder colonial rule. But in reality this modelserved development for the imperialist countryand caused under development for thecolonies. Yet these countries, after securingfreedom from alien domination, did not throwInternational Journal of Ruralvol. 15 no. 1 April 2008Studies (IJRS)ISSN 1023–2001 www.ivcs.org.uk/IJRS Article 5 Page 3 of 6

this model away but embraced it. Taiwan,South Korea, Indonesia, Brazil, for example,rolled out the red carpet for multi nationalcompanies and created a congenial politicalatmosphere. They provided docile, cheaplabour. This they could do becauseauthoritarian rule had been established inthose countries. Such a rule can easilyintroduce unpopular decisions because thereis no accountability to the people. Thesupporters of the market model believe that ifunder developed countries open up theireconomy, they will travel the road ofdevelopment. At present this model issupported by some powerful and influentialinternational organizations like theInternational Monetary Fund and the WorldBank.The next model of development is the welfaremodel which came into existence in the laterhalf of 19 th century and in the first half of the20 th century when the market model wasexposed to many shortcomings anddeficiencies.It has led to the concentration of wealth in ahandful of persons. It has led to monopolycapitalism. The market model laid stress onthe importance of individuals but the welfaremodel endeavors to reconcile the interests ofthe individual with those of society. This modelbelieves that development means insuringminimum social services to all members ofsociety. When this happens, there is welfarefor all. Development means developmentthrough the state. The market model banishedthe state. But this model invited the state andutilized it to modify the play of market forces inthree directions. First, it aimed at guaranteeinga minimum income to individuals and families.It ignored the market value of their work or oftheir property. Secondly, it restricted the extentof insecurity by enabling individuals andfamilies to face contingencies in life. Itprovided an umbrella to those who were sick,old or rolling in the abyss of unemployment.Thirdly, it made sure that all citizens gotcertain social services and in providing these,neither status nor class was taken intoconsideration. If Adam Smith was the father ofthe market model, J M Keynes was the initiatorand formulator of this model. He pointed outthat the economic anarchy of the marketmodel could not ensure full employment orsufficient equality of income or wealth.Collective action was needed. The functions ofthe government must be enlarged. Public workprogrammes and low interest rates should bemade instruments of the state’s action. Thismodel works within the market economy. Itbelieves that poverty, dependency andeconomic insecurity are caused neither bynature nor by laziness, lethargy aor theincompetence of the poor but rather they arethe consequences of the institutions ofsociety..This model gives great importance to the stateas an agent of development and isopposed tothe market model which holds that the statecan advance the interest of the individual byleaving him alone. The welfare model believesthat the state is a powerful vehicle which canbe used for furthering the common interest.The state should remodel and reorganize theeconomy in the interest of the welfare of all itscitizens. Translated into political terms, itmeans that only a democratic state canperform this task of development. A minimumstandard of welfare must be ensured for allcitizens. Welfare is not an abstract term. It hasa concrete meaning. It means medical care,education and housing for all. The entirepopulation should be covered by welfareschemes.The nature of welfare differs from country tocountry. In England welfare is based on theprinciple of equal and flat rate benefits for all.In Germany welfare benefits are linked to jobsand benefits distributed in harmony with thesalary. In the USA and Canada many schemeshave been introduced but they do not fallunder the category of welfare. India, too, haspassed through the welfare model ofstatehood. The leaders felt that it was notpossible to eradicate economic backwardness,illiteracy and poverty by remaining in themarket model but that the welfare model wasbest suited for these purposes. It pursued fourwell defined goals. The first was freedom ofthe economy from its reliance on strategicimports and foreign aid - a goal of selfsustained growth. The second was that theresources should be mobilized and capitalaccumulated to augment rates of saving andinvestment - the goal of achieving a high rateInternational Journal of Ruralvol. 15 no. 1 April 2008Studies (IJRS)ISSN 1023–2001 www.ivcs.org.uk/IJRS Article 5 Page 4 of 6

of growth. The third was reduction in socialdisparity - the goal of attainment of equality.The fourth was to give minimum conditions ofsubsistence and survival - a goal of equity andjustice. Gunnar Myrdle has pointed out thatplanning by the state and central direction ofthe economy of the state are imperative if acountry wants to enhance capital formationand productive investment, do away with non –essential imports, invest in economic andsocial overheads, obtain loans from othercountries and make sure that the urge forprivate profit does not result in gross anddangerous inequalities. Hence we find thatIndia laid stress on both production andredistribution of wealth. Critics of this modelpoint out that it does not free the economyfrom recurrent cycles of boom and depressionor ensure its citizens an adequate income tomeet insecurities. It does not provide a stableand civilized life to its citizens.The fourth model is the socialist model whichbelieves that development is a social andsecular question and a specific interest-ladenproblem. It tries to strike a balance betweenindividualistic and collectivist ideas ofdevelopment. There are several schools ofthought. The Marxist model is one. The SovietUnion practised it and then jettisoned it. But itis being practised in Cuba, North Korea andChina. This model is based upon the publicownership of the means of production and oncentralization of all sectors of the economy.There is a central authority which takes alleconomic decisions. It controls the marketinternally and externally. Emphasis is placedon heavy industries. The important instrumentof achieving goals is planning which acquiresthe status of law. Social welfare is determinedby central planning. This model ofdevelopment did wonders. It transformed abackward agrarian society into an industrialone. The Soviet Union became a super powerin the 20 th century.When we come to the Gandhian model, wefind that it is based on a philosophyfundamentally different from the ideas andprinciples of the western model. It is a productof the Indian soil. It hears the imprint of localconditions and needs.R C Vermani says “The Gandhian view ofdevelopment is radically different from thewestern model of development. It was basedupon his metaphysical idealism with emphasison the supremacy of ethical values and amoral approach to the problem ofdevelopment. It was a plan of political, socialand moral reconstruction and a critique of thewestern model of development basedessentially”. 4The proponents of the western model ofdevelopment approach the problem from aneconomist’s point of view. For them theparamount consideration is economics. Theyfeel that economic factors constitute the coreof development. In the opinion of Gandhiji,development based on economics andeconomics alone is no real development.Gandhiji adhered steadfastly to the view thatreal development is moral development whichtakes place when a person pursues truth andpasses through the highways of love and non– violence. Truth left to itself is sterile. Whensuffused with love and accompanied by non –violence, it performs miracles. 5Gandhiji had a clear cut criterion to judge aneconomic policy. If it was detrimental to themoral health of an individual or nation, thenthat economic policy was immoral and sinful.Gandhiji never assessed development in termsof money.Modern economic theory states thatdevelopment means reduction of poverty orremoval of extreme poverty. Gandhiji too, wasfully in favour of improving the materialconditions of the masses and raising theirstandard of living but he saw several socialbarriers which create stumbling blocks to sucha goal. Gandhij wanted to abolishuntouchability and ameliorate the conditions.Like all modern economists, Gandhiji wantedto increase production but he was againstindustrialization and large scalemechanization. Gandhiji believed – and it isalso a fact – that the use of machines in allspheres and on a large scale creates a hugearmy of unemployed. Unemployment meansno work and no wages and the immediateresult is skating on the verge of starvation.Further, an unemployed person becomesmorally degraded and loses confidence inInternational Journal of Ruralvol. 15 no. 1 April 2008Studies (IJRS)ISSN 1023–2001 www.ivcs.org.uk/IJRS Article 5 Page 5 of 6

himself and trust in the goodness of thesociety. The use of machines ultimately leadsto moral degradation.Gandhiji realized that the character of India’seconomy is rural and so rural life needs to beregenerated. “India is to be found not in its fewcities but in 7 lakh villages. But the towndwellers believe that India is to be found in itstowns and the villages were created to ministerto the needs of the towns. We have hardlypaused to inquire if those poor folk getsufficient to eat and clothe themselves withand whether they have a roof to shelter themsolves from sun and rain” (Harijan - April 41936).In Mahatma Gandhi’s eyes, rural developmentis an urgent necessity. The future of thecountry depends on it. In his Samagra GramSeva, he took a comprehensive and allembracing view of the regeneration of thevillages. The kind of development which hewanted had a variety of dimensions - spiritual,moral, economic, political and social. He“expounded his scheme of constructiveprogrammes which is called GandhianBlueprint for micro-building from thegrassroots’ level and bottom up by using thelocal resources as the main planks of hisapproach for resurrecting the rural areasleasing to self-reliance and self-sufficiency inrural communities”. 6REFERENCES1. Singh, Katar, Rural DevelopmentPrincipals, Policies & Management,ND. 1986, p. 18.2. Robert Chambers, RuralDevelopment: Putting the last First(London : Longman. 1983), p. 147.3. Singh, Katar, Rural DevelopmentPrincipals, Policies & Management,ND. 1986, p. 18.4. R C Vermani, An Introduction toPolitical theory, p. – 4635. Unnithan, JKN, Gandhi & socialchange: Rawat Publication 1979.6. Tendulkar, D G, Life of M K GandhiVol. I p. 236.7. Tendulkar, D G, Life of M K GandhiVol. I p. 2378. Tendulkar, D G, Life of M K GandhiVol. I p. 2389. Tendulkar, D G, Life of M K GandhiVol. I p. 280.10. Unnithan, JKN, Gandhi & Socialchange p. 32.11. (Anatomy of Rural DevelopmentRelevant to Eastern India by Dr.Prabodh Kumar Jha, P. 53) andRural Development to India,Problems and Prospects: Acollection edited by Dr. U M Jha.12. (An Evolving Strategy for India’sAgricultural Development, NewDelhi, The Ford Foundation 1968, p.3). Agricultural Development, NewDelhi, The Ford Foundation 1968, p.9).13. (India 2001, P. 431).14. (India 2001, P. 432).15. (India 2001, P. 434).16. (India 2001, P. 391).17. Singh, Katar, Rural DevelopmentPrinciples, Policies & Management, ND.1986, p. 238.International Journal of Ruralvol. 15 no. 1 April 2008Studies (IJRS)ISSN 1023–2001 www.ivcs.org.uk/IJRS Article 5 Page 6 of 6