Farms are rural, but rural is not just farms

Policymaking must reflect a nuanced understanding of the reality that there is much more to rural India than agriculture

Partha Mukhopadhyay

Partha Mukhopadhyay
is senior fellow at the Centre for Policy Research, New Delhi

India has a constitutional administrative separation between rural and urban areas. This is enshrined as parts IX and IXA, inserted through the 73rd and 74th constitutional amendments, which define the structure of local governments and their relationship to the state and union. Each settlement in India is governed either by an urban local body — from the Brihanmumbai Municipal Corporation in Mumbai to the Jhanjharpur Nagar Panchayat in Madhubani in Bihar — or, if rural, by a panchayat (village council).

The classification has concrete consequences for the implementation of government schemes that differ between urban and rural areas. It decides whether the National Rural Employment Guarantee Act will apply to residents, the amount of subsidy due to beneficiaries under the Swachh Bharat (clean India) Mission, and a lot more. There are complications here.

Even the Census of India has, for a long time, recognised the incongruity of fitting India’s settlements into a neat binary categorisation. That explains the intermediate classification — the census town — a settlement that is administered by a panchayat but whose population size and physical and economic character are not rural. Specifically, it needs to have a population in excess of 5,000, a density of more than 400 people per sq km, and more than three-fourths of its male workforce engaged in non-farm work.

Over the 2001-2011 period, the share of the country’s urban population living in census towns doubled from 7.4% to 14.6%. This phenomenon has occupied the policymaker’s imagination.

India’s economy and its people transcend the segregation. Subject to dated data — the split between rural and urban is published infrequently and was last released by the government in 2017, for the year 2011-12 — India’s rural economy is not just a farm economy.

As figure 1 shows, agriculture (including fishing and forestry) formed only 38.7% of the rural economy in 2011-12, the rest comprising manufacturing, construction and services. Even back in 1999-2000, agriculture’s share was barely above 50%. Since then, construction and manufacturing grew at the expense of agriculture, as the reform process built up steam over the following decade.

Figure 2 reveals the extent of economic activity taking place in rural areas under different heads. In a number of key sectors — manufacturing, for instance, as well as real estate — the rural share has grown over time and over half of manufacturing GDP came from rural areas even in 2011-12.

Some of this relocation to the rural periphery of large cities has been to benefit from land availability, industrial estates outside urban boundaries, etc, but that is not the only explanation. The rural roads programme has increased connectivity and, in some states, electricity supply is reasonably reliable. This enables small towns and nearby villages to become hubs of economic activity and occasionally, a global ‘micropolis’ (an example is Tiruchengode in Tamil Nadu).

1. Mining 2.Manufacturing 3.Utilities 4.Construction 5.Trade, hotels, restaurants 6.Transport, storage, communication
7. Financial Services 8.Real estate, professional services 9.Public administration and defence 10.Other services
1. Mining 2.Manufacturing 3.Utilities 4.Construction 5.Trade, hotels, restaurants 6.Transport, storage, communication
7. Financial Services 8.Real estate, professional services 9.Public administration and defence 10.Other services

Holding its own

Overall, despite various claims popularised by the media, the official estimate is that 47.7% of India’s GDP came from rural areas in 2011-12, almost the same as in 1999-2000. That means the country’s rural sector held its own during a period that saw among the highest growth rates experienced by the Indian economy.

Much like the economy, people too do not stay fixed to their administrative boundaries — they commute and migrate. Households often spread risk, with some members seeking non-farm work while others look after farming.  The poor are less able to do this. Unskilled landless labourers choose between farm work or brickkilns and construction sites (both of which may be in nearby rural areas). 

The government has admitted to over 10 million inter-state returnees post-Covid, but the overwhelming proportion of migrants do not leave their home states. Immediately after the lockdown in late March, the number of Facebook users — yes, many migrants at the lower end of the scale use the social networking site — dropped sharply in the big cities and even in small towns. And it rose in villages, digital affirmation of the images of people streaming home on empty highways.

The spread of the non-farm economy and transport improvements (almost a third of rural households now own a two-wheeler) also facilitate local commuting. A study by S Chandrasekhar and Ajay Sharma estimated an up to four-fold increase in commuting, both rural-urban and urban-rural, for non-farm work between 1993-94 and 2009-10.

This, in itself, generates work in the intermediate public transport sector, with small vehicles ferrying people and goods to and fro. With increasing income from non-farm sources, supporting farming is important, but it is not the only way to increase rural incomes.

Policy response

How should public policy respond to this fluid reality? First, the design of central government schemes need to avoid the rural-urban differentiation. A good cross-learning example is the beneficiary-led construction in the Pradhan Mantri Awas Yojana (Urban) Mission, which intends to provide housing for all people living in urban areas by 2022. Borrowed from rural housing schemes, such construction is now the dominant model in urban India as well.

Second, states must realise that the demand for services cannot be grouped into a neat binary. Administratively rural areas may demand septic tank cleaning services and streetlights, as much as people in areas classified as urban may want to seek work at MGNREGA sites.

Third, the push to ‘make in India’ or to make Bharat atmanirbhar (self-reliant) need not be a story just of big cities and large-scale migration. It can also be a story that is more dispersed, with diverse economic activities across a large number of small- and medium-sized cities, drawing upon local labour pools while serving a global market.

In India, large enterprises may be able to self-provide reliable power, logistics services and the rest in rural areas, but micro, small and medium enterprises may be unable to thrive outside an urban ecosystem that provides them common shared services. That’s why focusing on service provision in smaller towns is crucial for an atmanirbhar Bharat.

The key to these policy changes is opening one’s mind to a recognition of the rural as it is in today’s India.

The views expressed are those of the author and do not reflect the official policy or position of the Tata Trusts.